02 Aug My part is asset quality and banks selected are ahli united bank and Gulf International Bank. I need only one page.?? Need in few hours. No late will be accepted and no e

FIN323: Commercial Banking Summer 2021-22

Course Project Guidelines

Overview:

It is a group project (with a minimum of 10 students not more than 11) where students are required to analyze the financial condition of two banks of their choices in terms of Profitability and risk. Students are supposed to deliver a written report in addition to a presentation.

Report:

Should include three parts:

1. Select two conventional banks from Bahrain. Using financial statements, Present and compare the two banks (History, organization, structure, and corporate social responsibility)

2. Using tables and graphics make a CAMEL Analysis of the two banks:

· Capital Adequacy: The purpose of capital, the ratio for evaluating capital adequacy, The measurement of capital, Prompt Corrective Action

· Asset Quality: Concept of asset quality, Impact of asset quality on bank’s financial statements. Analyzing asset quality ratios. Adequacy of allowance for loans and leases losses (ALLL)

· Management Competence: Management organization and function. Assessment of management. Evaluation factors and ratings

· Earnings Ability: Analysis of the different components of earnings (ROE, ROA). Importance of earnings to a bank’s financial condition

· Liquidity Risk: Liquidity risk management. Factors for evaluating liquidity

Report Format:

· WRD doc of Minimum Pages 10, Maximum 20 : Font: New Times Roman, Font Size: 12 , Spacing: Single

· PPT File of Maximum 15 slides.

Important Note:

Report should be written with your own words without repeating the statements or sentences available in the financial reports of the commercial bank you have chosen (Avoid plagiarism).

The grading rubrics is given below for your reference.

	Marks
Present and compare the two banks	3
Capital Adequacy	2
Asset Quality	2
Management Competence	2
Earnings Ability	2
Liquidity Risk Liquidity	2
originality in reporting	4
PowerPoint presentation	3
Total	20 marks

	Above Expectations	Meets Expectations	Below Expectations
	90%-100%	70%-89%	<69%
Present and compare the two banks	A deep explanation is provided for History, organization, structure and corporate social responsibility of the two banks.	A limited explanation is provided for History, organization, structure and corporate social responsibility of the two banks.	A weak explanation is provided for History, organization, structure and corporate social responsibility of the two banks.
Capital Adequacy	The purpose of capital, ratio for evaluating capital adequacy is properly explained and compared for both banks	The purpose of capital, ratio for evaluating capital adequacy is not properly explained and compared for both banks	The purpose of capital, ratio for evaluating capital adequacy is poorly explained and compared for both banks
Asset Quality	Concept of asset quality, Impact of asset quality on bank’s financial statements. Analyzing asset quality ratios is properly explained and compared for both banks.	Concept of asset quality, Impact of asset quality on bank’s financial statements. Analyzing asset quality ratios is not properly explained and compared for both banks.	Concept of asset quality, Impact of asset quality on bank’s financial statements. Analyzing asset quality ratios is poorly/ not adequate explained and compared for both banks.
Management Competence	Management organization and function. Assessment of management. Evaluation factors and ratings is properly explained and compared for both banks.	Management organization and function. Assessment of management. Evaluation factors and ratings is not properly explained and compared for both banks.	Management organization and function. Assessment of management. Evaluation factors and ratings is poorly/ not adequate explained and compared for both banks.
Earnings Ability	Analysis of the different components of earnings (ROE, ROA) is properly explained and compared for both banks.	Analysis of the different components of earnings (ROE, ROA) is not properly explained and compared for both banks.	Analysis of the different components of earnings (ROE, ROA) is poorly/ not adequate explained and compared for both banks.
Liquidity Risk Liquidity	Risk Liquidity management. Factors for evaluating liquidity is properly explained and compared for both banks.	Risk Liquidity management. Factors for evaluating liquidity is not properly explained and compared for both banks.	Risk Liquidity management. Factors for evaluating liquidity is poorly/ not adequate explained and compared for both banks.
originality in reporting	Organization clarity & originality in reporting is exceptional	Organization clarity & originality in reporting is above average	Organization clarity & originality in reporting is not up to the mark
PowerPoint presentation	The presentation provides clear and comprehensive explanation to the project	The presentation provides limited explanation to the project	The presentation provides unclear and weak explanation to the project

,

University of Bahrain

Collage of Business Administration

Economics and Finance Department

Second Semester 2021-2022

Bank323 Project Submitted to Dr Mehdi

Bahrain Development Bank (BDB) & Bank of Bahrain & Kuwait (BBK)

Section 1

Prepared by:

Aleena Ansari: 20180859

Wafa Wasim: 20192031

Hawra’a Abdali: 20173479

Hussain Jaffer: 20197280

Munem Hussain: 20180411

Contents:

