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Chairman's Message
Dear Stakeholders

AS-SALAMU-ALAIKUM


For over 20 years, Mercantile Bank Limited (MBL) is contributing towards the growth of Bangladesh economy by creating entrepreneurs and serving the underserved. Our guiding principle in this regard is to empower people, businesses and communities by enhancing their financial well-being. We are proud to be regarded as a safe, strong and community minded organization by our customers. It is our delight to be judged as a good place to work by our employees, a good place to be associated with by our customers, stakeholders, and a good place to invest by our shareholders.

 

Since I took office as Chairman of the Board of Directors of MBL in July 2019, it has been an honor for me to be engaged with stakeholders across different layers of the organization in our common attempt to sustain the business growth of the Bank. I am pleased to report that the Bank posted a resilient financial performance in 2018 in spite of some challenges in the operating environment. It has indeed been another significant year for the Bank, which made good progress on its strategy, strengthened its balance sheet and delivered quite satisfactory returns. This achievement illustrates that we have the suitable business model to deliver sustained value for our shareholders as well as other stakeholders.

 

Global Economic Review

In 2018, global economic growth is estimated to have reached 3.0% when calculated at market exchange rates, or 3.6% when adjusted for purchasing power parities; the highest growth rate since 2011. Currently, all major developed economies are experiencing a synchronized upturn in growth. Compared to the previous year, growth strengthened in almost two thirds of countries worldwide in 2018. Growth of global GDP assumed to be slow in the coming years. This slow pace will affect both developed and emerging market economies. The trade war between the United States (US) and China in particular may lead to a harder than expected decline in global GDP growth. However, Bangladesh’s textile industry may gain if US-China trade war prolonged.

 

Bangladesh Economic Review

In 2018, Bangladesh met United Nations criteria for graduating from ‘least developed country’ status by 2024. The elevation to ‘developing economy’ means a significant boost to our nation’s self-image. Bangladesh has achieved outstanding success in both poverty eradication and human development. Aided by a fast-growing manufacturing sector, Bangladesh’s economy has averaged above 6% annual growth for nearly a decade, reaching 7.86% in the financial year 2017-18. Per capita income has risen nearly threefold since 2009, reaching $1,909 this year. Bangladesh is moving ahead on the development path at a rapid pace. GDP growth in recent years has benefitted from robust domestic demand, underpinned by strong private consumption growth and a mild recovery in private investment and exports. Remittances have turned around significantly after declining for two years in a row. Momentum in industrial and services growth have been sustained.

 

MBL Performance in 2018

In 2018, we continued significant progress amidst challenging operating environment. Our focus was on to maximize revenue generation, to identify new business and cementing strong relation with existing clientele. The combined efforts of all the stakeholders paved the way for the Bank to meet key financial targets despite a steady profitability. Through a wider business effort we were able to record a steady Pre-tax profit of BDT 4,350.94 million and a Post-tax profit of BDT 3,000.94 million for the year 2018. We experienced steady growth in our lending volumes which resulted in Loans and Advances growing buoyantly by 12.31% year-on-year. In contrast, the deposit base grew moderately, increasing by 10.49% year-on-year. Bank mobilized deposits of BDT 243.64 billion and total loans and advances stood at BDT 224.23 billion at the end of 2018. Our core business of lending remained the main source of revenue for the Bank, contributing 72.49% to gross revenue while the non-fund based income being the other main source of revenue came primarily from fee and commission, trading in shares and the receipt of dividends. In addition, we have made strong focus on Trade Finance, Readymade Garments, Commodities, Iron, Steel, Real Estate and other diversified economic sectors for maintaining stable growth in the year 2018. Earnings per Share (EPS) were BDT 3.68, Return on Average Assets (ROA) was 1.09%, Return on Average Equity (ROE) was 16.55% and NIM was 3.01% as on December 31, 2018. Shareholders’ Equity increased to BDT 18.68 billion in 2018.

 

Assets Growth and Quality

We have experienced 12.00% growth in total assets which stood at BDT 291,385.65 million as at the reporting date, mainly driven by the growth in loans and advances. We were cautious about the increasing credit risk and took steps to strengthen our recovery process to mitigate the impact on asset quality. Despite these efforts, the non-performing ratio moved upward to 4.82% due to a few large accounts. Those accounts are however backed by adequate security.

