MBL Young Bankers Appreciation Award 2018
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MANAGING DIRECTOR & CEO'S REVIEW
Dear Stakeholders,
Mercantile Bank Ltd (MBL) has performed exceptionally well in all key areas of banking business activities during 2017 and maintained its growth trail in an extremely challenging and distress environment. At the outset I wish to congratulate and extend my sincere appreciations to the Board of Directors and Management Team and every staff at MBL.

Steady growth inclusive of deposits, advances and annual profits has ensured long term sustainability and better future prospects for further expansion, as one of the largest private banks in the country. Strength of the Balance Sheet, solid financial fundamentals, compliance with regulatory requirements, high standards of corporate governance, transparency and commitment to international best business practices were the key to our success and to earn the reputation of being one of the fastest growing and most compliant private commercial bank in Bangladesh.
WORLD ECONOMIC REVIEW
The global pickup in activity that started in the second half of 2016 gained further momentum in the first half of 2017. Growth is projected to rise over this year and next in emerging market and developing economies, supported by improved external factors—a benign global financial environment and a recovery in advanced economies. According to International Monetary Fund, global output growth is expected to rise to 3.5% in 2017 and 3.6% in 2018. The aggregate growth figure masks significant cross-country and regional variations. Growth in the advanced economies is expected to increase from 1.7% in 2016 to 2% both in 2017 and 2018. Overall growth outlooks for emerging market and developing economies and in India are gaining momentum both in 2017 and 2018. Although geopolitical risks remain elevated in Middle East region hosting the bulk of our migrant workers, overall growth is expected to increase due to some improvement in oil prices in 2016. Forecast for China’s growth, though gradually moderating, has been revised up by 0.1 percentage point and 0.2 percentage point in 2017 and 2018.
BANGLADESH ECONOMY
The Bangladesh economy has emerged as one of the most sustained growth economy in the world. The GDP growth is estimated at 7.28% in FY2016-17, significantly up from 7.11% in previous year. Other contributors to growth were continued political calm, improved power supply, and higher growth in credit to the private sector. Average annual inflation eased to 5.5% in FY2017 from 5.92% in the previous year, largely in response to lower global commodity prices, steady domestic supply, and a stable exchange rate between the Bangladesh taka and the US dollar that translated into taka appreciation against the currencies of most of Bangladesh’s trade partners.

GDP growth is expected to moderate to 7.4% in FY2018 as domestic demand rises. Slower export growth caused by weaker consumer demand in the euro area and the United Kingdom is expected in part because the currencies of these destination markets have depreciated against the dollar. Increases in wages and continued access to credit will help to sustain private consumption. Public investment is expected to strengthen through fiscal expansion as the authorities speed up their implementation of infrastructure projects. Growth in FY2019 is expected to rise at 7.6% as the broad momentum in the previous year continues.
BUSINESS AND FINANCIAL ACHIEVEMENTS
MBL has poised as one of the leading financial institutions and maintained satisfactory growth across its Business Units. We took a strategy to ensure sustainable quality growth by adhering to compliance in all spheres of our operations, and pursuing manifold sources of revenue. The Bank remained focused in all key areas like capital adequacy, quality asset growth, reducing nonperforming assets and strong liquidity thereby ensuring sound revenue.

At the end of the year 2017, total deposit of the Bank stood BDT 220,516.63 million against that of BDT 165,257.45 million till 2016, registering a growth rate of 33.44%. The amount of Fixed Deposit, Current Deposit and Deposit under Schemes contributes 34.94%, 3.80% and 27.41% of total deposits. Bank’s Loans and Advances, which are well diversified, have grown by 32.30% during the year under review. Total loans and advances of the Bank at the end of 2017 reached to BDT 199,660.72million as against BDT 150,912.52 million in December 2016. MBL remained one of the market leaders in terms of asset and liability growth among the private commercial banks.

In 2017, the Bank has made a noteworthy growth in terms of foreign business. The Import Business of the Bank grew by 36.48% whereas the Export Business grew by 19.21% during the year 2017. The Bank recorded BDT 190,753.60 million import business at the end of the year 2017 against BDT 139,766.40 million in December 2016. Export business stood at BDT 134,752.90 million till December 2017 against BDT 113,035.20 million at the end of 2016. During the year under review, the Bank also handled remittance business of BDT 29,976.40 million. In 2017, the Bank was able to make Operating Profit of BDT 6,570.57 million as compared to BDT 4,436.44 million in 2016. This was a growth of 66.95 %. Earnings Per Share (EPS) stood at BDT 3.89. Non Performing Loan (NPL) ratio stood at 3.79% in 2017.
AWARDS AND ACCOLADES
The Bank has received significant institutional recognitions, awards and accolades. We do have strategy, intent and ability to take the Bank forward. Our Annual Report contains enough disclosures. We also publish financial statements complying with all applicable Accounting Standards. In recognition, The Institute of Chartered Accountants of Bangladesh (ICAB) conferred upon us the Certificate of Merit for our published accounts and reports for a number of years.
CAPITAL BASE
MBL believes that Basel III is not merely a reporting system rather it is new risk management technique for the Bank. Therefore, it has put extensive care and attention to implement Basel III inside the Bank. With a view to facilitating the way of implementation, the Bank has formed “Basel Implementation Unit”. As at 31 December 2017, the Bank’s Basel III Tier 1 Capital Ratio was 7.91% and Tier 2 Capital Ratio was 4.02%, compared to 8.35% and 4.68% at 31 December 2016 respectively.
BUSINESS MODEL
The Bank’s priority is to maintain a robust and stable financial and operating platform, which will facilitate us to support our customers and provide superior returns to shareholders. In view of the current macroeconomic conditions and global developments, the Bank has shifted the business focus from corporate book to SME and retail book. The marked shift in business strategies adopted by the Bank in SME/retail lending and CASA has positively contributed to the Bank's better performance, despite significant stress in the economy.

