Dear Stakeholders,
AS-SALAMU-ALAIKUM

It gives me immense pleasure to welcome you all to the 23rd Annual General Meeting of the Bank. It has been indeed an eventful year and I would like to thank all the stakeholders for the steadfast support and unwavering confidence reposed in the Bank through the thick and thin. On behalf of the board of directors, it is my privilege to present the Annual Report of Mercantile Bank Limited for the year 2021.

Bangladesh as a country did splendidly under the charismatic leadership of our Hon’ble Prime Minister Sheikh Hasina during this year. 2021 marked a significant year in the calendar of Bangladesh. The country celebrated 50 years of independence this year, a milestone every Bangladeshi cherishes. The country has come a long way from being an ‘Economic Basket Case’ to becoming one of the fastest growing economies of the world. I, as an entrepreneur, cannot be more proud and at the same time thankful to Almighty for being able to play a part in this journey of development.

Mercantile Bank Limited (MBL) started the year 2021 with the shadow of COVID hanging heavily over our operations and the world as a whole. Although the country was doing quite well, there was always an uncertainty looming large. Fortunately, those fears of a COVID-driven downturn in our financial results proved unfounded. Along with the country’s economy, MBL also gathered momentum and our performance rebounded strongly with steady growth in lending, retail deposits, and total consolidated assets, along with an outstanding profit result. In fact, we delivered a pre-tax profit, which is almost 1.5 times that of the last year i.e. BDT. 6,112.12 million. Along with that, Mercantile Bank limited has always prioritized compliance as one of the strong priorities. The amount of profit we have been able to generate with being compliant is a very commendable effort by the whole MBL team.

Against this backdrop, it is therefore pertinent to review the economic environment within which our Bank operated during the year under review.

 

Economic Environment of the country

Before the COVID-19 pandemic, Bangladesh exhibited a steady and high GDP growth, averaging 7.4 percent per year during FY 2015-16 to FY 2018-19, and reached a record 8.15 percent growth rate in FY 2018-19. The global economy was at standstill due to the COVID-19 pandemic which has also had a huge negative impact on the economy of Bangladesh. According to the final estimations of BBS, the GDP growth in FY 2019-20 has slowed to 3.51 percent. Bangladesh’s economy is turning around. According to the provisional estimates of BBS, the GDP growth in FY 2020-21 stood at 5.47 percent. Despite the stagnation in the economy caused by the coronavirus, food production and supply chains remained unaffected, leading to inflation at 5.56 percent in FY 2020-21, slightly higher than the target (5.4%). Both export and import in Bangladesh have showed a sign of recovery after a sharp decline in FY 2019-20. In FY 2020-21, Bangladeshi expatriates remittance stood at US$ 24,777.72 million which was significantly higher (36.10%) than the previous fiscal year. The overall balance recorded the surplus of US$ 9,274 million in FY 2020-21 compared to US$ 3,169 million surplus in the previous year. As a result, the foreign exchange reserves increased to a record US$ 46.39 billion at 30 June 2021. During this period, a marginal (0.05%) depreciation in exchange rate of Taka with the US dollar is being observed. As per the directives of Honorable Prime Minister, activities are carried out under 21 stimulus packages of Tk. 1,20,153 crore in FY 2019-20 for additional expenditure in healthcare sector, emergency humanitarian assistance and economic recovery to address the COVID-19 pandemic. The number of the stimulus packages has further been increased to 23 in FY 2020-21. As a result of these actions taken by the government, the economy was expected to turn around and it actually has. One can easily gauge that from the amount of profit the commercial Banks have been able to generate. Most of the Banks have actually doubled their profits which is a testament to the growing and recovering recovery.

 

Financial Performance of the Bank

The excellent financial performance of MBL was built on the back of this resilient economy, which has coped with COVID far better than expected. All the key financial ratios have improved significantly compared to last year indicating that the Bank after a slight hiccup in the year 2020, is back on track again. The ROA and ROE of the Bank at the end of the year 2021 stand at 0.99% and 14.70% respectively. With that, due to registering a competitive profit MBL has been able to make sure it posts a strong EPS i.e. 3.31. This is a continuation of the trend set in the earlier years. The Net asset Value (NAV) is also very competitive i.e. 23.62. As a result of these, we have been able to propose a competitive dividend of 17.5% (12.5% cash and 5% stock) for the year 2021.

However, the excellent performance that MBL has been able to generate would not have been possible without a strong base. MBL has established this over the years. The bank boosts of a solid base which comprises of a strong capital base, prudent risk management techniques along with maintaining a diverse portfolio of loans. This diversity in loans coupled with a strong monitoring has ensured that Non-performing Loans (NPL) stays within limit. If we have a look at the following then the statements above will make more sense.

