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Report of Managing Director & CEO
Dear Shareholders,
We have a very clear vision for the Mercantile Bank Limited: to be the finest corporate citizen. This is an enduring, long term vision. At MBL, we aspire to excel at securing and enhancing the financial well-being of people, business and communities. Our strategy to achieve our long-term vision is built around a customerfocused culture comprising people who thrive on providing outstanding service, a strong balance sheet, globally tested applications of technology, and a focus on productivity and efficiency.

In 2014, Bangladesh economy could have performed better had it not been for the lack of investor’s eagerness resulting from political uncertainty, financial scams, a general downturn in asset quality, and rise in Nonperforming Loans. Banks were faced with a situation where liability growth mismatched with asset growth. Despite these, however the economy achieved a GDP growth of 6.12% in fiscal year 2014.

Amid this, we adopted a strategy of consolidation, by reducing costs in various fronts including liability cost, focusing on existing business, increase of our asset base, managing classification of accounts to keep the growth momentum. I am happy to share with you that despite difficult times, the overall performance of MBL was steady. During the year, we focused on few key financial indicators. These are maintaining capital adequacy, focusing on quality of assets, managing classification, recovery of non-performing loans and broadening low and no cost deposit base. These ensured risk, return trade-off in our banking operations. The operating profit of the Bank edged up to BDT 4.41 billion during the year 2014, from BDT 4.26 in 2013. The profit growth momentum bears the testimony that despite challenges, we performed well in terms of our financial result by achieving targets almost in all sectors of our banking operations. We maintained substantial reserves to strengthen the capital base of the Bank despite continued pressure on interest margins, exchange earnings, and provisioning requirements.

We have kept our NPL ratio at 5.10 percent through our prudent asset quality management control and policies, ethical business practices, and strong corporate governance. During the year, we have emphasized on restructuring our deposit mix with a view to keeping down the cost of fund and at the same time grow a sustainable deposit base by reducing dependence on price sensitive corporate deposits. Total deposits stood at BDT 140.48 billion, Loans and Advances at other hand BDT 117.06 billion at the end of 2014, registering a growth of 12.77% and 19.83% respectively. Bank’s Cost of deposit reduced to 8.26% in 2014, from 8.93%. Total Shareholders’ Equity increased to BDT 13.52 billion in 2014 experiencing 7.51% growth over that of 2013. MBL also made noteworthy contribution in facilitating Export and Import business. During the year Exports was BDT 78.35 billion while import was BDT 107.09 billion. During 2014, Bank’s inward foreign currency remittance stood at BDT 18.21 billion, a growth of over 46%.

We continue to strengthen our capital funding and liquidity position and we are well poised to meet future regulatory requirements. We issued subordinate debt bond of BDT 3.00 billion, which leveraged our balance sheet and our capital stood at 19.10 billion and Capital Adequacy Ratio (CAR) at 12.95%.

Technological transformation was a key strategic priority for the Bank and in 2014, we embarked on the project of implementation of our Core Banking Solution "TEMENOS T24"- a world class proven technology platform. We are investing in industry-leading online and Mobile Financial Services. Our investment in growth areas, including Agriculture, SME, and Green Banking is rising. Our objective is to take MBL to global standards and cater to ever changing customer needs.

As part of Green Banking, MBL is supporting loans to environment friendly proposals and refraining from projects which are non-compliant. We have established a separate Green Banking unit and various measures have been adopted to increase investment in this sector. Our encouragement on financing ETP or water treatment plants in existing Textiles and Readymade Garments continued, and we are seeking investments in Renewable Energy and Energy Efficiency sectors.

We are continuously expanding our network across the country for attaining geographical and demographic dividend. At the end of 2014, we had 100 branches and two subsidiaries i.e. Mercantile Bank Securities Limited with 7 branches and Mercantile Exchange House (UK) Limited at London, United Kingdom. At the end of 2014, we have as many as 127 ATM booths and 20 Cash Deposit Machines (CDM) 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 2015.

We believe that employees are key in delivering results. We are focused on building a culture that encourages people to be responsible and accountable, and where leadership is demonstrated at every level of the organization. Our training centre is well equipped and organized where the focus is continuous learning. We have a committed, passionate and skilled workforce and an excellent customer base, and we are continuously agile to the fact that we want to make every customers’ experience with us delightful.

MBL believes that, true success does not consist in profit maximization, but in doing something good for the less privileged. With a view to fulfilling our Corporate Social Responsibilities (CSR) activities, MBL has established a Foundation named Mercantile Bank Foundation in 2000 to carry out various benevolent and charitable activities. "Mercantile Bank Abdul Jalil Education Scholarship" provides financial assistance to poor and meritorious students across Bangladesh. On its founding anniversary 2nd June each year, MBL awards few personalities of the society for their outstanding contribution in fields of Education, Healthcare, Culture, Liberation War based Research, Bengali Language and Literature, Economy and Economic Research, Commerce and Industry, Journalism, Sports, Agriculture based Research and Development, and Science and Technology. Financial assistance in health sectors, assisting the victims of natural disasters, development of sports, and distribution of warm clothing in winter months, sponsorship programs for the mentally and physically challenged are some of the CSR activities which Mercantile Bank Foundation conducts each year.

2014 was a challenging year for the banking industry of Bangladesh, and hopefully 2015 will be an active year for the business and economy. The Banking industry is becoming increasingly competitive. Modern and hi-tech business is replacing conventional banking. Banks are handling similar financial products. Hence, customer delight, differentiation in products and delivery, efficient management and meaningful governance will make the difference in achieving sustainable growth and remaining ahead of competition.

In this ever changing competitive environment we will pursue a strategy to give what the customer wants, to manage risks particularly credit risk, maintain strong capital and liquidity, and manage costs at optimum levels. All these will drive progress. We hope to curve our niche and edge on our competitive advantages.

Tackling uncertainty and unexpected challenges of the economy, coupled with rising tends into classification meeting expectations of diverse services and demand for lowering of interest rate on the asset side and raising interest rate on liability side will be the major factors in determining and positioning of banks in 2015 and beyond. We are hopeful of managing these challenges well.

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 help and assistance, valuable guidelines and co-operation provided to the Bank from time to time. I am also very much thankful to all my colleagues in the Bank for their profuse help and efforts to attain the corporate vision, mission and strategic objectives by upholding our ingrained institutional core values. I acknowledge my debt and gratitude to the respected members of the Board for their valuable and judicious policy support to navigate this institution in the right direction for taking it to a higher place of sustainable growth with competitive edge.

The Bank is well positioned for the future and I am confident that we have the ability to continue to deliver superior long term performance for our customers, our shareholders, our people and the communities in which we operate. Thank you again for your support this year. Your management team will continue to work hard to ensure that Mercantile Bank remains strong and successful. We all look forward to building a sound, sustainable growing "institution".
Kazi Masihur Rahman
Managing Director & CEO
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