The year 2009 was started with a new horizon of hope. With a political government in charge after two years, both domestic and foreign investors' confidence was higher. As a result, the economic activities of the country have started to get its momentum, which has certainly gone in favor of the banking industry. Another important factor was our agricultural growth. Agriculture is always been the life-blood of our economy. With a bumper harvest for the three consecutive years, our economy is now expecting to grow more than the targeted rate of 5.5% in the current fiscal year 2009-10. The world economy is still very much vulnerable after the worldwide economic recession. With a stable agricultural growth & huge remittance inflow, Bangladesh has successfully mitigated the adverse effect of this global economic turmoil. Despite low rate of interest on loans & advances set by the Central Bank, banks have experienced commendable positive growth through expanding networks, introducing differentiated products and services.
After a positive growth in the last year amid the global economic turndown, it was a great challenge for us to
Continue the growth and take it to further. And with our allout efforts, we have successfully conquered that challenge. MBL has achieved positive growth in almost all business arenas in 2009. Credit Rating and Information Services Limited (CRISL) reaffirmed its 'A' rating in the long term and 'ST-2' in the short term. They have given the rating on the basis of strong and stable financial position of the Bank.
We express our heartiest gratitude to all valued clients, patrons, well-wishers and honorable shareholders for their continuous support and co-operation, which have facilitated our path towards continued growth.
Prospects in 2010
The year 2010 has started with a new hope and potential. New opportunities for the banking industry are awaiting, including Mobile and Internet Banking. With a political government in power and a strong foreign exchange reserve of more than 10 billion USD, the hope that the congenial business atmosphere will prevail is not illusory. Political stability is an important issue in this regard. A stable political situation boasts up the confidence of the investors. As a result, economic activities of the country are expected to get its momentum. This vibrant economic condition will certainly go in favor of the banking industry. Under these circumstances, we do strongly believe that with the patronization and co-operation of our valued clients and shareholders, our efficient and energetic workforce would be able to achieve significant growth in 2010 and subsequent years by capitalizing the new opportunity created in the banking sector.
Reviewing Our Business in 2009
We are aware of the need to distinguish between our strong operating assets and those that are lower returning. Our lower returning assets especially, non-performing assets need to be judiciously managed. We took a strategy of quality growth by adhering to compliance in all spheres of operation and we are happy that the model is effective. The Bank strengthened its position as a stable financial institution and maintained satisfactory growth. The Bank was able to make a net profit of BDT 1,911.70 million (before tax) during 2009, which suggests that the Bank remained very much focused on all important areas of business including capital adequacy, quality asset growth, sound earnings and strong liquidity.
Assets and Liabilities Position
Deposits of the Bank increased by BDT 8,495.12 million during 2009 registering a growth rate of 17.15 percent. At the end of the year 2009, total deposit of the Bank stood at BDT 58,033.47 million against that of BDT 49,538.35 million till 2008. The amount of Fixed Deposit, Current Deposit and Deposit under Schemes contributes 33.11%, 3.52% and 40.89% of total deposits. MBL remained market leader in terms of deposits, especially for its Scheme Deposit products. Bank's Loans and advances, which are well diversified, have grown by 11.23 percent during the year. Total loans and advances at the end of 2009 reached to BDT 48,295.55 million as against that of BDT 43,419.36 million up to December 2008.
International Business
In the year 2009, the Bank made a significant growth in foreign business, though the adverse effect of the worst financial meltdown in the world market is yet to over. The Import Business of the Bank grew by 7.19 percent whereas the Export Business grew by 7.40 percent during the year. The Bank recorded BDT 60,592.50 million as import business at the end of the year 2009 against that of BDT 56,528.80 million up to December 2008. Export business stood at BDT 46,298.60 million till December 2009 against that of BDT 43,108.50 million at the end of 2008.
MBL's Products and Services
Since the inception, the Bank has launched several banking products in the market, which has drawn huge public interest. Among these, Monthly Savings Scheme, Family Maintenance Deposit Scheme, Double Benefit Deposit Scheme, Quarterly Benefit Savings Scheme, Advanced Benefit Savings scheme, 1.5 Times Benefit Deposit Scheme, Consumer Credit Scheme, House Building Loan Scheme and SME Loan have attained significant popularity among the people.