1 INTRODUCTION

· BAHRAIN DEVELOPMENT BANK (BDB)

· BANK OF BAHRAIN & KUWAIT (BBK)

2 CAPITAL ADEQUACY RATIO

3 ASSET QUALITY

4 MANAGEMENT COMPETENCE

5 EARNING ABILITIES

6 LIQUIDITY RISK

7 References

1. INTRODUCTION

BAHRAIN DEVELOPMENT BANK (BDB)

Bahrain development bank started its operation in the region of Bahrain from the year 1991. The bank was established by the government of Bahrain to provide different service to the people of Bahrain it is one of the oldest banks of Bahrain. The banking authorization register with the central bank of Bahrain which provides regulation and different other aspects that has been followed by the Bahrain Development Bank. The bank headquarter has been operating from the city of Manama, Bahrain. The services that have been rendered by Bahrain Development Bank has been listed as the finance and insurance, consumer banking, corporate banking and investment banking. Key individuals of the company are listed as below. (Hassan, 2004)

1. Muhammed Bin Essa Al Khalifa (CHAIRMAN)

2. Salnjeey Paul (CEO)

The banking sector has been managing operation through providing different services that has been listed as the financial services that has been supporting the SMEs in the region to explore and expand into new ventures. The assistance has been provided through different sources of the banking services which includes the finance service of Islamic Finance and Tamkeen Finance that are contributing for businesses that are listed as below.

1. Manufacturing

2. Agriculture

3. Healthcare

These are some of the industries that are getting benefits from Bahrain development bank in regard to finance services. The banking phase of Bahrain has been developing quite well as the industry has been adopting the technology in managing service implication of fintech to ensure that banking industry has been leading towards growth. The fiscal year results of Bahrain development Bank have been providing with the results that Bank has been interpreting growth which has been utilized as the Interest income of company has been amounted to BD 7,323,000, total assets of bank amounted to BD 226,483,000 and total equity has been amounted to BD 68,705,000. The Bahrain Development Bank leads towards the agreement to promote different new ventures that has been performing in region and establish assistance to help them lead business towards success over the time. The bank partnered with the European community investment to access in funding and support Brussels and European industry in the region. The following opportunities and success have been led by the organization in managing expansion and growth of banking industry in the region and impact on the economy of Bahrain over time period. (Hidayat, 2012)

The Bahrain development Bank has been providing with the different aspects of corporate social responsibility in region which has been enabling to provide community with the growth and development of Islamic banking sector and helps in providing with empowerment of startups in region to build a strong economy of the region. The Bahrain development Bank has been providing with funds to the charitable organization to manage their operations and build a strong community. These are some of the corporate social responsibilities that has been providing sustainability to the community that has been gathering positive response in the market over time. (Tabash, 2013)

BANK OF BAHRAIN AND KUWAIT

The bank of Bahrain and Kuwait has been managing operation since the year 1971 in Bahrain and Kuwait. The region demand of banking industry has been quite high which leads the managing new businesses into the industry as the bank has been owned by the jointly of agreement government of Bahrain and general public which includes local and international investors. The position of managing targets of banking services has been expanded of Bank of Bahrain and Kuwait leading towards structuring process in involving the fintech in business operation which provides sustainability and efficiency in services. The Bank of Bahrain and Kuwait has been providing same aspects of services as the different other banks operating in region with proper functioning and establishing a customer demand towards the bank.

The bank shares have been floated in the Bahrain Bourse which has been distributed among Ithmaar Bank B.S.C, Pension Fund Commission, Kuwait Investment Bank and social insurance organization share ratio owned by companies has been listed as 25.38%, 18.77%, 18.70% and 13.34% respectively. The company has been divided into categories that includes retail banking, investment banking, e-banking and multi feature accounts. The purpose of managing capital management and corporate banking has been evaluated to lead the different organization managing their finances.

Since the year 1971 Bank of Bahrain and Kuwait has been providing with sustainability and efficiency in managing operation regarding banking industry and managing business portfolio with different operations over the period of time. The Murad Ali Murad has been working as the chairperson and A. Rahman Saif has been working as the CEO of the Bank of Bahrain and Kuwait. The business has been providing with the service that has been determined to utilize changes in structure of banking system to provides opportunities and acceptance of the future stability in the market (Hussain, 2012).

The corporate social responsibility by the Bank of Bahrain and Kuwait has been consist of providing funding and regulating social causes awareness. The business has been providing with opportunities to the organization that has been working towards community provide them with support and healthier society. The progress of company in corporate social responsibility has been highlighted in the annual report of organization creating to provide achievements that has been accomplished by the Bahrain Development Bank over the period.

