THE SOURCE AND APPLICATION OF FUNDS TO A COMMERCIAL BANKING SECTOR (A CASE STUDY OF ACCESS BANK PLC,)
ATTENTION:
BEFORE YOU READ THE
PROJECT WORK, PLEASE READ THE INFORMATION BELOW. THANK YOU!
TO GET THE FULL
PROJECT FOR THE TOPIC BELOW PLEASE CALL:
08068231953,
08168759420
TO GET MORE PROJECT
TOPICS IN YOUR DEPARTMENT, PLEASE VISIT:
THE SOURCE AND
APPLICATION OF FUNDS TO A COMMERCIAL BANKING SECTOR
(A CASE STUDY OF
ACCESS BANK PLC,)
ABSTRACT
This project work
examines the sources and application of funds in a commercial banking sector
with a particular reference to Access Bank Nigeria Plc. This is an
attempt to explore and reveal the extent to which the bank is sourcing its
funds and how it uses those funds so generated in achieving the bank’s goals
and objectives with a particular reference to laid down accounting principles
and Central Bank’s Prudential guidelines on commercial banks. Also to
include is the review of related literature, text books, magazine, newspapers,
journals and even the proper website on the internet will be browsed for easy
reviews, analysis and down loading of current related information for the
project work. The study will also include the various ways and method of
data collection i.e. primary and secondary sources through interviews,
observations and examination of existing banks records. The major
difficulties to be encountered in the course of this project are time and
financial constraints as collection and analyzing of data requires a lot of
time, to pay regular visit, to the venue of the case study, attending lectures,
writing of assignments and quiz, visiting the cyber café for internet browsing
and also attending one’s domestic responsibilities. Financial requirements
such as production and distribution of questionnaires, transportation and
binding of the project work expenses forms the major limiting factors to the
project work. The research study will also highlight the need for
prudential management and project accountability with good policies on loans
and advances as the way for the bank to acquire maximum liquidity and affective
application for the accrued funds by customers and shareholders. The
challenges of the modern banking in a global trend and proper solutions and
recommendations for the bank development, investments and enhanced customer
relations will also be highlighted.
TABLE OF CONTENTS
CHAPTER 1:
INTRODUCTION
Background of the
Study
Historical Background of Access Bank
PLC.
Statement of the Problems
Objective of the study
Significant of the
study
Scope and limitations of the
study
CHAPTER 2: REVIEW OF
RELATED LITERATURE
Introduction
Share
capital
Loan stock and debentures
Preference
shares
Retained earnings
Utilization of
funds
CHAPTER: RESEARCH
DESIGN AND METHODOLOGY
Introduction
Description of
Research
Description of
Population
Sample of the
Study
Description of investigation
Technique
Data Analytical
Procedure
CHAPTER 4:
PRESENTATION OF DATA
Analysis of data
Interpretation of
Data
Testing and prove of hypothesis and
findings
CHAPTER 5: SUMMARY,
CONCLUSION AND RECOMMENDATION
Summary
Conclusion
Recommendation
References
CHAPTER ONE
INTRODUCTION
Background of the
Study
The source of funds in an organization
denotes the various ways in which cash inflows to operate the business is
realized. The followings are some of the ways cash came into a business:-
Through an increase
in liability
Through an increase
in net worth
Through a decrease in
asset
Through a net profit
after tax
Though sales of
shares, preferred or common stock
It also shows ways an extra money comes
into the organization through consultancy services, borrowing in form of
loan. Summarize sources of funds to any organization devotes all the ways
money comes into an organization for its operational utilization and for
achieving its stated goals and objectives. However for an organization to
thrive well it must also spent money to achieve its stated goals and
objectives, thus application of funds refer to the various ways the sourced
funds are put to usage in order to increase the value of fixed or working
capital. The followings are the various ways funds can be put to use;
Where there is an
increase in assets
Where there is a
decrease in liability
Where there is a
payment of cash dividend
When shares are
purchased
Where there is a
decrease in Net worth.
Having explained the meaning of sources
and application of funds in a financial institution, it will be good to see
what accounting bodies say about the same subject matter. The Accounting
Standard Steering Committee (ASSC) in their Standard Accounting Practice No. 10
(ASSAP 10) requires that all firms with an annual turn over of gross income of
N25, 000 or more should produce funds statement. In its explanatory notes
it describes the statement and principles underlying its preparation as
follows.
