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Founder Chairman's Speech
Bismillahir Rahmanir Rahim
Dear Shareholders, Respected Members of the Board and the Dedicated MBL Team,
It gives me immense pleasure to welcome you all, on behalf of the Board of Directors, in the 13th Annual General Meeting (AGM) of Mercantile Bank Limited (MBL). I would like to express our heartiest gratitude and sincere thanks for your continuous support and co-operation which, has helped us achieve the greater success in almost all arenas of our business amid this highly competitive banking industry scenario. Without your kind collaboration and advice, it would have been simply impossible for us to attain strong footing in the business arena and stamp our name as a bank of ‘high reputation' in the banking industry of Bangladesh.
World Economy in 2011—"Slowing Growth, Rising Risks"
In 2011, the global economy has passed an edgy new phase. Global activities have weakened and become more uneven, confi dence has fallen sharply, and saggy risks are growing. Against a backdrop of unresolved structural fragilities, a barrage of shocks hit the international economy this year. Japan was struck by the devastating Great East Japan earthquake and tsunami combined with swelling turmoil in some oil-producing countries. At the same time, the handover from public to private demand in the U.S. economy stalled, the euro zone encountered major fi nancial turbulence, global markets confronted a major sell-off of risky assets, and there are growing signs of spillovers to the real economy.

The structural problems facing the crisis-hit advanced economies have proven even more intractable than expected, and the process of devising and implementing reforms even more complicated. The outlook for these economies is thus for a continuing, but weak and bumpy, expansion. Prospects for emerging market economies have become more uncertain again, although growth is expected to remain fairly robust, especially in economies that can counter the effect on output of weaker foreign demand with less policy tightening.

Recent projections indicate that global growth will moderate to about 3.4% over the year 2011, from more than 5% in 2010. Real GDP in the advanced economies is projected to expand at an anemic pace of about 1.2% in 2012 and 1.9% in 2013, helped by a gradual unwinding of the temporary forces that have held back activity during much of the second quarter of 2011. However, this assumes that European policymakers contain the crisis in the euro zone periphery and U.S. policymakers strike a judicious balance between support for the economy and medium-term fi scal consolidation, and volatility in global fi nancial markets does not escalate. Moreover, the removal of monetary accommodation in advanced economies is now expected to pause. Under such a scenario, emerging capacity constraints and policy tightening, much of which has already happened, would lower growth rates in emerging and developing economies to a still very solid pace of about 6 % in 2012. In view of the slow pace of global demand rebalancing, high commodity prices, and the modest growth outlook for advanced economies, long-term interest rates for key sovereigns are likely to stay low. This may foster risk taking in other economies-- previous episodes of money recycling on a massive scale have rarely been without fi nancial accidents. Unless policies are strengthened, especially in advanced economies, nothing beyond a weak and bumpy recovery is in the cards.
Bangladesh Economy in 2011
Although the economy of Bangladesh grew at a rate of 6.66% in FY 2010-11, it faced serious macroeconomic challenges in 2011. Higher infl ation remained as a major concern throughout the year. Price hike in the international market, increase in domestic demand, petroleum price raise in the domestic market as well as massive government borrowing from the banking system add fuel to the fl ame of infl ationary pressure. The foreign exchange reserve faced downward trend and fall below USD 10 billion because of excessive import, slowdown in remittance and decline in foreign aid disbursement. As a result, domestic currency depreciated against all the major currencies of the world. The bearish trend in the Capital Market was another matter of real concern. For the banking industry of Bangladesh, 2011 was really a challenging year. Higher demand of credit against low deposits growth rate, huge borrowing by government from the banking channel and a cautious monetary policy resulted in tight liquidity position in the industry.
Performance of the Bank in 2011
In the backdrop of the challenging environment of 2011, MBL focused on core banking business, made good growth in profi tability and maintained a sound asset quality. The Bank remained fi nancially strong by dint of its resolute focus on the vision of becoming country's fi nest corporate citizen and also emphasizing its' focus on commercial banking and fi nancing business, SME, Retail Consumer and relentless pursuit of providing excellent and need-based customer service.

