World Economy in 2009
The Year 2009 was much crucial for the world economy, as it had to pass through such an incessant economic catastrophe, originated in USA with the debacle of sub-prime mortgages, which no one witnessed since 1930's. The economic slowdown was so wide-reaching that almost every economy of the world had been affected mainly from September 2008. The world economy's deepest post-war downturn has resulted in higher rate of unemployment in many countries including robust economies like Russia, USA, UK, Japan, China, and India. The economic disaster had impelled huge increase in corporate defaults worldwide. International business volume had been dwindled significantly. Country leaders around the world together with big economic wigs came up with billion dollar rescue packages to address this unique disorder which has been treated as delayed response to counter the adverse impact of this meltdown.
During 2009, financial conditions improved more than projected. Emerging economies started to drag the world economy back to normality, mainly backed by the strong performance and stabilization of Asian economies. Declining rate of economic activities has been moderating gradually. International trade volume started to augment with time. Despite these positive signs, it is not easy to expect as regards faster revitalization of the world economy, as the stabilization of the economies is not smooth. Moreover, continuing drawing out of supports from public policies has also constrained the financial systems still in impaired situation. However, it is expected to witness a positive growth in 2010. According to IMF, world output will expand by 3.1% in 2010 following a contraction of 1.1% in 2009. Real GDP growth in emerging country is forecast to reach almost 5 % in 2010, up from 1.75 % in 2009.
Bangladesh Economy in 2009
In spite of this world economic fall down since 1930's Great Depression, Bangladesh Economy remained resilient in 2009, attaining 5.88 % Real GDP growth in the fiscal year 2008-09. Though it was the lowest growth over the last 5 years, performance of the economy was satisfactory compared to that of other developing nations. Almost all the macro-economic indicators showed positive trend during the period under review. Export earnings recorded 10.12% growth and import cost augmented by 4.06% in FY2009 over FY2008. Inflation remained at tolerable stage in the last few months of 2009. Foreign Exchange Reserve touched US$ 10 billion in November 2009, which is a milestone for Bangladesh Economy. The GDP growth target has been set at 5.5-6% in the current fiscal year 2009-10 considering the depressed world economic scenario. But recent emerging trend of inflation, declination of both Export and Import over the first 5 months of current fiscal, sluggish domestic as well as foreign investment certainly pose evident threat towards 6% growth target in Fiscal Year 2009-10. However, Bangladesh Bank, in its first Monetary Policy of FY 2010 (June-January) expressed its optimism to attain 6% growth in the mentioned time period.
Performance of the Bank in 2009
The Year 2009 was the challenging one for the financial sector. The incessant fall-out of international credit market due to world economic meltdown resulting sluggish growth has put significant pressure on financial performance of banks and financial institutions worldwide. Mercantile Bank Ltd. Achieved continuous growth in almost all arenas of its business despite this economic crisis, facing intensified competition of the industry. The Bank remained in financial strong position with its continued focus on the vision of becoming country's finest corporate citizen, providing excellent and need-based customer service.
The Bank mobilized deposits of BDT 58.30 billion as at December 31, 2009 compared to BDT 49.54 billion, till 2008. Total loans and advances stood at BDT 48.30 billion at the end of 2009 that was BDT 41.99 billion at the end of 2008. Import business stood at BDT 60.59 billion in 2009 compared to BDT 56.53 billion in 2008. Export business stood at BDT 46.30 billion in 2009 as against BDT 43.11 billion in 2008. The Bank collected foreign remittance of BDT 5.06 billion in 2009 compared to BDT 4.72 billion in 2008.
In 2009, the Bank was able to make profit before Tax of BDT 1.66 billion as compared to 1.28 billion indicating 29.73% growth. Net profit attributable to shareholders stood at BDT 807.52 million. The return on equity remained 18.80% during 2009 and Earning per Share (EPS) stood at BDT 37.41. Non Performing Loan (NPL) ratio reduced to 2.54% in 2009 as compared to 2.86% in 2008.