That the profit and loss account and
the balance sheet of a company should show the amount of profit during the
year, and the disposition of the company’s resources at the beginning and the
end of that year. But for a more understanding of the company’s affairs,
it’s necessary to identify the movement of assets, liabilities and capital
which have taken place during the year and the effect of such movements on the
net liquid funds.
The above statement is not specifically
stated in the balance sheet or profit and loss accounts but rather can be made
available in form of statement of sources and application of funds (fund
statement).
Though the fund statement is in no way
a replacement for the profit and loss account or the balance sheet, but yet it
contain in summary form the information contain in the two above. The
objective of such statement is to show the manner in which the operations of a
company are financed and the format selected should be designed to achieve this
objective.
A fund statement should be able to show
the resources from which funds flow into the company, and the way in which they
are put to use. It should clearly show the funds generated or absorbed by
the operation of the business and the manner in which any resulting surplus of
liquid assets have been applied or any deficiency of such assets has been
financed where by distinguishing the long term from the short term.
The statement should also distinguish
the use of funds for the purchase of fixed assets from funds used in increasing
the company. The fund statement will provide a link between the balance
sheet at the beginning of the period, the profit and loss for the period, and
the balance sheet at the end of the period. A minimum netting off should
take place as this will tends to mark the significance of individual important
figures for example the sale of one building and the purchase of another should
generally be kept separate in a funds statement.
The figures from which a fund statement
is constructed should generally be identifiable in the net profit and loss
account, balance sheet and all related accounts or notes. Furthermore the
fund statement should show:
The profit before tax or loss for the
accounting period together with adjustment for items, which did not use funds
or provide funds e.g. depreciation. The individual paid and those
proposed to be paid.
Acquisition and disposal of fixed and
other non-current assets.
Fines raised by increasing or expending
in repaying or redeeming medium or long term loans or issued capital of the
company.
Increase an decrease in working capital
sub-divided into its components and movement in net liquid funds. Net
liquid cash means cash at hand and at bank, less bank over drafts repayable
within one year.
Increase in liabilities and decrease in
assets in liabilities is regarded as a source of funds, while decrease in
liabilities and increase in assets are regarded as application. Some of
the functions of commercial banks includes the following.
i)
Acceptance of Deposits
On current account:- In this case
the money is with drawable by cheque on demand. There is no interest
payable to the customers on this account. The Access Bank current is a flexible
account that offers the customer a lot of new modern banking services either in
person, online, or by phone. Access Bank operates the following types of
current accounts.
Individuals
Joint account
Corporate account
Non governmental
organizations
Sole proprietorship/enterprise
account
Partnership account
Trustees/executers/administration
account
Unincorporated
societies, club and association account
ii)
Savings Deposit Account:- This is also an interest
yielding account, where customers are only allowed to withdraw money by using a
pas book and also allowed to deposit using the same pass book or the bank
teller.
The Access Bank Savings Account
attracts a competitive interest rate which is paid monthly on the full closing
balance.
The features of the account are as
follows
Zero
Cots
Quarterly statement of account
transactions
No invoice for withdrawals
Withdrawal and deposits from any of
their branch.
Statement of transaction on request.
It also offers electronic banking,
which includes Internet Banking, Telephone Banking, and Mobile Banking to
enable customers’ access to their account from just about anywhere.
iii)
Domiciling Account:- These are accounts maintained in
currencies other than the Nigerian naira, the accounts are essential to the
business operations of entrepreneurs due to the sizing global business
challenges and opportunities.
Access bank domiciliary accounts
carryout the following transactions:
Telegraphic fund transfer to Third
party Own
Withdrawal of foreign currency cash and
travelers cheques.
Deposit of foreign currency cash and
travel less cheques
Choosing of foreign currency cheques
and foreign currency draft issuance
Lotlers of credit
The Access Bank Domiciliary Account
supports the following currencies
US Dollars
British Pounds
Starling Euro
The minimum opening balance for the
Access Bank Domiciliary Account is five hundred US Dollars (US$500) or its
equivalent in Euro es Pounds Starling.
iv) Long Term
Financing
Access Bank supports their customers in
the attainment of their long term business, by providing of a broad array of
financing options to suit their particular requirements. This is
particularly handled through the followings:
Term loans
Project finance
Syndications
Note issuance
facility
v)
Products and Services
At Access Bank, there is an extensive
range of products and services tailored provide a value added banking solutions
ranging from day – day transactional banking and complex financing structures,
to help customers achieve all the products and services they need in obtaining
liquidity, strong finding reduced capital costs and stronger balance sheets.