The Bank mobilized deposits of BDT 102,262.02 million as at December 31, 2011 compared to BDT 75,629.14 million till 2010. Total loans and advances stood at BDT 79,999.80 million at the end of 2011, which was BDT 66,377.70 million at the end of 2010. Import business stood at BDT 95,008.70 million in 2011 compared to BDT 89,524.10 million in 2010. Export business stood at BDT 81,311.80 million in 2011 as against BDT 59,404.20 million in 2010. The Bank collected foreign remittance of BDT 7,150.00 million in 2011 compared to BDT 5,108.10 million in 2010.

In 2011, the Bank was able to make pre-tax profi t of BDT 3,004.17 million as compared to 2,435.93 in 2010, indicating 23.33% growth. Net profi t available for appropriation stood at BDT 1,734.12 million in 2011. Earnings per Share (EPS) stood at BDT 3.49. Non Performing Loan (NPL) ratio stood at 2.61% in 2011. MBL made adequate provision against classifi ed loans. Specifi c provision made is signifi cantly higher than last year. Adequate provision made the Bank stronger than before. Tier-1 Capital stood at BDT 8,906.50 million at the end of 2011 compared to that of BDT 7,100.80 million at the end of 2010. Tier-2 Capital reached to BDT 1,794.40 million at the end of December 2011 as compared to that of BDT 1,583.52 million at the end of 2010. Return on Assets (ROA) was 1.49% as on December 31, 2011 and Return on Equity (ROE) was 17.95% as on December 31, 2011. Consolidated Capital Adequacy Ratio (CAR) of the bank stood at 10.60% against minimum requirement of 10.00% as per Basel II Capital Accord in December, 2011. Net Interest Margin (NIM) stood at 2.93% at the end of 2011 suggesting a healthy growth in Net Interest Income.
Corporate Governance Practice
Backed with a strong and experienced Board, befi tting its aspiration to become a leading bank of prominence, the Board of Directors remains committed to ensure the highest standards of corporate governance throughout the organization with the objectives of safeguarding the interests of all stakeholders and enhancing the shareholders' value and fi nancial performance of the Bank.

The Board of MBL always takes strategic decisions emphasizing good corporate governance to protect the interests of the Shareholders and other stakeholders at large, increasing their confi dence and establishing their trust. They always guides the Bank towards the goal set by the Shareholders, ensuring highest standards of integrity, accountability, transparency, ethics and professionalism of the management dealing with banking business. For smooth functioning of the Bank, two supporting committees of the Board precisely, Executive Committee and Audit Committee are retentlessly providing guidence and direction to the Management since the inception of the Bank.

MBL discloses all material facts to the Stakeholders for taking their timely economic decisions. MBL, depending on the structure, size, and location of the Branches and strength of its manpower, has delegated duties and powers to the Management. The Bank has appointed Chief Financial Offi cer (CFO) to look after the overall fi nancial affairs meticulously. Company Secretary has also been appointed to provide advices to the Board of Directors/Management and to comply with statutory requirements.