MBL's Card Business
MBL started its credit card operation in 2002 with Q-Cash proprietary cards and in June 2006, VISA Brand Card was launched. Very stiff competition prevails in credit card market. At the end of December 2009, MBL earned BDT 15.04 million net revenue from card business. The Bank extends various services to the customers to meet the modern and varied needs of the customers. VISA Dual Prepaid Card, VISA Dual Hajj Card, Credit Card and Debit Card have been introduced in the Bank with various up-to-date facilities such as withdrawal through Pay Order, SMS alert services, issuance of supplementary card, longer interest free period etc. Call center of the Bank provides 24 hours service to its cardholders. Bank's international/ dual cards are acceptable all over the world. MBL is expanding its ATM network each year to serve more customers with card facilities. The Bank is also alert to the potential risk of credit card fraud and unauthorized use of card. Procedures and policies to combat credit card fraud are regularly reviewed and updated to minimize the risk of loss to credit card customers.
Agro-Based Financing
In terms of sectoral share, agriculture sector contributes a major portion to the GDP. MBL is continuously financing in this sector with the help of Bangladesh Bank, different financial institutions and NGOs so that the sector can contribute more in the GDP growth. Aiming to finance to the farmer community, the Bank has already launched 12 rural Branches in the remote bucolic areas of the country, and in upcoming days the Bank will launch more rural Branches in unbanked areas of outside the divisional cities and upazilas. During 2009, a refinance agreement has been signed with Bangladesh Bank. Besides, the Bank financed the farmers to purchase tractors. An agreement in this respect was signed with ACI Motors Limited, the sole distributor of Sonalika Tractors.This valued initiative of the Bank would modernize the agriculture sector of the country. Initially financing to the farmers to procure Sonalika Tractor through ACI Motors Limited will be disbursed under SME Loan Scheme and later on it will be disbursed under Agricultural Loan Scheme. MBL,
In association with BURO-Bangladesh disbursed BDT 10 million agricultural loans to the farmers of Chilimpur union, Tangail.
Small and Medium Enterprise (SME) Financing
Small and Medium Enterprises (SMEs) are not only adding values to economic growth but also diversifying the export basket of the country. Considering the importance and needs of the economy, the Bank has given priority on SME financing and so far our growth in this arena of business is praiseworthy. At the end of 2009, total SME financing of the Bank stood at BDT 983.39 million, registering growth of 44.39%.
Our Priorities
Since inception, we have sharply emphasized on excellence in productivity, efficient use of capital, operating excellence and good governance.
Operation
The vision of the Bank is "would make the finest corporate citizen". And our core priorities are strong expense management and to show our ability to execute business strategies efficiently against our goal. To sum up, we want to maximize our profit and minimize the non-performing assets in order to attain sustainable growth.
Customer Relationship
Our goal is to make financial matters better and easier for our clients in every way that we can. During the last eleven years of operation, the Bank provided great value to its customers by developing a wide range of products and services. The Bank has always remained competitive in offering services to the customers and is continuously redesigning its products to meet customer needs. Acquiring thorough information about our customers and their growing needs is key to our business and success. As a part of customer care and awareness building, we are arranging various campaigns and fairs. Our customer group ranges from individuals, organizations and small business covering all sectors of corporate, SME and retail businesses.
We do believe that customers are the main stakeholders of the Bank. That is why; we always try to satisfy our customers remaining compliant to the regulatory bodies. In our effort to make the economy increasingly vibrant, we are emphasizing on SME financing & retail loans, the foremost potential sector for business expansion. Our efficient work force always maintains warm relationship with customers and serves them genially. We have already introduced a variety of attractive products to meet the varied needs of our customers.
Technology
Technology is rapidly changing in the banking sector. From the beginning, MBL has adopted modern hardware and software technologies to reach services easier and quicker way to the customers. We have introduced on-line banking and SMS banking services for our customers. We are providing 24 hours banking services to our clients through SMS banking and ATM booths across the country. We have given importance in expanding our ATM service. Our IT team has successfully implemented ATM Switching System and has already deployed 19 ATMs. Interface with a Switching System of other service providers has expanded our network to over 1000 additional ATMs situated across the country.
MBL is already a member of BACH (Bangladesh Automated Clearing House) System of the Central Bank.
An Agreement has been signed with Data Edge Limited for sound adaptation of automated clearing house. We believe that technology will play an increasingly crucial role in future and we would be able to provide more IT based products to our customers.
Human Capital Development
MBL believes that human resource is the most valuable asset for the Bank. The success and failure in banking services depends largely on the quality of the people who work with the clients. It is our continuous effort to create mutual trust and dignity and our investment in human resource development is key to sustainable growth and profit thereof. The Bank has a talent work force for its operational activities. We nurture that talent even more effectively through continuous and need based training in both home and abroad. Training Institute of the Bank arranges regular training on important modules of banking.
