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MANAGEMENT REPORT
Financial Analysis
Wholesale Banking
Retail Banking
SME Banking
“Green” Banking
International Trade
NRB Operations
Treasury Operations
Information Technology Services
Group Human Resources
Special Asset Management
Corporate Social Responsibility
Risk Management Unit
MTB Securities Ltd.
MTB Capital Ltd.
MTB Exchange (UK) Ltd.
Letter of Gratitude
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MTB Annual Report - 2012Management Report - Financial Analysis
In 2012, Mutual Trust Bank Ltd. (MTB) focused on the expansion and diversification of various business lines. A strategic approach streamlining diverse business opportunities had been undertaken, but due to the adverse economic situation it was not a completely successful business year. We achieved a remarkable line in diversification of business, though the year was marked with fierce competition amongst the major players seeking to streamline themselves successfully in order to keep pace with the industry’s transformation.
As of the year 2012, MTB’s total assets along with subsidiaries had risen by 22.0% over 2011, reaching BDT 93.2 billion. Accompanying this quantitative growth has been an improvement in asset quality, with our careful risk management measure contributing to high quality loans and advances. The NPL ratio of the bank increased by 1.2% to 3.7%, which is still lower than that of the average country NPL.
Due to the difficult economic situation, in 2012, our net income reduced by 18.9% going down to 328 million from 404 million in the previous year. A number of successful strategies were taken in the year 2012, including steady growth of our savings and lending businesses, development of more innovative and customer centric financial products.
Analysis of Consolidated Financial Statements
AssetsThe Bank’s total assets posted a 22.0% increase in 2012, rising from BDT 76.3 billion to BDT 93.2 billion. The major contributor to this growth was the increase in Investments, which jumped by 18.0%, or from BDT 19.8 billion to BDT 23.3 billion and in loans and advances, which jumped by 20.2%, or from BDT 47.0 billion to BDT 56.5 billion. Fixed assets of the Bank also increased remarkably i.e. raised to BDT 2.4 billion from BDT 1.6 billion, an increase of 53.6%.
MTB also had to increase its Cash Reserve Requirement (CRR) maintained with Bangladesh Bank and its agents in 2012. The earning assets grew at a rate of 18.2% to BDT 78.8 billion.
Summary of Assets in Balance Sheet:
Loans and Advances by the Bank & Subsidiaries:The Bank’s exposure to loans and advances increased from BDT 47.0 billion to BDT 56.5 billion in 2012 registering a 20.2% growth over last year. MTB’s credit portfolio is mostly comprised of corporate, consumer and SME clients.
MTB is delighted to have availed funding from UBL Dubai to finance through our Offshore Banking Unit (OBU) starting from the year 2010, though it reduced in the year 2012, and stood at USD 1 million i.e. BDT 80.2 million at the year end.
Overdraft against Margin loans stands at BDT 4.1 billion in 2012 from 3.5 billion in 2011 in MTB Securities Ltd. a subsidiary of MTB.
At the end of year 2012, the Bank’s total credit was up by 20.2% over 2011, showing an increase of BDT 9.5 billion. Despite this large growth, loans classified as “substandard and below” experienced a slight growth of 1.2%, which is being addressed carefully by the Bank. This allowed the
28,529 33,884 39,676
47,005
56,511
-
10,000
20,000
30,000
40,000
50,000
60,000
2008 2009 2010 2011 2012
BD
T M
illio
ns
Loans and Advances
Total AssetsLoans/ AdvancesInvestmentsFixed AssetsOther Assets
2012
93,16256,51123,251
2,3853,372
2011
76,33147,00519,756
1,5532,597
(%)Change
2220185430
BDT Millions
BDT Millions
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MTB Annual Report - 2012Management Report - Financial Analysis
Required/Base RatioTier 1 Ratio (%)Tier 2 Ratio (%)Maintained Ratio
2012
10.0%7.1%3.6%
10.7%
2011
10.0%8.1%3.9%
12.0%
(%)Change
--1.0-0.2-1.3
Bank’s NPL ratio a slight increase to 3.7% from 2.5%.
However, the Bank has been able to keep the NPL ratio at a manageable level due to prudent risk management strategies, a committed recovery team and an excellent monitoring and control system.
2012 2011Total loans & advances 56,511 47,005Non-performing loans 2,085 1,195NPL ratio 3.69% 2.54%
Liabilities and Shareholders’ Equity
LiabilitiesTotal liabilities (excluding equity) stood at BDT 88.3 billion at the end of 2012, which was 23.5% more than the previous year’s figure. This increase in liability is mainly due to increase in deposits from customers and borrowing from other banks, financial institutions and agents.
DepositsDeposits, representing the largest portion of total liabilities accounts for 85.1%, showing an increase of 27.3%, or BDT 16.1 billion, to BDT 75.1 billion from BDT 59.1 billion. Over the past four years, MTB was able to almost double its deposits portfolio from BDT 33.8 billion in 2008 to BDT 75.1 billion in 2012.
Deposit Mix and GrowthThe deposit mix showed significant changes during the year 2012.
The proportion of high cost deposits i.e. fixed deposits increased by 29% (from BDT 35.2 billion to BDT 45.3 billion). Deposit Products had also increased by 47% to BDT 9.8 billion from BDT 6.6 billion. In addition to this, zero cost deposit had increased by 3.0% or BDT 269 million (from BDT 8.8 billion to BDT 9.1 billion).
Shareholders’ EquityShareholders’ equity increased BDT 4.8 billion to BDT 4.9 billion in 2012. This rise, propelled by earnings growth, was also reflected in consolidated net income. General reserve is kept at BDT 277 million due to a policy for strengthening the reserve base for taking over any future claim for corporate tax and others.
The Consolidated Earnings per Share (EPS) stood at BDT 1.29 (Face value per Share BDT 10) and Return on Average Equity (RoAE) at 6.8% during 2012. Market capitalization stood at BDT 55.7 billion as of December 2012. During 2012, the Bank declared 10% stock as final dividend.
Summary of Shareholders’ Equity
Capital AdequacyThe Bank’s Capital Adequacy Ratio (CAR) decreased by 1.3% at the end of 2012. The main reasons for decrease were the increase of risk weighted assets and decrease in profitability. In terms of capital adequacy, Tier 1 capital edged up to post 7.1% at the end of 2012. A significant positive effect was made in Tier 2 capital through subordinated debt.
Position of Capital Adequacy Ratio:
33,82042,354 46,041
59,050
75,140
010,00020,00030,00040,00050,00060,00070,00080,000
2008 2009 2010 2011 2012
BD
T M
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s
Total Deposits
2011
15%1%
13%60%
11%
CD & OtherAccountsBills PayableSavings DepositsFixed DepositsOther DepositProducts
2012
9,0511,8149,224
45,301
9,750
Amount inBDT million Mix
2011
8,782602
7,84035,193
6,633
Growth(%)
32011829
47
2012
12%2%
12%60%
13%
0.86%
1.79% 1.79%
0.60%0.39%
0.00%0.20%0.40%0.60%0.80%1.00%1.20%1.40%1.60%1.80%2.00%
2008 2009 2010 2011 2012
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Return on Average Assets (ROAA )
Paid up CapitalStatutory ReserveRevaluation GainGeneral ReserveRetained Earnings
2012
2,5431,637
121277255
2011
2,5431,474
122362311
(%)Change
-11%-1%
-23%-18%
BDT Millions
Earning Analysis
Net Interest IncomeTotal interest income in 2012 showed a positive growth of 29% to reach BDT 7.8 billion from BDT 6.1 billion despite numerous challenges. Interest expenses in the year were BDT 7.0 billion which increased by 34% from 2011 (BDT 5.2 billion). Comparatively, the growth of interest expense is much higher than the growth of interest income, the resultant net interest margin (NIM) showed a negative growth by 4.1% in 2012 (BDT 850 million in 2012 and BDT 888 million in 2011).
Non-interest IncomeIn 2012, investment income, fee income from assurance/guarantee, beneficiary certificates and brokerage, credit cards and foreign exchange trading gains reached an amount of BDT 2.7 million collectively, which was 20% higher than 2011 (BDT 2.2 billion). Investment income consists of interest earned on treasury bills & bonds and dividend received on shares.