• Our Capital to risk weighted ratio (CRAR) meets the standards set by the regulatory authority and has never fallen under the requirement. At the end of 2021 the CRAR stands at 14.09% whereas, the minimum requirement is 12.50%
• Size of Balance sheet has been consistently growing while making sure that the sustainability aspect never gets overlooked.
• Our NPL ratio is 4.54 %, which is quite low considering the industry standards.

 

Balance between digitalization and personal touch

We continue to invest significantly in modernising and improving our digital capabilities. There’s no doubt that the power of digital technology has already transformed the nature of banking, and will keep doing so at an exponential rate. We have to keep improving these digital services to stay relevant. Digital technologies are also revolutionising back office operations as well. Modern core banking platforms can carry out tasks that were not even thought possible a few short years ago. As a result, we can deliver the services our members will demand in future. It is the reason why investing in technology will always remain a prime focus of MBL. But, that does not mean the Bank will lose its’ personal touch. That’s why we will continue to invest in our branch, Sub-Branch and Agent Banking networks as these provide a more personal touch to our customers. We firmly believe that branches will continue to play an important role in delivering services to our customers, alongside our digital channels. In fact, we are on track to opening a new dedicated Islamic Banking branch in Motijheel, Dhaka. The way people do their banking has changed in recent times and will continue to change in future. We need to adapt to those changes and provide multiple channels, including branches and digital. For us, it’s not one or the other – we intend providing both cutting edge digital banking options as well as a strong branch network for our customers.

 

Strong Corporate Governance and Employee friendly environment

Effective corporate governance is critical to the proper functioning of the banking sector and the economy as a whole. Banks perform a crucial role in the economy by intermediating funds from savers and depositors to activities that support enterprise and help drive economic growth. Banks’ safety and soundness is the key to financial stability, and the manner in which they conduct their business, therefore, is central to economic health. Mercantile Bank limited (MBL) realizes this and thus has been working tirelessly to keep in place a top-notch corporate governance structure within the organization.

The Bank realizes that employees are the most valued asset for any organization. As such, the organization puts utmost importance on the well-being of it’s employees. The bank strives to provide an environment that is employee friendly as it believes that satisfied employees will bring about positive results.

 

Corporate social Responsibility

Corporate Social Responsibility (CSR) refers to a company’s sense of responsibility towards the community and environment in both social and ecological. CSR activities have positive impact on firm’s performance and banking sector is no exception to it. Today, by recognizing CSR, banks from all over the world endorse programs of educational, cultural, and environmental, as well as health initiatives. Mercantile Bank Limited has been quite involved in the CSR activities from its inception. This year ended 2021 has been no exception to that. The bank spent a total amount of BDT 216.23 million in CSR. As mentioned earlier, the Bank emphasizes on the fields of Health, Education, Disaster management etc. MBL has spent a total of BDT 64.70 million in health and BDT 20.51 million on Education. The most has been spent on disaster management and others as the bank on 2021 has spent a total of BDT 131.02 million The country needs much spending on this sector presently to guard against any possible disaster. Our bank realizes that and thus emphasized this sector the most.

 

Outlook 2022

We are optimistic about the prospects posed by the country’s anticipated economic growth, and the year 2022 has brought with it a renewed sense of hope. Though, the outbreak of omicron variant of Covid-19 has made the prospect for 2022 a bit gloomy, the continuation of the accommodative and expansionary monetary policy together with stable inflation is bound to generate positive sentiments relating to the country’s economic revival. Despite this uncertain environment, we remain hopeful of growing business. As the pandemic gradually recedes, there would be a greater ease of doing business and on which we will forge ahead in accelerating our development plans. To achieve the said targets for 2022, we will continue to strengthen our technology initiative and service standards along with operational processes to ensure our customer’s choices and expectation are met.

 

Acknowledgements

On behalf of the Board, I would like to thank our shareholders, customers and business partners for heir constant support, trust and patronization. We also appreciate the contribution made by our Auditors, Legal Advisors, Consultants and Correspondents for their time befitting and prudent roles. My heartfelt appreciation goes to the management, all executives and officers for their dedicated services to forge ahead the interest of our beloved institution. My gratitude to the Government of the People’s Republic of Bangladesh, Officials of Bangladesh Bank, officials of Bangladesh Securities and Exchange Commission, Financial Reporting Council, Dhaka Stock Exchange, Chittagong Stock exchange and National Board of Revenue. Thanks to my colleagues in the Board who have always been supportive and agile in our endeavor to navigate the institution in the right direction.

 

Best regards,

Morshed Alam, MP
Chairman