MBL made adequate provision against Classified Loans which is significantly higher than last year. Adequate provision made the Bank stronger than before. Tier-1 Capital stood at BDT 4.24 billion at the end of 2009 compared to that of BDT 3.47 billion at the end of 2008. Tier-2 Capital reached to BDT 758.91 million at the end of December 2009 as compared to that of BDT 660.29 million at the end of 2008. Return on Assets (ROA) increased to 1.22% in 2009 from 1.10% in 2008 and Return on Equity (ROE) also increased significantly to 18.80% from 17.75% in 2008. The Capital Adequacy Ratio (CAR) increased to 10.48% in 2009 as against that of 10.17% in 2008. Net Interest Margin (NIM) stood at 3.58% at the end of 2009, suggesting a healthy growth in Net Interest Income.
Diversified Business Activities of the Bank
Deposits
The Bank's deposits recorded 17.15% growth over 2008 and amounted to BDT 58.03 billion at the end of 2009. This higher deposit growth was achieved with superior customer service provided by the Bank's efficient employees; as well as expansion of branch network at rural areas, where inward foreign remittance flow is significant, propels to achieve deposit targets of the Bank. Fixed deposits, Scheme deposits, Savings deposits, and Short-term deposits from the customers remained the core deposits of the Bank. Our deposit schemes have already attained huge popularity among the big and small savers as well. At the end of 2009, our scheme deposits contributed 42.72% of the total deposits. Savings generates capital and sufficient capital enables investment, which ultimately creates employment as well as GDP growth. Hence, considering the importance of savings, MBL always intends to offer the highest rate of return on the customers' deposits to attract the savers to save more.
Loans and Advances
Total loans and advances of the Bank increased to BDT 48,30 billion at the end of 2009 as against BDT 43,42 billion till 2008 registering 11.23% growth. Like 2008, in 2009 the Bank emphasized on financing the productive sectors like agriculture and manufacturing including the core areas like Corporate, SME, and Retail etc. The Bank disbursed BDT 443.28 million as agricultural loan this year and we are keen to make our loans available to the farmer to meet their
fund requirement. Small and Medium Enterprise (SME) financing increased to BDT 983.35 million till December 2009, from that of BDT 681.08 million at the end of 2008. The Bank put special attention toward financing Ready-Made Garments (RMG) sector, as 75% of our total export earnings come from this sector. Total loans in Garments sector increased by 10.00%, which amounted to BDT 8.51 billion at the end of 2009. MBL also provides facilities under syndication for the corporate customers and already proved to be as a trusted partner in syndication facility development. The sectors of financing include other key areas of lending including Trading, Engineering, Contractor Finance, Lease Finance, Pharmaceuticals, Housing, Transport, Textile, Glass & Glass product, Plastic and Plastic Materials etc.
Import Export Business
Import and export is a core business area of the Bank. Bank's performance in this area during 2009 was satisfactory. During the period under review, total import and export business transacted were BDT 60.59 billion and BDT 46.30 billion respectively. The growth of import and export business was 7.19% and 7.40% in 2009 and 2008 respectively. The growth of export gave the Bank an edge in managing required foreign currency to meet L/C commitments.
Inward Foreign Remittance
Hard-earned remittance of the Bangladeshi expatriate working abroad plays significant role in the overall development of the economy. Amid the world economic turmoil, countless Bangladeshi expatriates had to return to the country, losing their job in the foreign lands. In spite of this adverse economic situation, growth of inward foreign remittance of the Bank was consistent. In 2009, the Bank handled BDT 5.06 billion of remittance business compared to that of BDT 4.72 billion in 2008. MBL continues to assist the overseas Bangladeshis to remit their hard-earned
money to their beneficiaries swiftly and safely. The Bank has opened several Branches in the rural areas with urban areas as well, aiming to aid the remitters to remit their money to their beneficiaries living in those rural areas.
MBL maintains a strong network with the Overseas Exchange Companies & Banks to ensure quicker and safer remittance services. The Bank has signed agreements with different overseas exchange companies including USA, Canada, UK, Italy, Japan etc. so that the remitters can easily send their money to their beneficiaries. As well, negotiation with more Overseas Exchange Companies is in progress. MBL has signed International Representation Agreement with globally reputed Money Transfer Company "Western Union Services". This arrangement helps us to provide better service to the expatriates sending their money to their dependents, relative, friends & family members residing in Bangladesh. An agreement with Bangladesh Post Office (BPO) has been signed for the distribution of inward foreign remittance. BPO provides services through its 450 designated outlets under this arrangement across the country. As a result, a new horizon has been opened for the Bank to extend its remittance services to the doorstep of beneficiaries easily, quickly and safely. Very soon, MBL intends to launch an Exchange House in U.K, namely-"Mercantile Bank Exchange House" to make the remittance service convenient for the expatriates living in U.K.