Operating ExpensesTotal operating expenses increased by 14.6%, or BDT 276 million, resulting in an amount of BDT 2.2 billion in 2012. This is because of a significant increase in people cost, rental, advertisement and other expenses, which include mainly employee training, business development, registration fees, security services for additional branches, etc.
The Bank provided full provision for gratuity payment, which was BDT 46 million in 2012. Increase of fixed assets caused a 29% increase in depreciation charged during 2012.The headcount increased by 4% throughout the year mainly due to opening of new branches and expansion of business network.
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MTB Annual Report - 2012Management Report - Financial Analysis
Operating Income per employeeProfit before tax per employee
2012
2.7M0.6M
2011
2.5M0.8M
737 870
1,245
888 850
-200 400 600 800
1,000 1,200 1,400
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Net Interest Income
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081MTB Annual Report - 2012Management Report - Wholesale Banking
The banking industry of Bangladesh, as a whole, continued to operate amidst a challenging environment in 2012. In the backdrop of the macroeconomic conditions and continued challenges encountered by the banking sector globally as well as the ever-changing competitive landscape of the banking industry in Bangladesh, our Wholesale Banking Division (WBD) exhibited resilient performance during the year registering 24% growth over last year. Commission and exchange earnings have also increased by 1.3%. WBD offers a range of credit and capital market products and delivers integrated financial solutions to corporate and institutional banking clients all over the country through 5 (five) major units: [i] Centralized Wholesale Banking Unit [ii] Branch-Support Wholesale Banking [iii] Syndications & Structured Finance Unit [iv] Cash Management Unit and [iv] Offshore Banking Unit.
Centralized Wholesale Banking deals with selected corporate clients to provide solutions to their comprehensive financing needs. The clients are booked by the unit, ensuring personalized service. Established in 2011, the unit provides origination and client coverage for top-notch corporate clients and has booked fresh large and top-tier customers of different industries with a particular focus on non-funded income. The prominent names booked in the year were Citycell (telecom), Sylvan Agricultural Ltd. (food processing unit of PRAN-RFL Group), Saiham Group, HR Textile, Dignity Textile, Nikita Apparels, Donglian Fashion (RMG), Faisal Spinning (textile) and Magnum Engineering & Construction Ltd. (real estate). Total portfolio built up during the year was approximately BDT 2,750 million comprising of BDT 1,450 million in funded facilities and BDT 2850 million import & BDT 1524 million export in non-funded facilities. Income earned was approximately BDT 429 million, of which non-funded income was BDT 51 million (12%) and interest earned was BDT 378 million.
Branch-support Wholesale Banking provides structuring, approval, monitoring and compliance support for clients booked at the branch level who have been availing wholesale banking facilities across the entire network. Of MTB’s total credit portfolio of BDT 41.7 billion, approximately over 73.8% belongs to the portfolio under supervision of this unit. The unit finances the establishment and expansion of
projects through long-term financing and supports their continued growth through working capital facilities. In 2012, the asset side wholesale banking team improved the bank’s capacity to deliver financial solutions to wholesale clients through different trade finance solutions e.g. draft purchase arrangement through Wells Fargo, HK, and factoring support for deferred export bills from DS-Concept Factoring GmBH.
This year, we also provided long-range sovereign risk-grade investment options to clients through sales of treasury bonds worth over BDT 2.0 billion, offloading the bank’s primary dealer’s HFT portfolio.
The Syndication Unit, participated in syndicated deals, albeit cautiously because of dry liquidity scenario and slow growth in the syndication market. Total portfolio built during 2012 was over BDT 1.7 billion from syndication. New deals include CP Bangladesh Ltd. (poultry), Orascom (telecom), BSRM (steel), Packaging World, Propac (packaging) and post-delivery USD finance to Biman Bangladesh Airlines through our offshore banking unit. Income earned during this year was approximately BDT 317.4 million, of which interest earned was BDT 312.3 million and non funded income was BDT 5.0 million.
The Cash Management Unit facilitates nationwide sales collection and payment services and engages as a banker-to-the-issue (BTI) and Lead Banker for IPOs. Additionally, it procures deposits, contributing to portfolio growth. During 2012, the unit successfully performed BTI role for 8 (eight) accounts while another 33 (thirty three) accounts have already been booked. It also played lead banker’s role for 1 (one) account while 11 (eleven) other accounts have been booked. New names for nationwide bill collection service are Robi, Banglalion and Abdul Monem Ltd. Another mentionable achievement of cash management unit during the year was opening DSE clearing account for trade settlement that would help source substantial transactional deposits to enhance the bank’s ability to lend more at competitive interest.
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082MTB Annual Report - 2012Management Report - Retail Banking
Retail Banking Customer’s confidence, loyalty, and satisfaction is gauged through multiple products (including savings, credit cards, loans and mortgages) and multiple channels (branches, ATMs, Kiosks, Internet Banking and superior services). At MTB, we aim to deliver a simple, efficient and fair customer experience, innovative products, and multiple delivery channels to be the Bank of choice for our customers.
2012 Initiatives This year, in our continuing efforts to meet customer expectations and create the best experience by providing the widest range of products in the market, we launched some attractive new deposit products and campaigns.
MTB ShanchayMTB Shanchay is a savings product for the “Base of the Pyramid”. It will provide access to banking facilities – enabling the management of financial needs for those in the low income group.
MTB CareMTB Care, a unique proposition of MTB, is a savings product for children with special needs. This product assists special needs children in opening and maintaining accounts at a lower cost compared to other savings products. MTB is committed to helping special needs children have access to banking services.
Customer Meet Program for BranchesThis year, we held 10 Customer Meet Programs across our branches, which elicited valuable feedback from existing customers and expectations of potential customers. A good number of initiatives have been implemented based on suggestions and feedback from these meetings.
Student Banking CampaignA Student Banking Campaign was launched across various universities to assist students and guardians to open student accounts.
MY MTB & ME MY MTB & ME campaign offered exciting rewards to
savings account holders, credit card holders and internet banking users.
MTB CEO’s Deposit Marketing AwardTo inspire employees to reach out to more customers, the MTB CEO’s Deposit Marketing Award was launched. Three phases of the award were conducted this year.
MD & CEO'S Award for Product Champion and Star MTBianThis award was given to branch and individual employees who showed stunning performance in certain products.
Cards BusinessOur debit card business has grown 49% from last year (2011). Contributing to this growth has been the introduction of the Classic card, Gold card, Dual Currency card, e-statements and card cheque facilities. Our 2012 Credit card outstanding portfolio is BDT 171.8 million, a growth of 200% from the year before, aided by our new dedicated cards sales team (which began in March 2012).
We have continued our deployment of Point of Sale (POS) terminals at different renowned merchants, installing more than 850 this year.
Service Quality With the guidelines of MTB Winning, an etiquette and service excellence guideline for employees, our Service Quality (SQ) Department is meeting the commitments and standards for the services that MTB promises.
Number of Debit Cards
2012
2011
Credit Card Outstanding(in million)
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55,248
171.8
57.17
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2012 2011
083MTB Annual Report - 2012Management Report - Retail Banking
Quality Improvement Program
Training Participants Number of Training Training Hour
20122011
350
300
250
200
150
100
50
0
908070605040302010
0
The SQ Department ran several “Service Excellence Training” programs with customer facing units as part of our ongoing Quality Improvement Program. A total of 329 employees attended training programs conducted by SQ Department. Additionally, a number of spot surveys were conducted throughout the year to ensure service quality levels were being maintained.
MTB Contact CentreSince its establishment on December 27, 2011, our Contact Centre (MTB CC) has continued to offer an uninterrupted 24/7, 365 days per year service. This year, MTB CC received more than 100,000 inbound calls, and has served each and every client.
We have also made outbound calls to more than 100,000 customers. Both the self service based Interactive Voice Response (IVR) system and our Specialized Agent service ensure world class customer experience. With an average 16% monthly increase in call volume, MTB CC has increased customer convenience. Customers can reach us by dialing 16219 from any mobile operator, and 09604016219 from both mobile and T&T numbers. MTB clients outside the country can reach us by dialing +8809604016219.