Other services Include:
Cash management
This is carried out
through;
Access Bank
collection services
Access Bank Payment
Solution
Access bank in liquidity
management solutions
Access bank in
correspondent banking services
Access bank
information solutions
Electronic banking
Access Bank provides the customers with
an easy and component ways to carry out their banking at the comfort of their
homes and offices
vi)
Working Capital Financing
At Access bank customers are offered
with a wide rang of working capital financing to enable them meet up with their
short-term financing needs. The above services is obtainable through the
followings:-
Drawing against undeared bank cheques
Overdraft facilities
Revolving credit facilities
Invoice discounting
Distributor credit plans
Trade finance
And leases
Historical Background
of Access Bank
Access bank was incorporated on 8th
February, 1989 as a privately owned commercial bank. It obtained a
banking license in December 1988 and commenced business on 11th May,
1989. The bank was converted to a public limited liability company on 24th
December 1998 and was listed on the Nigerian Stock Exchange on 18th
November, 1998. In December 2001, Access Bank was successfully
recapitalized and the bank’s board of directors appointed the current executive
management team with a clear mandate to reposition the bank as one of Nigeria’s
top five (5) banks by the year 2007.
Since the new team lead by Mr.
Aigboje Aig-Imoukhede (MD/CEO) and Mr. Herbert Wigwe (Deputy MD) assumed
office, the bank has witnessed a movemental change in all facets of its
operations.
The new Access Bank is well positioned
to become Nigeria’s leading provider of financial services, by providing its
customers with banking services and solutions that exceeds their expectations
and helping them manage their business more effectively.
i)
Business
Access bank is engaged in the provision
of universal services to corporate, commercial and individual customers.
Within the first year of its five year transformation program, the bank
recorded over N1 billion in pre-tax profits for the 2002/2008 financial year
exceeding the total cremelative profits made by the bank since inception.
It is for this reasons amongst others that Access bank shares were the most
actively traded stocks on the Nigerian stock exchange in year 2008 and the bank
was nominated as “Bank of the year 2008” by This Day News Paper.
The bank maintained this outstanding
performance in its 2008/2009 financial years and was ranked 5th in
terms of total assets from a lowly 65th in 2001. in
recognition of its strong operating performance, the bank was conferred with an
“A” rating by the Global Credit Rating Company (GCR).
ii)
Technology
Success in the highly competitive
financial services sector often depends on the speed with which an organization
reacts to opportunities and market changes as at and when due.
In October 1999, Access Bank became the
first Nigerian bank to deploy the Flexcube Banking Application to Support its
banking operations. Flexcube is an end-to-end, integrated product suite
for universal banking. Flexcube has evolved over the years in response to
changes in global financial world. The most recent version is Flexcube
6.2 “a state of the art universal banking solution”.
Consistent with the bank’s desire to
bring world class banking to customers and after an extensive due diligence review
by KPMG international, the bank took a bold decision to upgrade its existing
Flexcube application to the latest version 6.2, a browser enabled
version. This ground-breaking upgrade positions access bank as the first
bank in Africa to implement the latest version of Flexcube and the second most
advanced Flexcube user in the world after one of India’s biggest banks –
Syndicate Bank. In recognition this the bank recently received the
Hewlett Packard for the best implementation of a core banking infrastructure in
West Africa.
iii)
Value Added Services
The bank defines value as the ability
of its products and services to deliver cost savings to its customer’s board in
the course of the year approved a charter on the bank’s internal audit.
The charter isolates and insulates the Internal Audit Department from the
control or influence of the Executive Management and also frees staffs within
the Internal Audit unit from operational and management responsibilities that
could impair their ability to make independent reviews of all aspects of the
banks operation there by making the department independent.
v)
Financial Summary
The financial summary presented below
is extracted from the reporting accountants report on the profit forecast of
access bank for the years ending 31st December, 2005, 2006 and 2007,
assuming the offer is fully subscribed, and the reporting accounting’s report
on the audited financial statement of Access Bank for each of the five year
ended 31st December, 2009.