 

AD Ratio and CRAR

Our Bank has sustainable growth over the recent past, as indicated by our total assets growth 12.00% and Advance Deposit (AD) ratio 86.30% as on December 31, 2018. We are very much vigilant to comply with Bangladesh Bank’s instruction. We have been gradually scaling our total capital base to facilitate the business growth. Presently Capital to Risk Weighted Assets Ratio (CRAR) is 13.28% where Tire-1 Capital Ratio is 8.08% (Including Buffer Capital) and Tire-2 Capital Ratio is 5.20%.

 

Information Technology

Banking environment has become highly competitive today. Emerging technologies have changed the banking industry radically through digitization and networked banking platform. Mercantile Bank has been effectively leveraging technology to serve its customers better. We have already implemented Core Banking platform. MBL has always been moving with the latest technology and time-to-time the Bank has adopted different advantages of the technology which has enriched its IT infrastructure. We believe investment in technology facilitates access to untapped resources and improve competitive edge. Our people are also continuously learning use of latest technology technique and financial knowledge to help upgrade the Bank.

 

Healthy Returns

We continue to reward our shareholders with healthy dividend payout. In 2017, we have been paid industry remarkable dividend 17% Cash and 5% Stock dividend. I am glad to announce that the Board approved 15% Stock dividend for the year 2018. This will be gradually improving though our continuous effort.

 

Financial Inclusion

We are committed to uphold our corporate motto ‘Efficiency is our strength’. Mercantile Bank continues to place its brand in the market and enhance accessibility by expanding its network of Branches and Alternate Delivery Channels. Our customers have useful and affordable access to our financial products and services which we deliver in a responsible and sustainable way. Our endeavor is to get the unbanked and under banked section of the society to have better access to our financial products and services. Bank serves a large customer base comprising individuals and institutions through a network of 139 branches supplemented by 173 ATMs & 20 CDMs across the country. Today, MBL is a platform, where customers have access to useful and affordable products and services that meet their needs (i.e. transactions, payments, savings, credit and insurance) that are delivered in a responsible and sustainable way. In addition to providing all ranges of banking services, MBL is also providing other services through its 2 subsidiary companies, 2 Off-shore Banking Units, Internet Banking & Mobile Financial Services etc. In a part of financial inclusion, we are going to start Agent Banking and Islami Banking operations to get the unbanked people in 'MBL Umbrella'.

 

Better managing our Risk

The perception of risk management has already fundamentally changed the approach to business and it is further evolving with expanded scope and coverage. Risk management is ingrained in our culture. Managing risks effectively is fundamental to the successful execution of our strategy, while enabling us to deliver sustainable value to our multiple stakeholders. Our risk management activities require that the risk is identified, measured, aggregated and managed. Accordingly, our risk policies aim to analyze and monitor the risk within appropriate limits. We allocate sufficient resource to monitor and control core risk areas. Our risk management approach and policies are regularly reviewed and updated to account for changes in the Bank’s business strategies and the external landscape, notably spanning legal and regulatory stipulations.

 

Our Corporate Social Responsibility (CSR)

Mercantile Bank CSR is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders. It is an integral part of our mainstream business. Always we presume to contribute to the community through different projects, but our main focus is to help millions of underprivileged children and poor people in Bangladesh. Mercantile Bank promotes CSR activities, apart from its own fund, through Mercantile Bank Foundation, which acts as a helping hand to the distressed people of the country. The areas of our contribution under the banner of corporate social responsibility (CSR) are well diversified across different segments as well as geographical areas. Our main contributions are in the sectors of Education, Healthcare, Disaster Management, Art and Culture, Sports etc. It is our great pleasure that our Bank has spent BDT 122 million in 2018 for CSR activities having growth of 69% over previous year.

Besides, as a part of CSR activities Bank provided ‘Mercantile Bank Abdul Jalil Education Scholarship’ to the meritorious and poor students across the country under the category of J.S.C, S.S.C and H.S.C from 2011. Like previous years in 2018, Mercantile Bank Foundation provided awards to 5 (five) eminent personalities for their outstanding contribution in different areas under the heading ‘Mercantile Bank Award-2018’. The Bank has newly introduced ‘MBL Young Bankers Appreciation Award’ among the young talented private commercial bankers in 2018. Basically, the aim of this award is to inspire young bankers and make them more professional.