2. CAPITAL ADEQUACY RATIO

The capital adequacy ratio highlights Bahrain development bank and Bank of Bahrain and Kuwait efficiency to eliminate the weighted risk that has been emerged due to the credit spending of capital available in the bank. The formula utilized for the computation for capital adequacy ratio has been adding up the tier 1 and tier 2 divided by the risk weighted assets for the period. The capital adequacy ratio has been leading towards providing trust of the customers who have deposited amount in the bank as they could payoff the amount while eliminating risk of credit. The tier 1 and tier 2 consist of shareholder’s equity, retained earnings, revalued reserves and undisclosed reserves. The risk weighted assets has been based on debenture and percent of risk. This overall computation leads towards providing with capital adequacy ratio has been based on the projection, determining position, and building up trust of the customers of organization.

The capital adequacy ratio has been providing with the Bahrain Development Bank and Bank of Bahrain and Kuwait. The capital adequacy ratio has been providing with details that Bahrain Development Bank has been lowered due to the reason that company losses over the credit, which has been impacting the capital adequacy of the banking sector while analyzing capital adequacy ratio of Bank of Bahrain and Kuwait has been highlighting the progress that bank has been maintaining risk position quite efficiently over the period of time to have stable operations and building up the trust of the customers into the business which has been highlighted through increase in finance income for the bank for the period. The capital adequacy ratio of both the banks has been concerned to be stable after analyzing the details of accounts that conclude the business provides sustainable results over the period. The depositors amount within both the banking organization has been forecasted to be safe and secure while analyzing through the capital adequacy ratio of the Bahrain development bank and Bank of Bahrain and Kuwait. (Oudat, 2021)

CAPITAL ADEQUACY RATO
FORMULA
(Tier 1 + Tier 2)/ Risk Weighted Assets
BANK OF BAHRAIN AND KUWAIT		BAHRAIN DEVELOPMENT BANK
Computation		Computation
TIER 1		TIER 1
Shareholder's equity	241.8	Shareholder's equity	68.7
Retained earnings	125.6	Retained earnings	-2.65
TIER 2		TIER 2
Revalued reserves	66.8	Revalued reserves	1.18
Undisclosed reserves	61.6	Undisclosed reserves	1.14
RISK WEIGHTED ASSETS		RISK WEIGHTED ASSETS
Debenture	1555.8	Debenture	1468
Percent of risk	0.4	Percent of risk	0.4
CAPITAL ADEQUACY RATIO	0.796696	CAPITAL ADEQUACY RATIO	0.116433924

3. ASSET QUALITY

The asset quality rating provides details regarding assets of Bahrain Development Bank and Bank of Bahrain and Kuwait. The asset rating has been one of the important prospectuses that need to be analyzed for the period that assets of banks are riskier or not. The assets include the investment in bonds and stocks portfolio. Each assets have certain amount of risk that has been occurred at a time which has been crucial to be analyzed to maintain sustainability of organization. The formula that can be utilized for the computation of the asset quality risk has been evaluated as per the net profit or losses for the period divided by the number of loans bank has lend over a period of time. The second formula that has been utilized was net profit or loss divided by the total equity of the bank. The allowance for loan loss divided by total loans represents the impact of losses on allowance and percentage designated for the loan losses. The provision for loan loss ratio has been evaluated to provide with details of loans loss ratio divided by total loans for the period. These are some of the formulation which has been leading towards providing with the asset quality of the bank and provides clear image of the bank statement about efficiency and stability over the risk of losses that could organization cover and impact on profitability of the Bahrain Development Bank and Bank of Bahrain and Kuwait.

The impact of asset quality on financial statements has been represented through the implication of potential risk on assets that devalued the profits of banks due to increase in expenses of losses over the assets. The assets are being purchased to increase profit for the Bahrain development bank and Bank of Bahrain and Kuwait but if the losses started interpreting from the assets that would be affecting organization profits over the period. The value of assets starts to decrease over the period which has been impacting in the statement of financial position and statement of profit and loss. The efficiency, stability, profitability and sustainability over period of time in representing over processing and complete information of the risk. (Hawaldar, 2017)

ASSETS QUALITY RATIO
Formula
NPL's to total loans
NPL's/total loans
NPL's to total equity
NPL's/total equity
Allowance for loan loss ratio
Allowance for loan loss/total loans
Provision for loan loss ratio
Provision for loan loss ratio/total loans
	BBK	BDB
NPL's to total loans
NPL's	52.6	56.3
Total loans	2167.4	3530
	0.024269	0.015949
NPL's to total equity
NPL's	52.6	56.3
Total equity	514.5	687
	0.102235	0.081951
Allowance for loan loss ratio
Allowance for loan loss	83.1	96.2
Total loans	2167.4	3530
	0.038341	0.027252
Provision for loan loss ratio
Provision for loan loss	5.6	3.8
Total loans	2167.4	3530
	0.002584	0.001076
	BBK	BDB
NPL's to total loans	0.024269	0.015949
NPL's to total equity	0.102235	0.081951
Allowance for loan loss ratio	0.038341	0.027252
Provision for loan loss ratio	0.002584	0.001076