Profit Before Tax (PBT)
The bank’s PBT for the year ended 31st
December 2009 was N952 million, representing a 17% increase over the previous
year’s PBT of N811 million. The bank’s PBT is projected at N2.02 billion,
N4.89 billion, and N7.85 billion for the years ending 31st December
2005, 2006 and 2007 respectively.
Profit After Tax
(PAT)
The bank’s PAT for the year ended 31st
December or increase their capacity to generate more revenues. The bank
has hosted several sector forums to enable existing and prospective customers
learn about best practices, share experiences with pears, and freely interact
with regulators and policy makers. These interactions have had
significant positive impact on customers business.
The bank also collaborated with
Nigerian Maritime Authority to develop a functional framework for
implementation of the newly enacted sabotage legislation. Local shipping
companies, as beneficiaries of this legislation have confirmed that the
implementation framework completely addresses the operational and funding issues
the law intends to resolve.
At significant financial cost to the
bank, it engaged, a local software developing company to incubate “cliuc”,
which is a software application that allows customers to reconcile their bank
statements in seconds. The not only made this software available to
customers but its free of charge and the bank also bears the cost of
installation and training of their employees.
iv)
Corporate Governance
Access Bank has imbibed the highest
standard of corporate governance and best practices. In line with the
bank’s quest to maintain the highest standards and ensure the independence of
the internal audit, the 2005, 2006 and 2007 respectively is projected at N1.56
billion, N3.76 billion and N6.05 billon respectively.
 |
|||
 |
|||
8 Profit before
Tax
Profit after tax 8.0
(N’b)
(N’b)
6
6.0
4
4.0
2
Profit before Tax
Profit after
Tax
2.0
 |
|||
 |
|||
0
0.0
2000 2001 2002
2008 2009
2005 2006 2007
E
= Estimates based on
Access Bank’s profit forecasts for the years
Ending 31st December 2005,
2006 and 2007
Total Assets
As at 31st December 2009,
Access Bank’s total assets stood at 31.34 billion representing a 39% growth
over the previous years total assets of N22.58 billion.
vi)
Shares
At present the authorized share capital
of the bank stood at N6 billion comprising 12 billion ordinary shares of 50k
each, while its issued and paid up share capital is N2 billion comprising of 4
billion ordinary shares of 50 kobo each.
vii)
Nationwide Spread
Access Bank’s Head Office is situated
at Plot 1665 Oyin Jolaefemi Street, Victoria Island Lagos Nigeria’s commercial
capital. Access Bank has in excess of 118 bank branches in Nigeria’s
major commercial centers
The Chief Executive of the bank is the
Managing Director, who is accountable to the Chairman Board of Directors for
the overall running affairs of the bank.
The current Board of Director of the
bank is permanent Nigerians as follows.
1.
Mr. Aigboje Aig – Imoukhuede
- Chairman
2.
Mr. Herbert
Wigwe
- Deputy MD
3.
Mr. Taukeme Edwin Koroye
- Executive
Director OPS
4.
HRH Oba Shafi
Sule
- A Non Executive
Director
5.
Dr. Cosmos
Maduka
- A Non Executive
Director
6.
Mr. Gbenga Oyeb ode
MFR
- A Non Executive
Director
7.
Mr. Adekunle
Disu
- A Non Executive
Director
8.
Mr. Oritsedere Samuel Otubu
- A Non Executive
Director
Statement of
Problems
(a)
The uncertainty due to lack of strong assets base of some financial
institutions in the country and the lack of political stability since 1993 has
negatively affected the nation economic performance, the effect of the above
has lead to the unwillingness of the wealthy individuals to invest their money,
and also the massive movement of people and their goods from one geographical
zone to another in the country due to political, sectarians and religious
crises, the like not experience since the late sixties, has also lead to
restriction s in the volume of protective economic activities.
Therefore as a result of all these the
research work has been directed to explore whether or not this situation has
any effect on the sources and application of funds in the bank.
