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MANAGING DIRECTOR & CEO'S REVIEW
Dear Fellow Stakeholders
AS-SALAMU-ALAIKUM

We have delivered a credible result in 2019 for shareholders, customers and employees given the significant challenges facing MBL and the industry. Our possibilities are deeply interwoven and energized by Bangladesh’s rapidly developing economy. As one of the country’s third generation private sector banks, MBL has always strived to play a pivotal role in the economy and society. We look towards the future with optimism and a deep sense of responsibility towards nation-building. A fast-paced economy like our country needs a robust financial ecosystem to flourish; and the banking sector has always been at the vanguard in supporting the country’s growth aspirations. We have expanded our reach across the country and have emerged as a reliable banker for the society we operate in. As one of the leading private sector bank in one of the world’s fastest-growing economies, MBL offers a wide spectrum of financial solutions to a diverse range of customer segments spanning retail, small and medium enterprises and corporate businesses. As we completed our 20th year of operations, I feel honored and proud to lead the Bank – a local bank striving to serve a million of lives every day in a meaningful and humane manner. Trust and customer centricity have always been the key of the Bank’s association with its customers. There have been slowdowns in the growths of some of the developed economy’s banks. The developing economy has not been spared either i.e. India. It’s under these circumstances we find ourselves comparatively well positioned.

Our Bank has over these years stood by customers as a reliable friend in need – by not only being approachable and available at all times, but also helping them to meet their needs and life aspirations. I would like to thank all my predecessors over the years for their vision and contribution towards building this great institution. I believe that our culture is one of the biggest unsung strengths. This has been one of the key driving forces for us to build a great institution and ensure that we survive tough times. Over the last decade, the Bank has gone from strength to strength, and in addition built a lot of hidden gems among its businesses. Let me spell out some of them. The Bank has a strong deposit base which stands at BDT 26,296.11 crore as on December 31, 2019. Amongst the private sector banks, we currently have one of the largest branch & ATM network in the country. In mobile banking, we feature amongst the top players in terms of innovation. Whereas, in the credit card business, we positioned ourselves as a strong contender and have been growing at a much faster pace than others. Our Corporate, Retail & SME business has been built into an enviable financial institution with extremely healthy metrics.

However, I must also acknowledge that in the recent years, the Bank has faced some headwinds; our bank has also been affected by the overall financial sector trend of asset quality deterioration due to slowdown in the overall corporate segment of the economy. There was also an increase in operational risks in recent years. We are not yet out of the woods, but we are cautiously optimistic about the future. We need to learn from the mistakes of the past and ensure that they are never repeated again. We realize changing ourselves will be arduous and time consuming but we also strongly believe we are ready for the battle ahead and have the team in place to overcome any odds. Over my tenor, I have spent time extensively with the various business units across the Bank. I have also met many of our large corporate customers. Based on these interactions, I do believe there is lot of potential for us to grow and be among the top three players in each of our business segments and aspire for larger market share as per our corporate mission.

I am pleased to state that we have taken some strong and positive strides towards defining our priorities, the goals that we want to accomplish and how we will get there. We intend to sustain our winning mind-set, continue our growth momentum and get our fair share of business from our customers. We also want to strengthen our core business technology platform in view to improve our execution. That is why we are planning to upgrade of Temenos T24-the CBS. The strategy pivots around delivery of three important vectors – Growth, Profitability and Sustainability.

The entire senior management team is in place to execute the strategy and convert our aspirations into reality over the years. We have reoriented the organizational structure that would enable us to streamline and simplify our functioning and bring in greater accountability, productivity and efficiencies we have also made considerable progress in building cost consciousness across the Bank, and expect to improve our cost efficiency over the next few years. We have incorporated the learning from the past to improve our policies and processes. We have raised the bar further for the credit filters applicable to new credit proposals and strengthened our early warning systems.

Moving on to financial performance, the profitability and the asset quality metrics for the Bank in fiscal year 2019 improved materially after having witnessed challenging year. The Bank continues to have a strong balance sheet with a capital adequacy ratio of 13.92%. Our subsidiaries had another good year as they continued to gain market share in their respective segments. On the Credit Operation, we have been focusing on portfolio diversification, reduction in concentration to selected sectors and project loans and have further increased our focus on transaction banking and working capital business. The performance of the corporate segment in fiscal 2019 improved as compared to the past few years. In this segment, we are focusing on building a relationship based model with SME and Corporate business customers to drive growth across both assets and liabilities. MBL continues to remain a strong customer centric bank and has shifted its deposit strategy to focus on getting higher CASA plus term deposits. Finding out the favorable deposit mix for the Bank is to be top priority for us in coming days.

MBL is successfully achieved to stabilized its’ spread (3.30%) in this year of interest rate turbulences by strategically maintain our cost of deposit stoutly at 6.92% and manage to uphold the yield on advance at 10.22%-which I consider remarkable compared to the yield of last year i.e. 9.59%. Thus, our net interest income has reached BDT 860.06 crore which is almost 13% higher than that of previous year. But the net noninterest income of the Bank has been a concern for us. Although, the fee and commission based income has increase, it has not been able to cope up with the non-interest expense resulting in a negative figure which is higher than last year. It is because the foreign exchange business exposure of the Bank has not flourished. The import, export & foreign inward remittance has stood at BDT 18,465.00 crore, BDT 16,315.23 crore and BDT 3,523.91 crore respectively. The coming year will be massive challenge for the Bank to expand the existing portfolio sharply. The coming year would be a watchful year for the Bank in view to scan our existing loan portfolio for optimized result by the way of alignment and re-alignment of sectoral allocation and identification of new thirst zone of the existing loan portfolio.