 

Our Corporate Governance and Transparency

Mercantile Bank will continue to maintain the highest standards of Corporate Governance as we believe this is a predominant issue for Banks to obtain stakeholders confidence for “Institution Building”. We recognize the principles and importance of Corporate Governance and have been complying with the statutory requirements and also voluntarily formulated and adhered to a set of strong Corporate Governance practices. We have a set of rules of Corporate Governance in compliance with applicable regulatory framework and are reviewed regularly by the Board of Directors. We are always alert in upholding their interest at any cost as we are largely indebted to them. In Corporate Governance disclosures, MBL has been awarded ‘Certificates of Merit’ at the ICAB awards for Best Presented Annual Report 2017, which testifies to our commitment for promoting transparency vis-a-vis our multiple stakeholders. Furthermore, in recognition of our unwavering commitment towards best customer service, CSR activities and overall good governance, our Bank was awarded “National Productivity and Quality Excellence Award-2016” by National Productivity Organization (NPO) under the Ministry of Industries of the Government of the People’s Republic of Bangladesh.

 

The Way Forward

We started 2019 with positive changes to our political and socio-economic landscape and renewed hope for higher levels of inclusive growth. MBL is strongly aware of the increased responsibility that we, and indeed all businesses in Bangladesh, have to ensure to improve the lives of all of our citizens. I am proud of the role MBL continues to play in supporting the economy.

 

The Year 2018 was a good year for the Bank. Though there were some internal and external challenges, we have achieved moderate growth in terms of all the Key Performance Indicators. Mercantile Bank continues to remain optimistic for the year ahead, as we target to grow our core businesses, seek new avenues of investment, and endeavor to remain ahead of competition in the industry. The Bank will remain attentive to ongoing developments and will pursue its selective growth strategy. We will seek to consolidate our positioning within existing businesses while pursuing meaningful expansion of other area of businesses. With respect to liability management, we shall prioritize to build sustainable deposit base with more importance on ‘no cost- low cost deposits’.

 

We shall also continue our relentless efforts to upgrade the service quality by providing real time need based array of services to our clientele and at the same time to raise skill levels of our employees and make them more proactive and responsive to emerging challenges. New products/services and initiatives will be launched so that we can enhance our value proposition to existing customers, and acquire new business relationships. We will reinforce the Bank’s branding presence by increasing our network of branches. We are in process of establishing two new subsidiaries i.e. ‘MBL Asset Management Limited’ (including venture capital), ‘MBL MyCash Limited’. In 2019, we are going to start Agent Banking and Islami Banking operations subject to approval from regulators.

In pursuit of sustainable business growth, the Bank will invariably continue its good corporate governance practices, sound risk management policies, compliance with the prudential guidelines. We will enhance our Corporate Social Responsibility activities beyond education and health care in line with UN Sustainable Development Goals (SDGs)

 

Acknowledgements

My gratitude to the Government of the People’s Republic of Bangladesh, Governor and other officials of Bangladesh Bank, Bangladesh Securities and Exchange Commission, Dhaka Stock Exchange, Chittagong Stock Exchange and other regulatory bodies. On behalf of the Board, I would like to thank our shareholders, valued customers, business partners and well-wishers for their constant supports, trust and patronization. We also appreciate the contribution made by our Auditors, Legal Advisors, Consultants and Correspondents for their time befitting and prudent roles. I would like to express my gratefulness to my fellow Board members for their contributions to guiding the Bank and wise counsel. I would also like to extend my deep appreciation to our Managing Director & CEO, Senior Management team and all officials at MBL for their ongoing commitment to deliver our strategy every day. Total number of 2,305 employees and 1,914 support staffs works every day to add value to our 1.13 million plus clients. I am grateful for their ongoing commitments to embracing change, ensuring MBL leads to the competition while living a strongly ethical culture.

 

We have entered 2019 with a more positive outlook and I am excited by the opportunities we have to contribute to the strong growth track of our country and to help improve the lives of all citizens. The Bank’s Corporate Values will dictate our actions at work so that we can continually deliver superior service and meet the needs of our customers by truly becoming ‘বাংলার ব্যাংক’.

 

Warm regards,

 

Morshed Alam, MP

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