In recruiting fresh graduates, we follow competitive job exams, which eventually ensures the efficient human
Capital of the Bank. Our team consists of experienced personnel and talented fresh graduates, who are capable of taking the challenges of highly competitive banking industry.
Corporate Social Responsibility (CSR)
The impact of business on the society has become a crucial issue. Business organizations are now regarded as "corporate citizens" and as a result, the business world is striving to play their responsibility in this regard. MBL has profound commitment towards the society. Profit maximization is not our only goal. As a corporate citizen, we are committed to the society. The Bank firmly believes in the need to focus on the areas of poverty alleviation and health care for the benefit of the nation in the long run. With this vision, we have established Mercantile Bank Foundation. A certain percent of the operating profit of the Bank is allocated each year to this Fund. The activities of the Foundation and the Bank are in the areas of health, education, sports, support to destitute, cultural activities, environment protection etc. In the year 2009, MBL donated BDT 30.62 million for CSR activities.
MBL Brokerage House
Providing need-based customer service has been ingrained as a part of corporate culture of the Bank. Considering the demand of the markets and our total commitment to support and serve the customers from different angle, MBL has commenced operations of its Brokerage House, namely "Mercantile Bank Brokerage House", as a part of capital market operations in 2009. Within a year of business, this initiative of the Bank proved profitable and the Bank has made a commendable profit of BDT 51.81 million. In order to make this service available all over the country, we are expanding our branches of Brokerage house. Already, the Bank has inaugurated its second Brokerage House at Sylhet and three more are on the card. We believe that such endeavor will widen the opportunity of the Bank to serve the customers from different aspect with utmost care.
Mobile Banking
The Central Bank has given approval to Mercantile Bank Limited to introduce Mobile Money Electronic Remittance System with mobile payment facilities. An agreement has already been signed with a leading telecommunication company of the country in this regard. As a result, the Bank will be able to transfer money from one place to another using mobile network. The service will also include to business payments like utility bill, flexi load, savings/scheme deposits etc. With the system, a customer will be able to deposit and withdraw cash directly from any MBL Branches or Bank's designated other outlets including ATMs and other channels. This effort of the Bank has been ecstatic and treated as time saving and cost-effective for the customers.
Commitment to Government
MBL has contributed significantly to the government effort in collection of revenue and we are proud that we are one of the largest taxpayers in the country and therefore, an important source of revenue for the Government of Bangladesh. As per law, MBL deducts at sources income taxes, VAT and excise duty from various payments and services and deposits the same to government exchequer. Besides, the Bank also pays income tax on its earnings. In 2009, we made a provision of BDT 855.26 million for the National Exchequer.
Basel-II Capital Accord
Bangladesh Bank, the prime supervisory authority of the banking industry has implemented the new Capital Accord (Basel-II) from first January 2009 parallel to basel-I. Afterward, from January 01, 2010 Basel-II has been solely implemented in the Banking sector. Basel-II Capital Standard requires to addressing and managing Market Risk, Operational Risk as well as Credit Risk of Basel-I. Basel-II Capital Standard is acting as a major mechanism in the Bank to enrich risk management practices. In response to the new Capital Accord (Basel-II), new risk management process has been introduced supporting the principles of risk sensitive assets to capital adequacy. MBL has formed Basel II Implementation Unit to ensure smooth and timely adoption of Basel II Accord. The Unit had been working to put into practice the Basel II Capital Accord as per Bangladesh Bank's guidelines. Members of the Basel II Implementation Unit sit on fort-nightly basis. MBL was successful in timely submission of Basel II Quarterly Report, meeting Bangladesh Bank's requirements. The Bank has arranged a number of training programs on Basel II for the Senior Management, Credit Officers, and Managers of the Branches. These Training programs are being arranged to make the officials of the Bank familiar with the concept of Basel II and give them a solid understanding about the new capital structure. For minimizing Credit Risk, the Bank has already taken steps on credit rating of the corporate clients. Market Risk and its constituent Risks are managed in the Bank with the collaboration of various Management Committees (such as ALCO) and Divisions (such as Treasury Division). ALCO, in fact has the main responsibility to manage the Market Risk. For managing Operational Risk, the Bank is initiating to install modern core banking software along with other initiatives like, anti-money laundering drives. MBL has
already taken initiatives to raise its Capital Fund through issuance of Subordinated Debt of BDT 100.00 crore and Right Share of BDT 143.89 crore to meet the capital requirements as per Basel II.