The Bank recognizes the small and medium enterprises (SMEs) as an important sector in its business strategy. In view of this, it is imperative to operate with the ideal mix of corporate and personal banking in the portfolio composition with optimum size to maximize the returns to scale from these two key areas of core business activities of the Bank.

We are continuously expanding our network across the country for attaining geographical and demographic dividend. At the end of 2017, we had 129 branches and two subsidiaries i.e. Mercantile Bank Securities Ltd (MBSL) and Mercantile Exchange House (UK) Limited. At the end of 2017, we have as many as 163 ATM booths at different important hubs across the country. We intend to keep increasing the number of branches of MBL as well other new products of Alternate Delivery Channels across the country in 2018.
LEVERAGING TECHNOLOGY
Technological leadership is an absolute necessity for the delivery of value to all our stakeholders amidst rapidly changing life styles and paradigms. Mercantile Bank is committed to place cutting edge technology at the forefront of our delivery channels and operations. For core banking software MBL has implemented “TEMENOS T24”, a world class proven technology platform, ensures real time integrated banking software. Our endeavor to continuously upgrade its core banking platform and invest in other and hardware is ongoing- ensuring not only its alignment with technology but also to bring efficiency to its operations and ensure continuous customer satisfaction.
HUMAN RESOURCES
Our Bank acts on the conviction that Human resource is the most valuable asset for the Bank. It is our continuous endeavor to create an organization of mutual trust, establish an open and enabling environment where our people could work professionally with self respect, dignity and freedom of speech. We believe that our investments in Human Resources Development are keys to sustainable growth. Bank plans to hire, develop and retain its human resources base with the right level of skills and talent to meet current and future needs.
COMMITMENT TO GOVERNMENT
MBL made significant contribution to the government’s effort in collection of revenue. We are proud that being one of the largest taxpayers in the country, we have become an important source of revenue for the Government of Bangladesh. As per law, Bank deducts income taxes, VAT and excise duty from various services at source. Besides, the Bank also pays income tax on its earnings. In 2017, the Bank has made a provision of BDT 1300 million for the National Exchequer.
CORPORATE SOCIAL RESPONSIBILITY
Banking Industry is an integral part of our economy which contributes to the society through banking services. The impact of business on the society has become a crucial issue. Business organizations are now regarded as “Corporate Citizen” with obligation and responsibility to the society. We are emphasizing on social, ethical and environmentally responsible approaches to business activity. The Bank examines the environmental effects are approved which are detrimental to the environment. MBL is well aligned with Bangladesh Bank’s Guidelines on this aspect. The Bank continuously plans to be more focused on poverty alleviation through education and health care, for the long run benefit of the nation. With this vision for CSR activities, MBL has established a Foundation immediate year after its incorporation. Each year one percent of the operating profit or BDT 40 lac, which one is higher, contributed to this Foundation. The activities of the Foundation and the Bank’s are noticeable mostly in the areas of health and education, development of sports, talent development, capacity development in banking sector etc. In the year 2017, MBL donated BDT186.25 million for CSR activities.
LOOKING AHEAD
The year 2018 is expected to be the year of growth as major macro-economic fundamentals remained fairly positive during 2017 which will continue to contribute to our economic growth and development. Various development and policy initiatives taken by the Government are expected to drive the economy to a higher growth trajectory in the years ahead. Mercantile Bank is well positioned to benefit from the transformation that is taking place in the banking landscape with low interest rates and intense pressure on margins and volumes on one hand and technology driven exciting developments in new products and services on the other.
OUR STRATEGIES FOR 2018
In order to be successful in the backdrop of this rapid changing competitive sector, we have prepared ourselves accordingly. Our strategy is to continue the business that we do well. Better management of our exposure in corporate/ commercial business and diversification of portfolio are our focus. Among others, the following are the priorities for 2018:
Concerted efforts and aggressive marketing to procure more low-cost deposits with a view to reducing cost of deposits and improving Net Interest Margin (NIM) of the Bank.
Emphasizing on SME, Agri-credit and Retail Credit to make the loan portfolio more diversified.
Focusing on disciplined Credit Risk Management especially credit appraisal process including documentation and monitoring with a view to maintaining strong asset quality.
As banking industry is predicted to remain highly competitive with low interest margins, fee-based income and non-funded incomes shall be a strategic imperative in 2018. Maintaining asset quality by restricting increment of non-performing assets through early detection, monitoring, corrective action plans, shared information and disclosures to keep future recurrence in check.
Strengthening the recovery against rescheduled, classified and written-off loans for reducing NPLs to a large extent through intensive recovery measures and further arresting fresh slippages.
Taking all required steps to maintain its position as a fully compliant bank in line with regulatory guidelines.
ACKNOWLEDGEMENT
On behalf of management of the Bank, I express my appreciation and thanks to the Government of the People’s Republic of Bangladesh, Governor and other officials of Bangladesh Bank, Bangladesh Securities and Exchange Commission (BSEC), Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Registrar of Joint Stock Companies and Firms for their continuous support and assistance, guidelines and cooperation provided to the Bank from time to time.

We have a dedicated team who are well equipped to meet the challenges of modern and highly competitive banking industry while remaining compliant to all regulatory issues. I would like to thank the MBL team for their passion and effort to attain the corporate vision, mission and strategic objectives at the same time ensuring that our core value remains consistent. My sincere note of gratitude goes to our dynamic Board of Directors for their valuable and judicious policy support and timely decisions to steer the Bank for being the finest corporate citizen.

With best wishes,

Yours sincerely,
Kazi Masihur Rahman
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