We fi rmly believe that, sound control culture has been established within the Bank. External Auditors are appointed by the Shareholders in the AGM. They audit the accompanying Financial Statements of the Bank and provide opinion whether the Financial Statements refl ect the true and fair views and have been prepared in accordance with applicable rules and regulations. For an effective control system, separate and independent Divisions, namely Internal Control & Compliance Division (ICCD) and Board Audit Division are functioning within the Bank. Internal Audit team of the Bank conducts their regular audit functions based on different manuals, instructions, guidelines and procedures laid down by regulatory bodies and the Board of the Bank time to time. The Board undertakes prompt actions to protect the Bank and shareholders wealth based on internal audit reports.
CSR Programs
We, as a Corporate citizen also have a vital role to play in the community and MBL since its inception cares for all of its stakeholders along with the community people. MBL believes that CSR is fundamental to attain longterm sustainability and business growth. CSR plays an important role in promoting the image of the Bank locally and internationally too. Accordingly, MBL integrates social, environmental and economic issues into its values and operations. MBL operates its banking activities in economically, environmentally and socially sustainable manner in line with the Bank's Vision and Mission Statement. Looking forward, to enable us to prosper and for the sake of betterment of all the communities we touch, we have set up the Mercantile Bank Foundation in 2000. The Bank is legally bound to contribute each year 1% of its operating profi t or BDT 4.00 million (which one is maximum) to Mercantile Bank Foundation and indeed it is our immense pleasure to announce that the actual amount contributed towards betterment of the society often exceeds the promised fi gure (1% of operating profi t or BDT 4.00 million, whichever is higher) by manifolds. The foundation will cover all aspects of human well-being - from social and medical welfare and community development to heritage preservation and environment conservation. The Foundation awards some famous personalities of the country each year for their outstanding contributions in the society. MBL Foundation supports the writers and publishers by purchasing their books and distributing these to different educational institutions on the occasion of national and historical days. The Foundation supports in establishing hospitals, clinics, etc. for the improvement of the health sector, donates one time fi nancial endowment to the poor artiste, literature-patron and fatal disease-affected poor patients, supports the poor parents for arranging their daughter's marriage, aids poor but bright students for continuing their studies. From 2011, the Foundation has started providing Education Scholarships to poor but meritorious students in the name, ‘MBF Education Scholarship'. This year, fi nancial support has been given to 384 students of J.S.C, S.S.C and H.S.C level of the country. The goal of the foundation is to do nothing less than transform lives, and underlying all its activities is the principle of sustainability.

MBL is trying to enrich economic and indicators of society by creating employment opportunity, helping the underprivileged people and ensuring environment friendly society. MBL always shares the misery of the distressed people. The Bank continuously strives to assist the victims of natural disaster by providing fi nancial help in rehabilitation and rescue purposes.
Customers Service
We know Customers' needs are varied with the change of time and technology; hence, MBL always emphasize on customer service excellence and provides technology based real service to attract the potential customers and also retain the existing customers. Quality service is the responsibility of every staff and uniformity of action is maintained at all level. The Bank always remained very competitive in offering services to the customers and redesigned its products to meet the customers need. MBL each year has been increasing its branch and ATM network to provide the banking services to mass people. Number of correspondent relationships is augmented and agreements with foreign exchange remittance companies are being signed every year to facilitate the expatriates to remit their hard-earned money to the doorsteps of the benefi ciary easily and quickly. Services through alternative delivery channels were expanded and many services are now available to our customers through the channels. Research & Planning Division regularly conducts surveys and studies on business related issues which helped the management to take decisions more appropriately and provide services to customers effi ciently. The Bank arranged syndication loans for its customers and also participated in the syndication loans arranged by other banks and fi nancial institutions. Emphases are given on SME & agro-based fi nancing, the two most potential sectors for expansion of business. MBL participated in various road shows along with the regulators for building awareness and developing skills. The direct interactions with customers helped to nurture and cement our relationship. Undivided attention has been paid to our customers to provide them prompt service. The Bank used to train its offi cial for providing better services to its Customers.
Human Resources Development
In MBL, we consider our employees as a resource, an asset, that provides competitive advantage to the organization, and on whom organizational success is leveraged as the Bank is always prepared and committed to play strategic HR Management. To establish the perfect strategic HR, MBL has developed the linking human resources to strategic goals and objectives in order to improve business performance and develop organizational culture that foster innovation, fl exibility and competitive advantage. Employees of the Bank play signifi cant role in providing better customer service. A brilliant and well-organized offi cer can win the heart of a customer by delivering on time services and which, eventually create a strong, encouraging and everlasting business relationship with him. "Effi ciency is our Strength"- is the MBL's theme against Human Capital.