(b)
The major reason of government equity participation especially in banking
services is to enable government control the commanding heights of the economy
and get closely involve in all the banking activities, so as to arrest the
problem of distress banks that has become a common phenomenon in Nigeria, hence
the N25 billion bank capitalization requirement announced by the CBN Governor
in July 2009, and other financial commissions e.g. (E.F.C.C.) ie. The Economic and
Financial Crimes Commission Act 2009.
Therefore to what extent has these
government efforts affected the bank’s sourcing and funding its business.
(c)
Banking industries has now, due to globalization become highly competitive and
challenging in Nigerian. Therefore to what extent has the management
performed effectively in the emergent competitive and challenging market
environment, so as to adequately financed their banking business.
(d)
There is also the problem of credibility and public confidence in the
operations of financial institutions, especially the banking sector of the
economy. Ramparts cases of frauds and financial mismanagement have marred
the progress of many banks. This project wants to appreciate the
situation and recommend ways to combat such lapses. Other problem
question which are likely to arise are:
How can problems of loans be predicted
Did customers received due attention
from the bank
Do banks incure a very huge amount of
debt
What is the effectiveness of Federal
Government Monetary policies measured on capital finance of banks
How proper funding and application of
the bank’s sourced fund helped in the economy of our country.
What are the impact of Federal
Government fiscal policies on the sources and application of funds of a bank of
this nature?
Objective of the
Study
The optimum aim of any profit making
organization is to make profits and also service the community in which it was
established and therefore obtain the maximum profit obtainable, commercial
banks are therefore not left out in this regard.
It is when an organization is
financially sound that individuals, other organizations and the government will
become interested to invest in such organization. In time with the problems
stated earlier in 1:2 above, many people keep away form commercial banks
activities and this is what prompts the researcher a commercial bank sources
its funds and the various ways those sourced funds are expended.
This study is also aimed at trying to
show the profitability level of the banks and how such funds are
utilized. This study will also urge and suggest the most suitable ways of
investing surplus funds that accumulated. Various monetary policies will
be studied together with both the political and social sphere of the business
environment.
Significance of the
Study
This project work is intended to play a
vital role in the monetary endeavours of financial institution of this
kind. First and foremost the findings of this research work will
tremendously contribute to Access Bank Nigeria Plc. and other banking
industries towards improving their sources of funds, and finally adopting the
most effective way(s) to apply or extend such funds.
Another important and significant of
the research work is to broaden the researcher’s knowledge and experiences,
coupled with the advantage of practically meeting with various people who are
professionals in their field. The research work will be of benefit to
others (third party), as its intended to provide an indepth knowledge and
information as to how the banking normally sourced and apply their funds.
Moreover, the research work will give
room to good decision to be taking as regards investment in the commercial
banking sector more especially Access Bank, as the decision will be availed
with all the necessary information he will required to base his judgment on
either investment will be profitable or not.
Scope of the Study
The scope of this project work is to
cover all possible/legal sources of funds to a commercial bank and, all the
effective or best ways such funds will be applied, in order to safe guard the
shareholders funds and hopefully make profits.
However, its obvious that in carrying
out a research of this kind, the researcher is bound to be faced with some
constraints which includes time constraints, constraints into having access to
vital information from the organization concerned and which are necessary from
the work, and also the financial ability of the researcher to source for funds
to carter for the research expenses.
For those of us that are workers, the
project work really present to us a conflict of interest i.e. between our
responsibilities as workers and that of our studies (research work), therefore
as a result one hardly has enough time to deront to the project work alone, but
rather to have some sort of compromise between the two.
Consequently writing the series of
quizzes and assignments, which one is subjected to, and which will be recorded
to form part of the final assessment for the award of National Diploma ND in
Banking and Finance. This means that one has the conflicting roles of
writing the project and as well preferring for final exams.
The cost effect of data can not be
left out, as one is always asked to comeback the following day due to
lack of time to have interview with the top management of the bank, and
of course involves money, bearing in mind economic conditions of the country.
The researcher due to lack of readily
available materials for the project work from the bank concerned, resorted to
the use of the INTERNET were journals, historical background of the bank
etc. were browsed, downloaded into temporary storage device, and finally
printed into hard copy, which indeed require a lot of money to buy time, storage
device, printing the hardcopy and the computer knowledge to do all these.
AFFILIATE LINKS:
Comments
Post a Comment