The asset quality rating provides details of Bahrain development bank and Bank of Bahrain and Kuwait. The progress of Bahrain development bank has been highlighting higher impact on managing risk and output of sustainability in progress and gaining higher financial progress. The overall business position of Bahrain development bank has been lower as compared to Bank of Bahrain and Kuwait.

The adequacy of allowance has been leading towards utilizing the (ALLL) Bahrain development bank and leading towards guidelines in regarding featuring of allowance of lease and loans has been implementing the progression of allowance of loans that has been managed. The allowance provides sustainability in operations of both the banks and maintain position to determine stability all over the financial aspects over the period of time.

4. MANAGEMENT COMPETENCE

The management competence has been dependent on approach to provide strategies that has been leading towards stability in working environment and management. The management has been quite competent enough to provide sustainability and leading towards achieving goals and objectives that has been set by the organization over the period and provide expansion in business portfolio. The management of the BBK and BDB has been working on introducing fintech on commercial purposes which would be helping managing performance of the organization with highly automated environment of the business. The implication of departmentalization has been gathering positive impact on business entity as each strategy has been evaluated towards progress of the business.

5. EARNING ABILITIES

RETURN ON ASSETS AND RETURN ON EQUITY
Formula
Return on assets
Net income/total assets
Return on equity
Net income/shareholder's equity
	BBK	BDB
RETURN ON ASSETS
Net income	52.6	56.3
Total assets	3760.4	226.4
	0.013988	0.248675
RETURN ON EQUITY
Net Income	52.6	56.3
Shareholder's equity	514.5	687.5
	0.102235	0.081891

The BBK and BDB has been utilizing their resources quite efficiently over the period of time which has been resulted in progress of the business through having higher financial results at the year end. The return on assets for the BBK has been lower as compared to the BDB due to the reason the amount of assets has been higher for BBK which has been causing the impact on sustainability of the return on assets. The return on equity has been providing with the results that BBK has been higher number of returns over equity due to the reason that equity has been lowered for the bank while BDB has been highlighting lower returns for the period.

6. LIQUIDITY RISK

LIQUIDITY RISK
Formula
Current asset/ current liabilities
Computation
Liquidity risk	BBK	BDB
Current asset	3576.3	152920
Current liabilities	2327.9	153334
	1.536277	0.9973

The liquidity risk has been providing with the information regarding the changes that has been occurring in the current assets and current liabilities of the BBK and BDB. The overall portion provides with the implication that company could pay off their short-term liabilities through the current assets. The position of BBK has been quite well as compared to the BDB position which has been reflected in above computation of the ratios.

References Hassan, M. A. A. a. S. A., 2004. An empirical study of relative efficiency of the banking industry in Bahrain.. Studies in economics and finance.. Hawaldar, I. K. K. P. P. a. S. S., 2017. Performance analysis of commercial banks in the kingdom of Bahrain (2001-2015).. International Journal of Economics and Financial Issues, , 7(3), pp. 729-737. Hidayat, S. a. A. M., 2012. Does financial crisis give impacts on Bahrain Islamic banking performance? A panel regression analysis.. International Journal of Economics and Finance,, 4(7), pp. 79-87. Hussain, H. a. A. J., 2012. Risk management practices of conventional and Islamic banks in Bahrain.. The Journal of Risk Finance.. Oudat, M. a. A. B., 2021. The Underlying Effect of Risk Management On Banks' Financial Performance: An Analytical Study On Commercial and Investment Banking in Bahrain.. Ilkogretim Online, 20(5). Tabash, M. a. D. R., 2013. An empirical analysis of the flow of Islamic banking and economic growth in Bahrain.. International Journal of Management Sciences and Business Research,, 3(1).

ASSET QUALITY RATING

BBK NPL's to total loans NPL's to total equity Allowance for loan loss ratio Provision for loan loss ratio 2.4268709052320751E-2 0.1022351797862002 3.8340869244255789E-2 2.5837408876995477E-3 BDB NPL's to total loans NPL's to total equity Allowance for loan loss ratio Provision for loan loss ratio 1.5949008498583567E-2 8.1950509461426485E-2 2.7252124645892353E-2 1.0764872521246459E-3

,