Anti Money Laundering
MBL believes that endeavor for anti-money laundering initiatives are not only for meeting compliance requirements but also acting as a catalyst in escalating Bank's business values and reputation. For preventions and detection of money laundering and terrorism financing transactions using the Bank's facilities, MBL has strengthen its efforts as per Central Bank's instructions, complying with the provisions of Money Laundering Act-2009. MBL has taken commendable initiatives to prevent and identify money-laundering activities. The Bank has formed a Central Compliance Unit under the leadership of a Senior Executive to look after the overall compliance of money laundering regulations. Individual responsibilities of all employees have been defined and assigned for the prevention of money laundering activities. The Bank has delegated enough authority to the Chief Anti-money Laundering Compliance Officer to implement and enforce anti-money laundering policies and procedures. Compliance Officer at branch level has been set to prevent money-laundering transactions. After detecting a suspicious transaction, the assigned officer has to report to the Head of Branch for immediate action. The Head of Branch then sends the report to the Central Compliance Unit and subsequently, Bank reports it to Bangladesh Bank. Customers' information are collected and recorded properly as a defense of arising money laundering transaction in the Bank's premises. At the time of opening an account, transaction profile (TP) and Know Your Customer (KYC) are filled properly for true identification of the customers. TP of the customers is updated time to time. Training programs on money laundering have been and are being continuously arranged for the employees in handling money-laundering transactions professionally.
Network Expansion
We are expanding our network in order to make our services available to all level of people of both urban and rural areas. So far we have 50 Branches and we aspire to augment this figure to 60 by the end of 2010. New SME service centers will also be opened in 2010 across the different commercially important hub of the country. Apart from these, we want to increase the number of ATM booth across the country for meeting the demand of 24 hours cash withdrawal facilities of our customers. All new Branches are equipped with ATM booths and soon all existing Branches will also be facilitated with this service. The Bank has signed remittance agreement with various overseas companies from different parts of the World to strengthen its business network in global financial market and to facilitate remittance flow in the country.
Challenges in 2010
In the year 2010, banking industry may face severe challenges. The ongoing world economic crisis has already spread its adverse impact on our economy. The sign of stress is already in the export market as well as in the job market. Also, there are possibilities that Non-Performing Loans of banks may rise with major export sector coming under price, deferment orders and reduced demand threats. So, the year 2010 might be a very crucial one for the world economy as well as for the banking industry. Actually, growth in the banking industry will mainly depend on how quickly the world economy overcomes the current catastrophe and how efficiently we can avert ourselves from the pinch of the crisis. A healthy world economy will foster the volume of international business, inflow of foreign remittance and foreign direct investment. A business friendly atmosphere will create the ground of the Bank to deploy its deposits by encouraging the locall investors.
Now a days, our banking industry is more competitive and the concept of typical banking has been changed. Modern and technology-based banking has taken the place of traditional banking. Again all the banks are handling similar products and hence, quality service and efficient management are really important matters for achieving sustainable growth and leading position in the industry. In 2010, this phenomenon is also expected to continue.
Our Preparation
In order to be successful amid the ever-changing and competitive arena, taking the ongoing stiff competition of the industry as challenge, we have prepared ourselves accordingly. Our strategy is to continue to do the business that we do well. Expansion of business into areas of potentialities like retail and SME business; further expansion of collaboration in micro finance with NGOs; exploration of new and innovative ideas; continued focus on IT development for efficient customer service and expand to larger customer base; continued efforts in mobilization of remittances with an ever increasing network of exchange houses both at home and abroad- are some measures with which we are working giving due importance.
We are working incessantly to provide our customers with quality and quick service. Moreover, we have come forward with sophisticated technology and new product as per requirements of our clients. Our officials are well equipped with contemporary knowledge regarding banking and economy, which helps them to foresee the future and devise the potential business, plans accordingly.
Acknowledgement
On behalf of the management, I would like to express my gratitude and heartiest thanks to the Government of the People's Republic of Bangladesh, Governor and Other Officials of the Central Bank, Securities and Exchange Commission (SEC), Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE) and Registrar of Joint Stock Companies and Firms for their cordial help and assistance, valuable guidelines and co-operation provided to the Bank from time to time.
We are grateful to our Board of Directors for their valuable guidance, prudent and very timely decisions to drive the Bank to ultimate destination. We firmly believe that we have a dedicated, sincere, hardworking team who can make the dream true by meeting financial and operational objectives of the Bank as well as the needs and expectations of our customers and people of the country. Loyalty, effort and hard work of the employees are behind the every success of the Bank, which truly established MBL as 
.
Dewan Mujibur Rahman