SME
Small and Medium Enterprise (SME) sector plays an important role in accelerating the growth of the Bangladesh economy. SME accelerates economic growth through employment generation and risk mitigation by diversified investments. MBL is dedicated to contribute the economy through serving this promising sector by introducing its SME service in 2006. SME Service Centers have been opened in different commercially viable places to ensure proper marketing of SME products, handling SME loans and foreign remittance. Presently, the Bank has three SME Service Centers and 10 new SME Service Centers will be launched in 2010. SME Desks have been set up in almost every Branch with a view to provide better service to the Small and Medium Entrepreneurs. Credit Officers have already been appointed to work in SME Desks.
Card Business
MBL started its credit card operation in 2002. In June 2006, VISA Branded Card was introduced. Until December 2009, total number of cards of the Bank was 10,950 including 4,185 Credit Cards and 6,865 Debit & Prepaid Cards. At the end of December 2009, MBL earned BDT 15.04 million net revenue from card business. Varieties of card products have been introduced by the Bank to meet the modern and varied needs of the customers. VISA dual prepaid card, VISA Dual Hajj Card, Credit Card and Debit card has been introduced with various up-to-date facilities such as withdrawal through Pay Order, SMS alert services, Issuance of supplementary card etc. Call center of the Bank provides 24 hours service to its cardholders. MBL Cardholders need not to pay
any withdrawal fee if withdrawal is made using MBL Booth, however cash withdrawal fee is BDT 10 only if withdrawal is made using any other Q-cash ATM Booth. Bank's International/Dual cards are acceptable all over the world. Credit Facility is offered to the credit cardholders for maximum 45 days free of interest. MBL is augmenting its ATM Booths each year to serve the customers with card facilities. ATMs enable card holders to get their account balance and withdraw cash, even if the card is issued by a foreign bank.
Corporate Governance Practice
MBL believes that corporate governance should not be a mere statement of compliance. The Board always takes strategic decisions emphasizing good governance to protect the interests of the Shareholders and other stakeholders at large, increasing their confidence and establishing their trust. The Board of Directors always guides the Bank towards the goal set by the Shareholders, ensuring highest standards of integrity, accountability, transparency, ethics and professionalism of the management. For smooth functioning of the Bank, two supporting committees of the Board precisely, Executive Committee and Audit Committee have already been formed to support the Board in discharging its responsibilities, as it should be.
The Board formulates and evaluates business strategies, policies and plans of the Bank. It ensures that MBL complies with all relevant laws and regulations including the Central Bank's guidelines and Securities & Exchange Commission's Notifications. The Board of Directors approves the Annual Budget and Capital Plan of the Bank. The Board monitors and reviews the position of income, expenditure, liquidity, non-performing assets, capital base, capital adequacy and maintenance of loan loss provisions every month. The Board reviews inspection reports by the Bangladesh Bank and corrective actions are taken regarding lapses mentioned in the reports. Management of the Bank is responsible for the day-to-day banking operations.
Executive Committee of the Board monitors activities of the Bank, which are beyond the scope of delegated power of the Management. It ensures implementation of policies, approves the credit and other business proposals as per approved policy of the Board, reviews the policies and guidelines issued by the Central Bank regarding credit, foreign exchange, treasury and other operations. Audit Committee reviews the status of implementation of Bangladesh Bank's and other regulatory bodies' guidelines and Bank's own policies and procedures. It also reviews the corrective measures taken by the Bank's Management as recommended by the Board Audit Division, Internal Control and Compliance Division, Bangladesh Bank Inspection Team and External Auditors relating to deficiencies in internal control or other similar issues.
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 provides valuable suggestions where applicable. For an effective control system, separate and independent Divisions, namely Internal Control & Compliance Division (ICCD) and Board Audit Division are functioning within the Bank. The ICCD and Board Audit have direct access to the Board of Directors and the Audit Committee. Internal Audit team of the Bank periodically conducts their regular audit functions based on different manuals, instructions, guidelines and procedures laid down by regulatory bodies. The Board takes adequate action to protect the Bank and shareholders' interest as per internal audit reports.