MTB CC continuously runs various outbound campaigns, encouraging our valued clients to strengthen their relationship with the Bank even more. They inform customers regarding our range of products and services which is also another MTB CC requirement.
Security is a top priority, and we run various levels of security checks. Customers are assigned a highly secured computer generated 4 digit secret number (TPIN) to authenticate activities in related accounts.
The following services are available through the MTB CC:
Account Service• Account Balance Information • Transaction Details Information• Cheque Book Request• Customer Feedback & Complain
Remittance Service• Remittance Send & Receive Inquiry• Exchange House Related Inquiry• NRB Account Balance & Transaction Details
Card Service• Debit and Credit Card Activation• Card Transaction Details• Card Block, Lost & Stolen Report• Credit Card Balance Inquiry• Card Cheque Activation & Block• Card Replacement• Credit Card Application Status Inquiry• Credit Card Payment Inquiry• Credit Card Statement Inquiry• Card Dispute Resolving Request
Product Information• Deposit Product Information• Loan Product Information• Cards Product Information• NRB Product information• SME Product Information• Internet Banking & SMS Banking Related Information• Application for New Credit Card & Loan
Foreign Currency Exchange Rate• Daily Foreign Currency Exchange Rate Inquiry
Outlook 2013We are looking forward to more innovative value propositions in retail banking next year, in our continuing efforts to fulfill the widespread needs of retail customer segments through the highest levels of service and comprehensive delivery of all our retail products and services.
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084MTB Annual Report - 2012Management Report a - SME Banking
MTB recognizes the important role played by small and medium enterprises (SMEs) in the development of the economy. Since 2007, we have been providing our services for urban, semi-urban and rural customers. We are committed to playing our part in supporting this engine of growth by providing the necessary access to finance needed by SMEs, evidenced by the fact that we offer one of the lowest lending rates in the market for SME clients.
MTB supports micro enterprises and SMEs across agriculture, renewable energy and other productive sectors. We also have a special focus on women entrepreneurs. MTB offers special current accounts and deposit products with market incentives for SMEs to facilitate better business management. We also offer training and workshops for access to finance, financial counseling, overcoming legal barriers, commercial linkages and business advisory services.
We continue our planned expansion and diversification by introducing new loan products for SME entrepreneurs and
comprehensive financial solutions for farmers. MTB has also focused on providing banking facilities and linkages with micro level customers, sharecroppers, marginal farmers and “hawar” area beneficiaries as our ongoing strategy to support the financial inclusion of low income groups. Overall statistics up to 2012 are as follows;
Number of SME Borrowers 7378Loan disbursed (in BDT millions) 9025.9Loan Outstanding (in BDT millions) 3323.7Loan Products 12Deposit products 2
Backed by refinancing facilities from Bangladesh Bank, MTB has introduced a loan product, carrying a lower rate of interest, for “green” or environment-friendly projects - “MTB Green Energy” - to support our environmentally conscious customers. We have also designed a specifically targeted credit product “MTB IT Genius” for IT entrepreneurs.
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085MTB Annual Report - 2012Management Report - SME Banking
MTB Supports the Development of Women EntrepreneursMTB’s core offering for women entrepreneurs are two loan products MTB Bhagybati and MTB Gunabati. Special features include low interest rates, no collateral, lower processing fees, easy processing, flexible repayment and grace periods (depending on business nature). The MTB Women Entrepreneur Cell has also extended additional support through workshops for bank financing, dealing with legal barriers, linkages with training institutes for business-based training, support at local and international fairs to display customer products and business advisory services.
Our Deposit and Lending Products Deposit Products:
• MTB Probaho: interest bearing current deposit product
• MTB Buniad: fixed deposit product
Loan Products:
• MTB IT Genius: “MTB IT-Genius” is tailor-made for ICT entrepreneurs, as a first time initiative by any bank in Bangladesh.
• MTB Light Engineering: Designed to finance the light engineering sector and its sub-sectors.
• MTB Krishijat: Designed to finance the agro processing industry and its sub-sectors
• MTB Gunabati: Designed to finance women-led SMEs engaged in manufacturing and special service industries that are 100% pre-financed by the SME Foundation. We apply single digit rate of interest - 9% p.a under the MTB Gunabati Loan scheme.
• MTB Mousumi: Designed to finance SMEs engaged in seasonal businesses.
• MTB Krishi: Specifically designed to finance the agricultural sector and its sub-sectors.
• MTB Bhgyabati: For women entrepreneurs, these loans are fully refinanced by Bangladesh Bank.
• MTB Small Business: This product is designed for all types of business requirements for micro and small enterprises.
• MTB Revolving: This product is designed to meet working capital requirements and support continuous growth (CC (H) & revolving type loan).
• MTB Microfinance: This product is designed for NGOs (MFI NGOs) to supply wholesale credit for onward lending to their beneficiary members in the form of micro credit.
• MTB Diggon: This product is extended on the basis of fixed deposit receipts (FDR).
• MTB Green Energy: Designed to finance the renewable energy sector (solar, bio-gas); agri-SMEs and farmers are the target customers.
Complete Financial Solution for Agro-Based FarmsFor farms and agro-enterprises that have different financing requirements (e.g. for solar irrigation pumps, farm equipment, seed and fertilizer) MTB is a one-stop financial facility.
NGO Linkage Program NGOs support sustainable development through programs for poverty reduction, gender equity and climate change adaptation and mitigation. MTB is proud to support the development of these target groups through our NGO linkage program by ensuring access to credit.
Financing to Community based Organizations (CBOs)Mutual Trust Bank Ltd. (MTB) is the first bank to provide financial support to CBOs, having financed 18 CBOs, creating positive development impact in terms of employment and poverty alleviation.
SME Focus in 2013MTB will continue to focus on financial inclusion through the delivery of financial services at affordable costs. We will continue to develop new ideas and processes and explore the use of innovative technologies as delivery mechanisms to support the growth of our SME business. We will modify, update and develop our policies and programs periodically to support enterprise creation, foster entrepreneurship and facilitate access to finance and banking facilities for SMEs.
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086MTB Annual Report - 2012Management Report - Green Banking
Green Banking is a philosophy that guides the way we work – limiting the use of paper as much as possible and encouraging the use of online and electronic transactions for processing. We aim to spread awareness amongst our clients about environmental and social responsibility and environmentally friendly business practices. Underlying principles include the implementation of environmental standards for lending (especially in assessing capital/operating loans to businesses involved in the extraction of natural resources).
Our Green Initiatives
For CustomersAlternate Delivery Channel (ADC) - bringing together all
our alternate delivery channels under one umbrella and giving customers the convenience of banking anytime, anywhere through internet banking, mobile banking and electronic payments. Internet banking provides MTB's customers with access to account information, summary of accounts, and account statements. They can also order cheque books, transfer funds to any MTB account, set up payees (within MTB), view credit card details, and pay credit card and utility bills and manage their profile information.
Opening of 1st MTB solar irrigation system at Barguna
Kiosks for smart banking- MTB Smart Banking Kiosks offer 24/7 ATMs, cash & cheque deposit and bill payment facilities, internet banking access with extended hours for customer service from 9 a.m. to 5 p.m. This initiative provides our customers hassle-free service and paperless banking.
Green energy products under Green Finance for investment in energy efficient industries, with re-financing from Bangladesh Bank. MTB has made investments in solar energy (solar irrigation plant & solar home system-under linkage programs) and bio gas plants. We have disbursed BDT 0.5 million to a solar irrigation plant, and BDT 97.5 million in solar home systems this year.
MTB Krishi - for financing the agricultural sector (crops, fisheries, livestock, etc.). Under this loan scheme, we have disbursed BDT 485.4 million in 2012.