MBL expects that they will ensure their effi ciency in delivering customer service. The effi cient work force of Mercantile Bank acts as the fundamental pillar to reach the Bank at today's height of success. MBL always emphasizes to satisfy both the customers and employees offering better facilities than other commercial banks, such as viable remuneration package, training facilities at home and abroad, and other fringe benefi ts. MBL has formulated its Human Resources Policy calibrating with recruitment procedures, pay and benefi ts, training and development, disciplinary and grievance etc. Each year, MBL recruits new employees, fresh and experienced as well to meet the customers' ever-increasing demand and to support the ever changing business scenario.
Future Outlook & Challenges
The 2011 fi nancial year has been a challenging one for the Bank and many of its customers. While the resources sector has performed well, other parts of the economy have been subject to headwinds including fragile consumer and corporate confi dence, political uncertainty, a continuous currency devaluation and mayhem in Capital market. Ongoing offshore instability continues to impact the domestic economy and has the potential to place further upward pressure on wholesale funding costs for domestic banks.

The 2011 fi nancial year has been characterized by subdued credit growth and intense competition. At this stage there is nothing to suggest that the 2012 fi nancial year will see any material improvement in this front. Nor it is clear what the catalyst will be for a meaningful revival in consumer and corporate confi dence which is a prerequisite to stronger demand for credit. Infl ation continues to be a worry. Complaints about the cost of living are already being heard from consumers; these are augmented by rise in prices of consumer items on both the world and domestic markets.

Against all these backdrops, the Bank will continue to operate in a disciplined and prudent manner with a focus on driving productivity initiatives which will deliver sustainable improvements in business performance. The Bank's priority is to maintain a robust and stable fi nancial and operating platform, which will enable us to support our customers and provide superior returns to shareholders. We intend to continue fi ght like the strongest contender as we always are. We will refocus our priorities on organic growth, our capacity to respond to change, loyalty to our values, and maintaining our solid expertise in risk management and operational effi ciency. While, we have no doubt that the 2012 fi nancial year will be a challenging one for the Bank and its customers, we are nonetheless very optimistic about the Bank's future and its ability to continue to deliver superior returns to its stakeholders. While we have much to celebrate about the achievements of the last 12 years, we also have much to look forward to. As the Bank enters a new era, we have a stable and strong organization with a business franchise which is the envy of many of our peers.

However, despite these obvious advantages, we cannot afford to be complacent in the face of a rapidly changing domestic and global competitive environment. In fact, we will need to be increasingly innovative and nimble if we are to take advantage of the opportunities which will inevitably accompany both these changes. Looking forward, our decisions from the inception to invest heavily in technology, human capital and productivity initiatives, have placed us in a strong position. Our challenge now, is to ensure that as an organization we optimize these investments for the benefi t of our customers and our shareholders.
At the conclusion, I express my heartfelt thanks and appreciation to all at various level of the Management along with the other staffs for the time given and effort to achieve the goal of the Bank. The confi dence that the shareholders and clients have reposed on us has always been the source of our strength. We are grateful to them for their continuous support and co-operation. We are thankful to the Government of the People's Republic of Bangladesh, Governor of the Bangladesh Bank, Securities and Exchange Commission, Dhaka Stock Exchange, Chittagong Stock Exchange, our respected Shareholders, valued Customers, Patrons and Well-wishers for keeping their faith and trust on us to go ahead.

I sincerely thank Ahmed Zaker & Co. and K. M. Hasan & Co for carrying out the external audit professionally and advising us on various compliance issues relating to International Accounting Standards and Bangladesh Accounting Standards. Finally, I wish to thank my colleagues in the Board for their important contribution to the Bank's strategic thinking and most for their strong leadership in view of the current edgy operating environment. Their relentless support and commitment during the year were worthy of deep appreciation.

We believe Mercantile Bank Limited is in great shape and well poised to meet the challenges of the upcoming years and we are convinced that we will play a vital role in building the society by fi nancing the economy and helping clients turn their dreams into reality. At MBL, our number one goal is to fulfi ll this important role, RESPONSIBILITY.
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