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 responsibilities and authorities to the Management. The Bank has appointed Chief Financial Officer (CFO) to look after the overall financial affairs. Company Secretary has been appointed to update the Board of Directors/Management on statutory requirements.
CSR Programs
MBL embraces the concept of CSR and believes that CSR is fundamental to attain long-term sustainability and business growth. CSR plays an important role in promoting the image of the Bank locally and internationally. 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. The Board ensures and encourages investment in CSR programs. Management of the Bank informs the Board on CSR activities and is responsible to implement a specific line of approving authority, control and monitoring for financial support of such activities.
MBL since its inception cares for all its stakeholders and the community. The Bank has established Mercantile Bank Foundation to promote dialogues between the Bank and the community. The Bank contributes each year 1% of its operating profit or BDT 4.00 million (which one is maximum) to Mercantile Bank Foundation every year. Through this Foundation, MBL provides financial support to the distressed people of the society. The Foundation awards eight famous personalities of the country each year for their dazzling contributions in eight arenas such as Bengali Language and Literature, Education and Culture, Research on Liberation War, Economy and Research on Economy, Commerce and Industry, Medicine, Science and Technology, Journalism and Sports. In continuation in 2009, MBL Foundation awarded nine prominent personalities for their outstanding contribution in nine arenas. As well, MBL Foundation supports the writers and publishers in purchasing their books and distributing these at 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. It also donates one time financial endowment to the poor artiste, literature-patron and fatal disease-affected poor patients. It also supports the poor father for arranging his daughter's marriage and helps poor but bright students.
Beside Mercantile Bank Foundation, the Bank itself is also engaged in conducting CSR activities from its own fund. MBL is trying to enrich economic and social 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 through financial assistance and various rehabilitation programs.
Customer Service
Strong and warm relationship with the customers drives the Bank to reach today's height of success. Customers' needs vary with the change of time and technology; hence, MBL provides them technology driven services to attract the potential customers while retaing the existing customers. MBL each year has been expanding its branch network to reach the banking services to the mass population. MBL has also been serving the people through its SME Service Centers and ATM Booths located in commercially significant places. The Bank started its capital marker operation to serve the customers from different angels. Number of correspondent relationships is augmented and agreements with foreign exchange companies are being made every year.
The employees are encouraged to provide excellent service to the customers, as we know that today's excellent customer service will be tomorrow's value addition for the Bank. Undivided attention has been paid to our customers to provide them prompt service. Mercantile Bank Training Institute has been formed, which trains the desk officers on customer service. We want to maintain our present position and in future to uphold the position in the industry providing quality customer services.
With the era of time and blessing of technology, MBL provides most modern and customized service to the customers. For many services the customers may avoid visiting the branch physically. Alternative banking channels such as Mobile Banking, Online Banking, and SMS Banking are used with greater flexibility enabling the customers to sort their finances at their own convenience and in their own time. Bangladesh Bank has already given approval to Mercantile Bank Ltd. to introduce Mobile Money Electronic Remittance system with mobile payment facilities. MBL has signed an agreement with a leading telecommunication company to deliver banking services through using its mobile network. This initiative will provide access to affordable financial services to the customers including local money transfer, business payments like Utility Bill, Insurance Premium, and Loan Installments etc.
Human Resources Development
MBL invests extensively in its human resource development to build up its employees' capabilities. The goal is to empower staff and create a culture, that encourages and rewards staff for their commitment, creativity and teamwork in order to respond rapidly to the ever changing customer needs and the market place. Our employees have shown remarkable agility in dealing with the challenges of new ideas. The successful implementation of various strategic initiatives, have demonstrated our resilience, determination and commitment to embrace change. We are always aligned with the strategic direction of the Bank.
A smart officer wins the heart of a customer by delivering services to the customers' expectation. Taking that into consideration, MBL has formulated its Human Resource Policy incorporating ample benefits to be provided and returns to be expected from the employees. Employees are the valuable assets and the Bank intends to make its employees more valuable, nurturing their knowledge and skills.
We put utmost care for the welfare of our employees. We always ensure congenial working atmosphere for our employees. We provide attractive compensation package to all level of executives, officers and staffs and considering the continuous change in the price level and living cost, we revise the compensation package at a regular time interval. Alongside the festival bonus, the deserving employees are rewarded as per their performance with accelerated promotion and other incentives. Our objective is to create a genuine partnership with our employees by providing appropriate incentives and rewards for performance.