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087MTB Annual Report - 2012Management Report - Green Banking
Solar powered branches and ATM- We have three solar powered branches-Ishwardi, Belkuchi & Hasnabad SME branches, and a solar powered Green ATM at Kapasia, Gazipur. Our green ATM saves 90% energy compared to conventional ATMs.
e-Dispatch- We have started sending e-cards on festivals to our clients. Our Research and Development department (R&D) publishes periodicals, MTBiz, regularly taking into account national and international economic data and events. Apart from that MTB news & events are also articulated there. We have introduced e-MTBiz, and started send it over email. We also use http://www.slideshare.net/Mtbiz for hosting and archiving MTBiz, and avoid printing.
For EmployeesGreen Office Guide - For in-house environment management, we have prepared and circulated the ‘MTB Green Office Guide’. This guide is the first such guide in the local banking industry providing information and guidance on how we can ensure in-house environment management. It includes practical information on:
a) Paper useb) Energy usec) Office equipmentd) Meetings and conferencese) Water usef) Carpoolingg) Responsible purchasingh) Online communicationi) Waste and recycling
Online leave management facility - We have introduced online leave management for our employees, with in-house software application, doing away with paper leave applications and manual leave registers.
e-notice board/intranet - Our corporate e-notice board/intranet displays all regulatory and internal circulars, office orders, office notes, etc, and thereby saves a lot of paper.
Our Green EngagementEarth Hour – As a token of our allegiance and commitment to the environment and society, we expressed our solidarity along with the rest of the world by participating in the ‘Earth Hour’ by switching off electric lights for one hour at our corporate head office. Khondkar Morshed Millat, Deputy General Manager, Bangladesh Bank was present and appreciated MTB as a green corporate citizen in the banking industry. MTB center was completely shrouded in darkness from 8.30 pm to 9.30 p.m. as we switched off for “Earth Hour”.
World Environment Day – We observed the day, June 05, 2012 by writing an article on the day’s theme “Green Economy: Does it include you?”
We believe that every ‘Green Banking’ step we take will contribute a little in ensuring a greener and sustainable world, and we strive to remain the trend setter in Green Banking practices.
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Celebrating Earth Hour 2012
088MTB Annual Report - 2012Management Report - International Trade
The International Chamber of Commerce’s (ICC) “Rethink-ing Trade and Finance” survey revealed “While 2011 opened with positive growth prospects for world exports and imports, with both projected to recover their pre-crisis volume level by December 2010, a series of global shocks: the Arab Spring disruptions, the earthquake in Japan and the debt crises in the euro-zone and the US resulted in uneven performance throughout 2011 and is dampening what had looked like a robust recovery. As a result, the outlook for 2012 is expected to have a negative carry-over, with annual trade growth forecast at 5.2% for 2012 and 7.2% in 2013.”
Total national growth in LC opening, during the 2011-2012 fiscal year, showed a negative growth by 4.0% against a positive 34.0% growth in the previous fiscal year. This negative growth continued to 10.9% at the end of July-September quarter of this year. Total national export stood at USD 24.3 billion in current fiscal year against USD 22.9 billion of the previous fiscal year, a growth of 5.9%. But, this growth stood at 3.1% at the end of July-September quarter of this year.
ImportImport volume of MTB during the year 2012 was USD 479.6 million (up to Dec 12) compared to USD 476.8 million in 2011 (up to Dec 11), which showed a slight growth by 0.6%. The major import areas were raw materials, fabrics and accessories, chemicals, electronic goods and other consumer products, capital machinery, medical equip-ments and food grains (vegetable oil, pulse, rice, sugar etc.). ExportDuring 2012, total export volume of MTB stood at USD 310.1 million (up to Dec 12) compared to USD 306.2 million in 2011. This reflects a slight increase in growth by 1.3%. The bank has given emphasis on export of traditional items like jute, jute goods, raw jute, leather and ready-made garments.
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35,869 37,471
Import (BDT Millions)
480 477
Industry
2012 2011
MTB
Export (BDT Millions)
25,113 24,435
310 306
Industry
2012 2011
MTB
089MTB Annual Report - 2012Management Report - NRB Operations
MTB NRB Division recognizes that every Non Resident Bangladeshi (NRB) has distinctly different needs and we meet these by providing exemplary levels of personal service, convenience and security. Prosperity, financial confidence and the well-being of our clients are the main priorities of our division. Our division’s competitive strength lies in the use of technology and our ability to deliver world-class service with fast response time. Our division’s philosophy is based on three core values: operational excellence, customer focus and product leadership. With attractive and competitive NRB products and services, MTB remains the preferred bank to NRBs. We have representatives and correspondents in most of the remittance sending countries to bring the services of the bank to the doorstep of NRBs. With a focus on product quality and service excellence, our portfolio of deposits has reached BDT 570 million, which shows a significant growth.
To serve NRBs and travelers, we have MTB Booths at Dhaka’s Hazrat Shahjalal Int’l Airport (Concourse Hall, Arrival and Departure lounges) and at Shah Amanat International Airport (SAIA), Chittagong to facilitate currency exchange transactions. This has enhanced our brand image among travelers and NRBs. This year our airport booths purchased different foreign currencies amounting to BDT 38.6 million and sold BDT 26.2 million, respectively. This year, we continued to serve Hajjis at Hajji Camp, Ashkona, Dhaka. Our booth offered pilgrims the opportunity to convert their local currency into Saudi Riyal and other foreign currencies at a very special rate with no endorsement fee.
In 2012, we procured inward foreign remittances of USD 144.7 million, equivalent to BDT 11.6 billion, a 6.3% growth over 2011.
Inauguration of MTB Hajj Booth at Hajj Camp
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Our Treasury department deals with money market, fixed income market, foreign exchange, asset-liability management, corporate sales and primary dealers’ business as a profit center with its own trading and investment activities. Primarily our Treasury is divided into the following three main wings:
a) Dealing Room (Front Office) operations – dealing with call money, REPO, reverse REPO, interbank placements, sale/purchase of foreign currencies, maintenance of the cash reserve ratio (CRR) & statutory liquidity reserve (SLR), submission of primary auction bids to Bangladesh Bank and the primary dealership business (government securities - treasury bills & treasury bonds - in the secondary market).
b) Back Office (Treasury Administration) operations - responsible for verification and settlement of the deals conducted by the dealers in front office. The major functions are maintenance of principal account with Bangladesh Bank, reconciliation of Bangladesh Bank A/C. and Nostro A/C, issuance of Bangladesh Bank cheques, all regulatory reporting, entries of securities purchase/sales & REPO, maintenance of Net Open Position (NOP), preparation and passing of deal vouchers, maintenance and funding of Nostro accounts, execution of all deal transactions as per value date and revaluation of government securities.
c) Mid-Office (Risk Information Unit) operations - reports to ALCO (headed by MD & CEO) on different risk aspects of the bank; and regularly monitors whether treasury activities and deals are done within board approved limits. This unit reports independently on crucial triggers, risk exposure (e.g. interest rate shock, exchange rate fluctuation) and the effect on the balance sheet of the bank.
Treasury ServicesMTB Treasury has the widest range of services customized to our client requirements. Our focus is to be the risk solution provider of choice and the premier market maker in the country. MTB treasury currently offers sophisticated
solutions supported by a large sales force and a state-of-the-art dealing room in Bangladesh. The major objectives are:
• Sound liquidity position of the bank.• Forecasts of monetary policy and interest rate behavior of
the market.• Arbitrage in the money market• Projections of bank fund situation
Money MarketMoney market refers to the raising and deployment of short-term resources, with maturities generally not exceeding one year. The MTB money market desk is one of the most active and efficient desks in the interbank market of the country. The money market is sub-divided into Call Money, Term Money, SWAP, REPO and Reverse REPO.
Our main responsibility is to meet CRR & SLR requirements fully as per Banking Company Act and Bangladesh Bank instructions by investing in various government securities like treasury bills, treasury bonds and qualified debentures. After meeting the CRR and SLR, we invest surplus funds in the money market.
DIBORThe interbank market is considered to be risk free though banks do carry counterparty risk. However, the interbank market carries the lowest risk after sovereign risk; hence the interest rates prevailing in the interbank market constitute “benchmark” rates. The call money rate as indicated by the overnight Dhaka Interbank Offered Rate (DIBOR) is the most widely accepted benchmark rate for corporate debt paper and bank credit extended on floating rates.