For us, branch banking continues to be an integral part of our growth strategy. The role of branches in deposit mobilization from new customers drives the Bank’s acquisition strategy across products and provides customer service and builds trust. However, the branch formats continue to get smaller with enhanced productivity led by automation and digitization of service operations. We are now focusing on agent banking in a view to enhance our network resulting of which will conqueror unbanked population of the country.

The Bank’s ability to innovate and offer right product proposition to its customers has helped the credit portfolio to grow, which reached BDT 23,689.05 crore, at a growth rate of 5.65% while the overall deposit of the Bank stood at BDT 26,296.11 crore at a growth rate of 7.93%. We have achieved significant diversification within our credit portfolio and deposit mix with a strong risk management architecture that has ensured that our asset quality has improved more than peer average. The Bank has always been ahead of the curve in terms of building its digital capabilities and has made significant investments in technology and digital analytics to manage risk outcomes and optimize costs. In the year 2019, the costincome ratio was 44.17% while Burden coverage ratio was 78.61%. We also manage to bind the Non-Performing Loan at 4.86%.

The Commercial Banks have traditionally used Savings Accounts as a product to start its relationship with customers and then build on it by cross-selling other products and services- it has not changed substantially over the past years. We are now increasingly looking beyond deposit base for customers. We are now looking to leverage our all business platforms for crosssell opportunities. The organization structure and the KPIs have been re-aligned to ensure direct accountability, greater differentiation and focus on developing relationshipbased long-term business model instead of focusing on shorter term targets. Our idea here is to have a full team with all the requisite banking as well as digital expertise and skill sets required to rethink traditional banking processes. It will start afresh, end-toend customer journeys, which will be completely digitalized. This will, however, take time to materialize and we will share our progress over the coming years. The Bank continues to invest in enhancing employee capabilities and provides career development opportunities to its employees. During the year, the Bank revamped its internal job posting process to allow internal talent to take on leadership positions based on their merit.

MBL has always believed that its long-term success depends on the progress of communities and the people we serve. The Bank continues to play an active part in extending credit to the economically active but under-banked rural population, particularly women, through its retail credit initiative ‘MBL Annanya’. MBL Foundation continues to work towards providing sustainable livelihoods and creating value for the target communities through its educational scholarship programs and providing assistance towards helpless and distressed class of society. During the year, under CSR activities, the Bank through its’ Foundation spend an amount of BDT 15.68 crore .

In 2019, MBL won the ‘Best Presented Annual Report-2018’ from the ICAB. In terms of maintaining Anti Money Laundering (AML) global standard, MBL is currently one of the top five banks of Bangladesh as per information provided by Bangladesh Bank in a meeting with our Board. The ranking jumps to 2nd when we consider only local Banks. This is a matter of great pride for us. Hopefully the coming years will bring some more excellence awards and acknowledgements as the whole Bank is performing in same harmony.

Our aspiration is to deliver around a healthy Return on Equity (ROE) on a sustainable basis. The reduction in cost, optimize portfolio management driven by a risk-adjusted returns framework and improvement in operational efficiency would be the key drivers for RoE improvement over the next couple of years as well. Notwithstanding the forthcoming challenging and unrest market conditions, we are strictly committed & positive to our goals. We stay behind in view to minimize the risks of the current economic situation, world trade tensions and the uncertain future path of interest rates. We will be proactive in managing costs and investment for revenue growth where necessary, but we will not take short-term decisions over long-term interests of the business. The forwardlooking approach of us will cater the requirement of our customers.

Bangladesh continues to be a fastgrowing economy with significant opportunities and possibilities. From the perspective of the financial industry as a whole, the liquidity issues faced by some of the financial organizations over the last couple of years which also can create some friction going ahead, but it presents opportunities for banks. Banks with a healthy capital position, quality assets and strong risk management capabilities can go far than their peers in coming years for sure. Great product mix, vast physical footprint, cuttingedge digital capabilities, robust corporate governance practices and one of the most valuable brands in Bangladesh- all these combined open many possibilities for the Mercantile Bank Ltd. in the near future. I believe that MBL is a great place of superior culture and manpower. If we execute well, we have the potential to improve our market share rankings without sacrificing anything whatsoever. While delivery of growth and profitability is important, sustainability forms the foundation of the Bank’s strategy. We want to build sustainability in our business performance and operations with disciplined execution and conservatism at the core.

At the time of writing, the Covid-19 virus outbreak has caused some uncertainty. The banking industry is likely to face a challenging operating environment and lower profitability in 2020. If the outbreak is contained within a few months, there would be only a modest shaving to total income growth. To respond to the situation, our priorities are clear. Based on our financial strength, we aim to continue to support our clients; look after our people; manage our bank in line with the interests of our shareholders; and play our part in limiting the impact of this virus in our communities. We are determined to help all our stakeholders to confront this challenge.

I would like to take this opportunity to thank my colleagues for believing in MBL and the vision of the Bank. I am also deeply grateful to all the customers and shareholders for standing by us and showing their faith in us all these years. My heartfelt thanks to our prudent and dynamic Board of Directors of the Bank for keeping their trust intact in me and provide valuable guidelines in timely manner with a view to steer the Bank for being the finest corporate citizen.

Lastly, on behalf of my team, I would like to express my sincere gratitude and acknowledgement, to all our regulatory authorities such as Bangladesh Bank, NBR, BSEC, DSE, CSE and RJSC&F for their continuous support and guidelines from time to time.

Wishing you all the best.



Md. Quamrul Islam Chowdhury
Managing Director & CEO
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