Recognition and Award
MBL has been honored by different professional and regulatory bodies frequently. In 2009, The Institute of Chartered Accountants of Bangladesh (ICAB), the highest Accounting Body in Bangladesh awarded the Bank for publishing its Annual Report-2008. In the Financial Sector-Banking Category, ICAB was kind to recognize our Bank with 'Certificate of Merit' for its best Published Accounts & Reports. This ICAB award has proved our financial transparency, efficiency in banking operation and full disclosure of all material financial and corporate information. In 2009, MBL has also been honored with 'Sonar Manush Sheba Award' by Refugee and Migratory Movements Research Unit (RMMRU) for its contribution to foreign remittance management.
Future Outlook
While the year 2010 is expected to be a tough one for the financial service sector, as the global
financial turmoil is not over and the resurgence of the world economy is sluggish. However the
Board of Directors of the Bank is optimistic about the Bank's prospects and success in upcoming
days. The Bank in 2009 achieved continuous growth almost in all arenas of its business and the Bank is well positioned to enter into the New Year 2010 with a strong management team. In 2009 we made good progress in executing the Bank's strategic agenda and priorities. Opportunities to further strengthen our business are becoming increasingly evident as the
environment becomes more challenging, which presents us with a range of organic growth and
acquisition opportunities. However, the Board recognizes that the future is uncertain and that in
the current environment its first priority is to ensure that the Bank continues to maintain its strong financial position.
We do believe that continuation of our superior services, adoption of new products and technologies, harmonious banker-customer relationship, embellishment of our human resources with various trainings, prudent business policies, better risk management and corporate governance system will help us to handle this challenge more efficiently. The priorities for the Bank are clear and despite trying market conditions we aim to make full use of strategic opportunities presented to us. We see ourselves as a Bank with a quality set of businesses, strong and effective management, well able, in relative terms, to face with confidence world market uncertainties With a view to reaching our services to the doorsteps of all types of people, we intend to establish some new branches and SME service centers in 2010 across the country. MBL aims to reach its desired goal by maintaining all the rules and regulations of all regulatory authorities, taking care of the welfare of the customers and society and its employees providing quality services to its customers.
Challenges in 2010
In FY2009, Bangladesh economy experienced a moderate growth rate of 5.88%, where target level of growth for FY2010 is 6.0%. World Bank predicted that Bangladesh Economy would grow by 5.4% whereas Asian Development Bank (ADB) came up with yet another projection saying that the Bangladesh economy would shrink from 5.4% to 5.2%. Bangladesh experienced adverse effects from the global downturn, primarily through slower growth of exports and workers' remittances, and damped investment sentiment. Still, it has maintained relatively strong expansion, reduced inflation, and kept a current account surplus mainly with the help of huge remittance inflow. The medium-term trajectory will depend heavily on the Government's ability to implement reforms, which include substantially boosting budget revenue and raising infrastructure investment in FY2010 as dampened global demand could weigh on exports and workers remittances. With this backdrop, 2010 will be another challenging year for the financial institutions of Bangladesh. Decline in garments and other export items, continued pressure on interest margins, fees, commission and exchange earnings and increased provision requirement will pose a challenge to the financial institutions during 2010 also. Sound political environment is also desired but on which we have no control. In this scenario, to pursue growth the Bank will always stick to good corporate governance and practices and sound risk management policies and strict credit evaluation.
Acknowledgement
On behalf of the Board of Directors, I wish to extend our sincere gratitude to all of our valued shareholders who have over the years supported us in our quest to take Mercantile Bank to greater heights of achievement and success. I also intend to thanks our valued clients for their continuous support. The confidence that the shareholders and clients have on us has always been the source of our strength and inspiration.
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 move forward.
Finally, I wish to thank all 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 operating environment. Their relentless support and commitment during the year were invaluable. I also appreciate the Management Team and the dedicated Staff Members of the Bank for their untiring commitment, loyalty and sincerity to the Bank.
We believe Mercantile Bank Limited is in great shape and well poised to meet the challenges of 2010 and beyond. We have a fine team of people, a shared set of priorities, a proud tradition of success and are eagerly looking forward to another year of success.
Allah Hafiz.
With warm regards,
Md. Abdul Jalil, M.P |