090MTB Annual Report - 2012Management Report - Treasury Operations
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091MTB Annual Report - 2012Management Report - Treasury Operations
Foreign ExchangeOur treasury department engages in the foreign exchange (FX) market through the purchase and sales of foreign currencies. Our corporate and institutional marketing team provides up-to-date market intelligence and advice and ensures the timely execution of customer deals including spots, forwards and swaps. Officials involved in the fixation of foreign exchange rates meet on a daily basis to review the prevailing market conditions, exchange rates, exposure and transactions to mitigate foreign exchange risk.
Primary DealerMTB is a Bangladesh Bank approved Primary Dealer (PD) engaged in activities, which support the primary and secondary markets for government securities. In this capacity, we are able to make business deals with the Bangladesh Bank, such as underwriting new government debt. We bid for government securities competitively and purchase the majority of Treasuries at auction. Through our branch network, we plan to expand our business further by redistributing these securities to clients, creating and broadening the initial market in the process. Our objectives are:
• To be a market leader in the primary dealership market and to establish a unique brand in the secondary securities market.
• Help enhance the liquidity and depth in the securities market through selling government securities and establish new trading relationships with other parties.
• Increased revenue generation.• Capture a high market share.• Aid in the development of the secondary market by
popularizing government securities to individuals and institutions.
• Help Bangladesh Bank achieve their strategic monetary targets.
Asset - Liability ManagementOur treasury plays an active role in Asset Liability Management (ALM), which is the ongoing management of the bank’s balance sheet in order to ensure the right balance between the sources and uses of funds in respect to their maturity profile, cost, yield and risk exposure. This dynamic process examines volumes, mix, maturities, yields, sensitivities, quality and costs in order to maintain liquidity and Net Interest Margin (NIM). Our Asset-Liability Committee (ALCO) comprised of senior management, meets monthly to discuss the market (economic factors, market status, peer group analysis, projection of interest rate, exchange rate and spreads, gaps in liquidity structure, internal transfer pricing, regulatory compliance, etc.) and takes strategic decisions on fixation of asset liability pricing. Special ALCO meetings are also held to respond to the unusual or seasonal market behavior or other volatile market scenarios as and when required.
Domestic borrowings, volatility in the capital market, price
hikes in necessary commodities and hiked fuel prices in the international market stimulated the liquidity crunch in 2012. ALCO exerted rigorous efforts to manage the challenges brought up by these issues.
In 2013, we will continue our focus on strengthening our capabilities in forecasting cash flow effectively and managing the surplus or shortfall of funds in a prudent manner, and strive to contribute significantly to the profit and growth of MTB.
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Recognized across the industry as a user of the most advanced banking technologies in the country, Information Technology (IT) at MTB has been about creating synergies across our operations, adding value to all our stakeholders and enabling financial inclusion across the nation. Ongoing investments in IT systems allow us to benefit from technological innovation, improve our ability to meet evolving business needs and deliver on customer service expectations and efficiency demands.
IT facilitates all our core business processes and components and serves to support, sustain, transform and realize our strategic objectives. IT also plays a pivotal role in ensuring that our business is better able to comply with regulatory requirements.
We have designed innovative e-delivery channels, e-Business platforms for corporate entities, and an internet banking channel for individuals and merchants. The internet banking software, developed in-house, has added
092MTB Annual Report - 2012Management Report - Information Technology Services
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093MTB Annual Report - 2012Management Report - Information Technology Services
feature-rich enhancements to online products and business portals. We are poised to launch mobile banking through secure SMS. This year, we created one of the largest ATM switches across the nation; introduced globally renowned data security measures and improved efficiencies in our banking links with business partners, including merchants and correspondent banks.
Efficiencies have been achieved in our internal processes and paper usage minimized by automating back office functions and frontline services.
Expansion in ATM & POS NetworkSince our first ATM was installed in 2011, we now have 150 ATMs across the country, making us one of the top five ATM service providing banks in the country. We are constantly working on expanding our ATM network to increase our reach. Currently, approximately 75% of cash withdrawals of our card holders take place through MTB’s own ATMs while 25% is through the VISA network. In 2012, we added nearly 100 ATMs to the network.
In March 2012, we completed the VISA certification process successfully for acquiring the cards of other VISA members and have started accepting VISA cards of other banks in our ATM network. This has facilitated enhanced access to other banks’ VISA customers and increased fee income. Our POS network launched in July 2011, now stands at over 1,000 POS machines.
MTB Smart Banking (Kiosk)MTB has installed five kiosks in prime locations around the country. Our interactive MTB kiosks provide ATMs, cash/ cheque deposit machines, access to internet banking, and a kiosk attendee to provide assistance and preliminary banking services.
Internet BankingA substantial expansion in the customer base was experienced through the enhancements to our internet banking services, now re-branded as ‘MTB Internet Banking’. The state-of-the-art software, built in-house, enabled us to overcome the hurdles to the single customer identification number and improved access security. ‘MTB Internet Banking’ is one of the best internet banking suits within the local banking industry.
SMS Alerts‘SMS Alerts’, one of the most valued fraud detection services offered to our customers, was enhanced this year, by offering customers the alerts to all transactions in addition to ATM and POS transactions.
Automated Clearing House OperationsBy installing Magnetic Ink Character Recognition(MICR) Cheque scanning machines in 67 branches in 2012, we have ensured that all our MTB branches can have clearing cheques scanned at their own premises, thereby reducing
the lead time – enabling same day clearing, ensuring customer satisfaction. New branches were opened with cheque scanning facilities from day one.
Electronic Fund Transfer Network Transactions through the Bangladesh Electronic Fund Transfer Network (BEFTN), the electronic fund transfer gateway introduced by Bangladesh Bank late in 2011, increased in 2012. A growing number of customers enjoy the ability to transfer funds electronically through the central bank without sending physical instruments.
At MTB, we have been using the EFT to process remittances to all banks and many remote locations, with a 95% success rate of same-day transfers. We also used the EFT to process a large number of dividend warrants to other banks, ensuring quick dividend proceeds to beneficiaries.
VMware Server VMware virtualization helps reduce capital expenses through server consolidation and improve operating expenses through automation, while minimizing lost revenue by reducing both planned and unplanned downtime. MTB uses the full server resources of server systems by deploying VMware applications.
MTB Corporate IntranetThe internal web portal popularly known as Corporate Intranet or iMail, was enhanced with new features including daily performance dashboards and live account opening meters (which has renewed staff enthusiasm and acts as an incentive). The HR management system was enhanced with the introduction of Online Leave Application and Approval System, Training Management System and Performance Management System (PMS). The introduction of an online requisition system has brought about an end to paper based requisitions in the bank.
Participation in National Payment Switch Bangladesh (NPSB)MTB has begun the process to join the NPSB, which will connect all switches in banks, mobile operators and internet banking solutions enabling inter-bank payment instructions to be sent via the NPSB for clearing and settlement. This will create a common platform for debit/credit/prepaid cards, internet and mobile based payments in the country for all the banks and financial institutes. E-commerce will spread and transaction costs will go down.
Outlook for 2013Our technology platform is poised to scale up financial inclusion across the nation. Achieving business volume growth by improving customer convenience, attention to data security and bringing in cost efficiencies across our operations would be our key strategies in 2013.
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MTB and its subsidiaries strive to create the kind of work environment in which every employee feels proud and is able to develop his or her full potential and capabilities. We recognise that our success is deeply embedded in the success of our human capital. During 2011-12, we continued to strengthen our HR processes in line with our objective of creating an inspired workforce. The employee engagement initiatives included placing greater emphasis on learning and development, launching leadership development programmes, introducing internal communication, providing opportunities to staff to seek inspirational roles through internal job postings and periodic job rotations, streamlining the Performance Management System (PMS), making the compensation structure more competitive and streamlining the performance-linked rewards and incentives.
People (2010-2012)
Year 2010 2011 2012 Number of People 1,089 1,269 1,316
In 2012, GHR has emphasized training programs on 1) Performance Management System culture 2) PMS rating techniques 3) effective performance review process; and developed an online system to identify employee objectives for 2012. All employees declared and recorded their objectives, which was reviewed and evaluated by his/her line manager. These changes have helped to increase the ownership of appraisers and reviewers in the performance management process.
094MTB Annual Report - 2012Management Report - Group Human Resources
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Induction of 2nd batch of MTB Management Trainees (MMT 2012)
Staff Demography (2012)
Gender Number Average Average Service Employee of Age Length in MTB Turnover Employees Rate
Male 1085 37.5 years 4.9 years 3.5%
Female 231 32.5 years 4.5 years 4.7%
Clear Job Descriptions (JD) will ensure the smooth work flow and accountability of employees. For this, GHR has conducted five JD trainings all over the country and also created an online process, which is hosted on our corporate intranet pages to demonstrate employee activities related to business goals.
Learning and Development (2012)
Training Programs Participation
In House (MTBTI) 70 900 Local /Out Source 66 280 International program 03 07 Training Participation Rate 94%
GHR has taken initiative for e-learning facilities through our corporate intranet system through daily “ Quiz”. ITS division along with the support of MTBTI commenced this flexible program for employees to reduce costs associated to training.
We believe learning is an ongoing process. Towards this end, MTB has built training infrastructure which seeks to upgrade skill levels across grades and functions through a combination of in-house and external programmes. In 2012, GHR has invested in training for all employees at the time of their joining and further career development opportunities. The flagship in-house programmes include the Induction Programme “MTB Orientation” for new entrants, Banking Law & Practice, credit and foreign exchange programmes for building a pool of specialists. GHR has conducted a training needs assessment in 2012 for further development in 2013. External programmes for team-building, leadership, organizational development, management development programmes and people management programmes have been organized in support with reputed banking and management institutions for middle management personnel. MTB initiated a Pre-Branch management training program for employees before every posting to ensure the right manpower allocation and right skill set; and to have direct impact on their operational and service level.
MTB believes that a transparent organization structure ensures efficient communication and also promotes a performance-driven work culture. MTB has its own corporate HR page, an intranet portal created to offer a one-click destination to employees for easy access to HR related information, policies, procedures and circulars.
Profile by Age
Below 30 years Above 30years to 40 years Above 40 years to 50 years Above 50 years
To promote a culture of leadership development and to build a pipeline of potential leaders within the Bank, many leadership development processes have been introduced. MTB Leadership Practices were designed for employees at different levels to promote desired behaviour and facilitate objective assessment. The Management Trainee Programme focuses on grooming business leaders of tomorrow through a rigorous 12-month cross-departmental and branch exposure training. In 2012, GHR has selected 12 new MTB Management Trainees. MTB’s workforce at the year-end was 1316 compared to 1269 at the end of 2011.
Our Green Banking philosophy has been embraced by GHR in all our functions - recruitment and selection, training and development, compensation and benefit, performance measurement, working environment. Initiatives included proper use of water, paper, electricity, energy; on-line communication; solar energy plan for own consumption; automatic shut down of computers, fans, light, air cooler, etc. We have also included e-learning and nomination process for employee training and provided supporting online information for employee awareness on environmental, social risk and the relevant issues as the part of the bank's human resource development. Furthermore, GHR has started initiatives to implement green strategic HR planning, which is a set of achievable targets and strategies (under PMS), and disclosure of job postings on websites, setting up Green Branches, improved in-house environmental management, such as video conferencing in lieu of physical travel. MTB has introduced electronic reporting lines and reporting system database and we have implemented background checking for potential employees and exit interviews for further development process.
MTB aims to engage in best-practice human resource management, which will facilitate excellence and enable the bank to be recognized nationally and internationally as an employer of choice and a model of best practice human resource management.
65%
20%
2%
13%
095MTB Annual Report - 2012Management Report - Group Human Resources
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096MTB Annual Report - 2012Management Report - Special Asset Management
The Special Assets Management Department (SAMD) has been established for the recovery and regularization of Non-Performing Loans (NPLs), complying with all circulars/norms/regulations of Bangladesh Bank and MTB Credit Risk Management guideline. Our team, committed to a continuous recovery effort, consists of a combination of experienced and young professionals under the direct supervision of the Deputy Managing Director (DMD) and prudent guidance of the Managing Director & CEO. The team provides support to branch executives and officials in keeping their NPL ratio at the lowest through speeding up the process of recovery and regularization. Below is a snapshot of our performance over the past seven years.
Recovery
Written-Off
Classified LoanTotal
Years
Figures in BDT Millions
2006
-
1.61.6
2007
-
35.935.9
2008
-
411.2411.2
2009
-
593.4593.4
2010
1.0
560.3561.3
2011
80.1
374.3454.4
2012
4.9
751.1756.0
Corporate Social Responsibility (CSR) is embedded within the ethos of Mutual Trust Bank Ltd (MTB). We believe that to be a good corporate citizen, we not only have to perform well, but do it in way that is beneficial to the society as a whole.
The initiatives undertaken in 2012 focused on education, especially for women and children; vocational training, skill
development for the underprivileged and disabled to allow them a chance for a sustainable living and promotion of arts and culture in the country. Additionally, we provided support to distressed people especially during winter. Many of these initiatives were new projects which began in 2012, and based on the success of the program, will continue in 2013. Contributing to the success of all these initiatives was the active participation by all the employees of MTB.
097MTB Annual Report - 2012Management Report - Corporate Social Responsibility
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MTB donates to the family of late Hazrat Ali for his act of bravery
098MTB Annual Report - 2012Management Report - Corporate Social Responsibility
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Annual contribution to a family affected by the BDR tragedy
Scholarship program to commemorate theInauguration of MTB Meghna Branch
Scholarship program to commemoratethe inauguration of MTB Kapasia Branch
MTB sponsored North South University’s Masters of IdeationProgram Finale
099MTB Annual Report - 2012Management Report - Corporate Social Responsibility
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MTB donates to Dhoritri Foundation
MTB Director Mr. Anjan Chowdhury is distributingwinter clothing amongst poor people at Pabna
Winter clothing distribution at Dinajpur
Relief distribution amongst flood affected people atChokoria, Chittagong
Winter clothing distribution at Naogaon
MTB–Dhaka University Alumni Association (DUAA)Scholarship Awards Ceremony 2012
Mutual Trust Bank Limited (MTB) is exposed to risks associated to its lending and trading businesses and operational activities. Managing such a wide range of risks has always been a primary concern of the bank.
On the other hand, to ensure the solvency of the bank against potential losses arising from those risks, the bank maintains adequate capital in order to absorb financial losses that may potentially occur. MTB proactively manages its risks - we aim to take precautionary measures before incidents occur. The Risk Management Unit (RMU) of the bank is responsible for establishing the Bank’s risk management framework, ensuring that procedures for identifying, monitoring, mitigating, and managing risks are in place, and operating effectively to ensure compliance with Risk Management Guidelines, Core Risk Management Guidelines, and Guidelines relating to Basel Accords.
We are extensively working on capacity building by way of organizing trainings, exchanging ideas about Basel-II, and risk management in order to create enterprise-wide risk awareness, and instill a risk management culture.
Risk AppetiteOur bank does not try to eliminate risks as a whole-it assumes both tangible and intangible risks during the course of regular operations. Our Board determines the level of risk we are willing to take in achieving our strategic objectives. MTB’s risk appetite framework sets out specific principles, objectives and measures which link diverse considerations such as strategy setting, risk recognition, target capitalization levels and acceptable levels of earnings volatility. It is built within a “business as usual” process.
Risk GovernanceThe risk governance structure for MTB is shown below:
This risk governance system is comprised of a different process levels-measure, monitor, learn and set. Effective risk management requires regular practice of such a governance system.
100MTB Annual Report - 2012Management Report - Risk Management Unit
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Board and Senior Management Oversight
Policies, Procedures and Limit Structure
Risk Management, Monitoring & Management Reporting Systems
Internal Controls and Comprehensive Audits
Defining Risk Appetite
Risk Management Structure
Risk Management Reporting
Risk Management Practice in MTB under Basel II AccordMTB follows the three approaches to determine the capital requirement, based on Total Risk Weighted Assets (RWA) under Pillar-I of Basel-II Accord:
• Standardized approach for credit risk • Standardized approach for market risk • Basic Indicator approach for operational risk
Besides, additional capital requirement has been determined for the risks, as specified by the regulator in Internal Capital Adequacy Assessment Process (ICAAP) process document guideline, under Pillar-II of Basel-II. Under Pillar-III, the qualitative and quantitative information is disclosed in this annual report, as well as, in the website as per Bangladesh Bank instruction.
Basel-II Framework
At MTB, we identify and assess risks; select and implement risk control measures and monitor the risks. All these processes are in line with the guideline provided by the regulatory body. Our risk management process is as follows:
Risk management process
Internal modules/models used under Pillar-II as ICAAP DocumentsBangladesh Bank has defined 10 risky areas and it is up to us at MTB to measure these risks. Under the instruction of Bangladesh Bank, we have developed our own formula (internal model) to identify those risks in both quantitative and qualitative form. For this, MTB needs to undertake an Internal Capital Adequacy Assessment Process (ICAAP). To monitor these activities, a separate Supervisory Review Process (SRP)-Supervisory Review Evaluation Process (SREP) dialogue will be undertaken with the Bangladesh Bank.
Core Risk ManagementThe six core risk areas, we have been working with, and guided by Bangladesh Bank, are:
101MTB Annual Report - 2012Management Report - Risk Management Unit
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MonitoringMeasurementIdentification Management
Pillar-I
MCR
• Credit Risk
• Market Risk
• Operational Risk
Pillar-II
SRP (ICAAP)
• Residual Risk
• Evaluation of Core Risk Management
• Credit Concentration Risk
• Interest rate risk in the banking book
• Liquidity risk
• Reputational risk
• Settlement risk
• Strategic risk
• Environmental risk
• Other material risk
Pillar-III
Market Discipline
• Qualitative Information
• Quantitative Information
• Credit Risk • Asset - Liability/Balance Sheet Risk • Foreign Exchange Risk • Internal Control and Compliance Risk • Money Laundering Risk • Information and Communication Technology Risk
Internal modules have been developed, in accordance with Bangladesh Bank Guidelines, for calculation of required capital against each of these core risks.
Credit Risk ManagementThe instruments and tools, through which we manage credit risk, are as follows: • Exposure Ceilings• Review/Renewal• Risk Rating Model• Risk-based Scientific Pricing• Portfolio Management• Credit Audit/Loan Review Mechanism
Credit Policies and PrinciplesMTB’s credit is restricted to carefully determined customers through a thorough credit appraisal system. This minimizes costs and losses from potential bad debts. To improve asset quality and protect our bank from bankruptcy we adopt strict policies including:
• Not to extend credit to persons/entities not supported by CIB report
• Maintain a feasible ratio of loan and deposit• Avoid directed lending• Ensure the highest ethical standards in all credit
activities• Extend credit in the areas where risks are sufficiently
understood and can be managed • Compliance with regulations
Credit AdministrationMTB’s credit disbursement functions are strictly handled by our Credit Administration Department (CAD) which ensures that:
• Documented credit approval is obtained• Legally enforceable security documents have been
prepared• Limit creation and loan documentation check list
(LDCL) has been obtained• All standard charges of documents have been
executed.
Credit MonitoringOur Credit Monitoring System (CMS) is a tool that allows
us to manage, monitor and control performance of assets (loans) in a proactive manner to prevent them from turning into non-performing assets (NPA). Statements on early alert accounts, delinquent and specially mentioned accounts are generated and necessary action is taken by the credit monitoring cell.
Non-performing Loan (NPL) ManagementMTB’s Special Assets Management Department (SAM) is responsible for effective NPL account management and is totally independent of credit origination and approval functions. SAM operates autonomously and prepares and implements our recovery strategy.
Asset - Liability Risk Management MTB’s Asset-Liability Management Committee (ALCO) is headed by the Managing Director and CEO, and considers the management of risk sensitive assets and liabilities, credit risk, capital risk, market risk, interest rate risk and liquidity risk. The functions of the committee include:
• Monitoring the risk levels of the Bank• Articulating the interest rate position & fixing the
interest rate on deposits & advances• Fixing differential rate of interest on Bulk Deposits• Facilitating and coordinating the bank-wide
implementation of the ALM system
Foreign Exchange Risk ManagementMTB’s policy regarding foreign exchange, in line with the policy given by our regulator, has well-defined internal approval procedures and position limits for each foreign currency transaction, as well as vigorous accounting and information systems and internal compliance controls. Our internal audit system reports on foreign exchange risk management policy on a quarterly basis to the senior management.
To minimize potential losses due to foreign exchange risk, our bank emphasizes monitoring of the following:
• Monitoring dealers’ dealing limit• Reconciliation of treasury front and back office
positions• Daily reconciliation of NOSTRO accounts• Matching of open items• L/C related unmatched items and unmatched items
other than L/Cs
Internal Control and Compliance Risk ManagementMTB has a structured Internal Control and Compliance (ICC) division of which there are three distinct units headed by a senior level executive:• Audit and Inspection• Compliance • Monitoring
102MTB Annual Report - 2012Management Report - Risk Management Unit
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The mission of MTB’s compliance function is to promote the culture and practice of compliance with legal and regulatory requirements and the Bank’s ethical standards. Internal control and compliance division reports on non-compliance detected by internal and external audits to the audit committee of the board for appropriate and necessary action.
Money Laundering Risk ManagementMTB, as a financial intermediary, is committed to taking preventive measures against money laundering and terrorist financing in line with the Money Laundering Prevention Act, 2009; Anti Terrorism Act, 2009; Guidance Notes on Prevention of Money Laundering of Bangladesh Bank; and the instructions circulated by them from time to time. MTB applies risk sensitive customer due diligence (CDD) measures, monitors business relationships and records in line with regulations.
MTB’s Activities Regarding Money Laundering Risk Management • MTB‘s policy guidelines have been drawn according to
Bangladesh Bank regulations regarding prevention of money laundering and combating the financing of terrorism.
• Correct and full documentation of Know Your Customer (KYC) which enables the prudential prevention of money laundering.
• Regular training for employees on prevention of money laundering and combating financing of terrorism.
• MTB has an experienced Chief Anti-Money Laundering Compliance Officer (CAMLCO) and 86 Branch Anti-Money Laundering Compliance Officers (BAMLCOs) to ensure regular monitoring, compliance and accountability both at corporate head office and branch level respectively.
• Updating Know Your Customer (KYC) and Transaction Profile (TP) of the customers at least once a year.
• Quarterly meeting of Central Compliance Unit (CCU) to ensure compliance with AML instructions.
• Activities regarding money laundering are reported to the Managing Director and CEO, who oversees the bank’s AML campaign.
• Visiting branches to check the status of AML compliance.
• MTB has integrated core banking software regarding customer information which helps to maintain updated KYC profile & Transaction profile, as well as, monitor and detect suspicious transactions.
• Each branch has assigned an official with specific AML compliance responsibilities.
• MTB has developed MTB Customer Acceptance Policy.
• Compliance with all regulatory instructions.
Information and Communication Technology (ICT) Risk ManagementMTB has evolved to a “one-stop” centre for a wide range of financial services for our valuable customers. MTB has its own “IT Security Policy” which is in compliance with guidelines regarding ICT Security provided by Bangladesh Bank. These policies define responsibilities and requirements for protecting information and information systems. They also define hardware, network, and related communication technologies and their use in providing financial services.
The MTB Data Centre, equipped with sophisticated technology, network and security systems tackles ICT security threats. Our ITS division upgrades the existing system regularly and controls ICT related risks. When developing and implementing ICT Management frameworks, the ITS department addresses issues related to:
• Business partners, which include customers, suppliers, retailers, and other stake-holders who have access to organizational ICT infrastructure on site or using remote access
• Core business and related processes; this includes the understanding of the organizational activities and processes
• Data and data infrastructure, including the organization of data used for business purposes, and infrastructure used to capture, store, manage, publish, archive, and remove the data
• Software and related applications, including the understanding of business applications (standard and special purpose) software management practices used to process the business information
• Hardware, network, and related communication technologies; these look at the hardware side of equipment used in processing and transmission of information across the stakeholders
• Security measures and related development processes; the security in banking industry is a major concern. As such, addressing security issues starts from the development process (each phase) to daily management of ICT, to ensure that risks are if not totally removed, but minimized at low rate of occurrences
Stress Testing- Sensitivity AnalysisOur forward-looking stress testing and sensitivity analysis sheds light on inherent risk exposures and offers alternative insight into the potential severity of negative outcomes. The metrics generated help our management evaluate capital and liquidity needs under adverse scenarios, inform the setting of risk tolerances, and facilitate the formation of appropriate contingency plans.
Regulatory Risk ReportingBangladesh Bank assesses our capacity to assume risk, and we regularly submit to them a periodic Risk Management Paper (RMP) containing an analysis and evaluation of the overall risks we face.
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MTB Securities Limited (MTBSL) is one of the leading stock brokerage service providers in Bangladesh, offering full-fledged international standard brokerage services for individual, institutional and foreign clients. The company is a fully owned subsidiary of Mutual Trust Bank Limited. With its 18 outlets spread throughout the country in strategic business locations, the company aims to lead the country’s capital market.
With membership on the Dhaka Stock Exchange (DSE), MTBSL is dedicated to providing a high level of professional and personalized service to its domestic and international customers. It has a proven reputation in serving customers, whilst maintaining stringent compliance practices and strong ethical standards. MTBSL is also recognized by regulators as one of the most compliant brokerage institutes of the country. The company is placed among the top 10 most active members of Dhaka Stock Exchange. This success is
underpinned by its strong business network and superior service quality. Furthermore, the company has earned recognition for its professionalism in its trade execution capabilities and settlement procedures from local financial institutions, corporates, and brokers alike. The company’s ability to foster a diverse and loyal client base is a result of its commitment toward building long lasting relationships based on mutual trust and respect.
Services Provided by MTBSL
Stock BrokerageWe have made a dedicated effort in developing a solid trading infrastructure, establishing a spacious trading floor, trading booths for ladies, multiple VIP trading booths and separate tele-trading booths. Some of our featured services are:
• Margin Trading - We arrange margin facilities for clients;
104MTB Annual Report - 2012Management Report - MTB Securities Limited
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Investor Awareness Program
• Institutional Help Desk - Any institution or large investor can avail customized client service through a separate institutional help desk;
• Online Trading - Enabling order placements over phone or e-mail;
• Female Trading Booth – Separate trading booths for ladies to facilitate trading for women investors;
• VIP Trading Booth - Offering seclusion and privacy to institutional investors, we have set up separate VIP trading booths in every outlet.
Client ServicesWe believe that "Quality makes a sale but salesmanship makes a resale". Holding this belief as the key criterion, we have formed a fine-tuned customer service team composed of fresh business school graduates and veteran customer care personnel who are amiable, efficient and receptive to customers' queries.
Margin Trading
MTBSL provides brokerage margins to facilitate leverage to investors as per Margin Rules 1999. A customer undergoes credit evaluation to avail margin loans. Securities purchased through margin loans are kept in our Beneficiary Owner Account (BO) account and all the client accounts are run under omnibus accounts.
Features of MTBSL Foreign Trade Wing
• Specially dedicated trader and workstation for foreign trades
• Orders can be received through email, telephone or fax• Trade execution confirmation can be provided through
email, SMS or fax (according to client preference)• Settlement done through DVP (Delivery VS Payment) –
RVP (Receipt VS Payment) basis• Portfolio and date-wise client ledger (on demand) sent
via email everyday• Updated dividend and rights issue news
NRB Trading Facilities
• Non Resident Bangladeshis (NRB) can invest in the Bangladeshi capital market from anywhere in the world
• A Non-resident Investor “Taka Account” (NITA) will be opened with any preferred custodian bank
• This will allow 100% repatriation of investment, capital gains and dividend
• NRB clients can apply for IPOs as well as buy and sell shares in the secondary market. They can use internet trading facilities, e-mail, fax or phone to place trade orders.
Depository Participant
Full Service Depository Participant (DP)MTBSL offers all services of a full service DP with its dedicated CDBL operator. Some of the DP services include:
• BO account opening and maintenance. • Dematerialization and re-materialization • Pledging, un-pledging and confiscation• Transfer transmission of securities
105MTB Annual Report - 2012Management Report - MTB Securities Limited
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MTB Capital Limited (MTBCL) is a fully owned subsidiary of Mutual Trust Bank Limited and is a full-fledged Merchant Banker licensed by the Securities and Exchange Commission (SEC) on December 06, 2010. MTBCL was incorporated to explore new markets and unresolved demand for merchant banking services. MTB Capital is dedicated to providing a high level of professional and personalized service to its clients. Preferential treatment with quality service to clients is what the Company believes to be its ultimate goal.
Products & ServicesWe offer merchant banking services of every kind including issue management, underwriting, investor portfolio management (including NRBs; both discretionary and non-discretionary) and financial advisory (mergers and acquisitions, capital restructuring etc.).
Capital Market Operations and Equity InvestmentThe country's capital market witnessed a disappointing 2012. We anticipate market conditions will improve to provide a favourable climate in which to continue our business growth with strong fundamentals. Almost all Merchant Bankers are suffering under huge unrealized losses and negative equity clients against which they are charging fees and commissions. In comparison, we are fortunately safe from such negative equity clients.
In 2012 our portfolio (including clients) stood at over BDT 50 Million and signed nine underwriting agreements worth BDT 345 Million. MTBCL submitted a prospectus for the IPO of Crystal Insurance Company to the SEC for the issuance of primary shares for BDT 60 Million. We also submitted an Information Memorandum (IM) for Zaheen Spinning Ltd. to the SEC for raising their paid-up capital to the tune of BDT 638 Million. In continuation with our issue management services, we are in the process of signing with a number of other companies for their forthcoming IPOs (to the tune of BDT 1,290 Million).
Despite the dampened capital market, we earned BDT 3.9 million in capital gains & dividends for our own portfolio. This performance underpins our belief that we can
continue to maximize shareholder value in future. We anticipate a better year in 2013 and hope to earn a target profit of BDT 17 million.
MTB Capital Ltd. signs agreement withZaheen Spinning Limited
106MTB Annual Report - 2012Management Report - MTB Capital Limited
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MTB Exchange (UK) Limited (MTB UK), a fully owned subsidiary of Mutual Trust Bank Limited (MTB) has been in operation since February 15, 2011. We were the third exchange house opened among other private commercial bank’s exchange houses in the UK. Competition has dramatically intensified as there are now 10 exchange houses owned by Bangladeshi commercial banks, in addition to traditional money transfer companies. According to UK money market experts, about 60 percent of the total remittance from the UK to Bangladesh comes through informal channels.
In 2012, market uncertainty and fears of unemployment due to the ongoing global recession lowered the levels of remittances sent by Bangladeshi migrants. A total of USD
5.3 million, equivalent to BDT 425.9 million was remitted by MTB UK in 2012, a growth of (4.1)% over the previous year.
At MTB UK, we monitor every single transaction that passes our counters. This vigilance has earned us the trust of our customers and appreciation of compliance experts and regulators. We also contribute to the total deposit base of MTB by selling MTB products and services to Non-Resident Bangladeshis (NRB) in the UK.
107MTB Annual Report - 2012Management Report - MTB Exchange (UK) Ltd.
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MTB Exchange (UK) Limited, 3rd Board Meeting
The Members of the Board of Directors of MTB would like to express their gratitude to all honorable shareholders, valued clients, patrons, employees and well wishers of this institution for their continued support and co-operation without which the Bank would not be able to reach its present position. We are also indebted to the Government of Bangladesh, the Ministry of Finance, Bangladesh Bank, the Securities and Exchange Commission, Office of the Registrar of Joint Stock Companies and Firms, the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) for their immense support and cooperation.
On behalf of the Board of Directors,
Dr. Arif DowlaChairman
108MTB Annual Report - 2012Management Report - Letter of Gratitude
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