MANAGEMENT OF CREDIT RISK OF MERCANTILE BANK LIMITED
CHAPTER ONE: INTRODUCTION
1.2 Significance of the Report
The prime reason of this study is to become familiar with the practical business world and to attain practical knowledge about the Banking and Corporate world, which is so much essential for each and every student to meet the extreme growing challenges in job market. It is also known to all of us that there is no alternative of practical knowledge and the practical knowledge is much more durable and useful than the theoretical knowledge. This study will help us to get a true picture of the practical business world, particularly of banking business and also to attain practical knowledge on the various spheres of banking business. So this study is of paramount importance for each and every student regardless of his/her study area or discipline.
1.1 Objectives of the Report
General Objectives:
The General Objective is to prepare & submit a report on the topic “The Management of Credit Risk of Mercantile Bank Limited”.
Specific Objective:
· The main objective of the study is to get a clear idea about the Banks and how it
runs and what functions it does.
· To find out the activities of credit management system.
· To know about the Overall Banking System.
· To examine the profitability and productivity of the Bank.
· To familiarize rules and regulation on approval of loans and advance procedures.
· To analyze the bank’s sources of the funds and how it is collected.
· To identify the sector where MBL provide the credit facility like: Trade and
business, import, export, garments, fisheries, real estate and micro credit programs that’s the primary parameter of a country’s economic cycle.
· To analyze the financing systems of the Bank and find out whether the bank
needs any improvement to be done and make greater contribution towards the country’s economy.
1.5 Limitations of the Study
Since the report is concerned with the Management of Credit Risk of Mercantile Bank Limited.
There are certain limitations regarding the studies that are summarized below:
· Deficiencies in data required for the study.
· Field practice varies with the standard practice that also created problem.
· The employees in Mercantile Bank Limited are so much busy in their responsible
fields; they could hardly provide little time to discuss with them.
· Management Information Systems is a very wide spectrum. However the branch
does not even have a separate MIS division. I could not therefore focus on MIS practices on local banks, as there is not much to deal with.
· Since it is a service oriented organization, the probability of the accurate data is
always low.
· The duration that is for internship program is not enough to learn about an
organization as well as its customer perception towards the organization like Mercantile Bank Limited.
1.6 Methodology of the Report
Methodology includes direct observation, face-to-face discussion with employees of different departments, study of files, circulars, etc. and practical work. In preparing this report both primary and secondary sources of information have been used.
The primary source:
For collecting primary data, I had to ask with the respective officer(s), others like:
· Face to face conversation with the officer
· Exposure on different desk of the bank
· File study
· Personal observation
The Secondary Source:
Sources of secondary information will be as follows:
Internal Sources:
· Bank’s Annual Report
· Group Business Principal
External Sources:
· Different books and periodicals related to the banking sector.
· Credit Manual of MBL
· Newspaper
· Bangladesh Bank Report
· Internet
CHAPTER TWO: (ORGANIZATIONAL OVERVIEW)
2.1. Background
Mercantile Bank Limited a scheduled commercial bank in the private sector incorporated in Bangladesh under the Banking Companies Act 1991. The bank was established by 30 sponsors and it started its operations on 2 June 1999 with an authorized capital of Tk 800 million divided into 8 million ordinary shares of Tk 100 each. On 31 December 2001, its paid up capital was Tk 596.5 million. During this short span of time, the Bank has been successful to position itself as a progressive and dynamic financial institution in the country and has always met up capital adequacy requirement set by Bangladesh Bank. The company Philosophy -“efficiency is our strength” has been exactly the essence of success of this Bank.
The bank has its head office at 61 Dilkusha, Commercial Area, Dhaka, Bangladesh. It is governed by a 21-member board of directors with a managing director as the chief executive. In December 2001, it had 14 branches and 305 employees including the executive officers. And now MBL, with 65 branches is engaged in serving customer focusing on a commitment to gain superiority and excellence in all fields of banking activities.
The principal activities of the bank are to provide all kind of commercial banking activities encompass a wide range of services including accepting deposits, making loans, discounting bills, conducting money transfer and foreign exchange transactions and performing other related cervices such as safe keeping, collections, issuing guarantees, acceptances and letters of credit to its cust6omers through its branches in Bangladesh.
2.2 Organizational Overview
2.2.1 VISSION, MISSION & STRATEGIC OBJECTIVES
VISSION
Would make finest corporate citizen.
MISSION
· Will become most caring,
· Focused for equitable growth based on diversified deployment of resources, and
· Nevertheless would remain healthy and gainfully profitable Bank.
STRATEGIC OBJECTIVES
· To achieve positive Economic Value Added (EVA) each year.
· To be market leader in product innovation.
· To be one of the top three Financial Institutions in Bangladesh in terms of cost
efficiency.
· To be one of the top five Financial Institutions in Bangladesh in terms of market
share in all significant market segments they serve.
FINANCIAL OBJECTIVES
· To achieve a return on shareholders’ equity of 20% or more, on average.
2.2.2 CORE VALUES
· For the customers:
Providing with caring services by being innovative in the development of new banking products and services.
· For the shareholders:
Maximizing wealth of the Bank.
· For the employees:
Respecting worth and dignity of individual employees devoting their energies for the progress of the Bank.
· For the community:
Strengthening the corporate values and taking environment and social risks and reward into account.
2.2.3 MANAGEMENT STRUCTURE
Source: HRD, Head Office MBL
Figure 1: Management Hierarchy of MBL
2.2.4 Corporate Structure
Composition of Board:
Board of Directors, the apex body of the Bank, formulates policy guidelines, provides strategic planning and supervises business and performance of management while the Board remains accountable to the company and its shareholders. The Board is assisted by the Executive Committee and Audit Committee
Board of Directors
· Md. Abdul Jalil Founder Chairmam
· Morshed Alam Vice Chairman
· A S M Feroz Alam First Vice Chairman
· Tazneen Aman Second Vice Chairperson
· A.K.M Shaheed Reza Director
· Md. Tabibul Huq Director
· Md. Anwarul Huq Director
· Dr. Toufiq Rahman Chowdhury Director
· Shubrota Narayan Roy Director
· M S Ahsan Director
· Bilkis Begum Director
· Alhaj Akram Hussain (Humayun) Director
· M.A. Khan Belal Director
· Saber Hossain Chowfhury Director
· A. K. M. Shahidul Haque Managing Director & CEO
Executive Committee
· A.K.M. Shaheed Reza, Chairman
· A S M Feroz Alam
· Tazneen Aman
· Md. Anwarul Huq
· Dr. Taufique Rahman Chowdhury
· M S Ahsan
· Bilkis Begum
· Alhaj Akram Hussain (Humayun)
· M.A. Khan Bela
Audit Committee
· K.M. Shaheed Reza
· Md. Mizanur Rahman Chowdhury
· Bilkis Begum
Auditors
· Khan WahabShafiqueRahman&Co.
Chartered Accountants
· Syful ShamsulAlam&Co.
CharteredAccountants
Tax Advisor
KMHasan&Co.
Chartered Accountants
2.2.5 Branches of MBL
From MBL start 1999 to 2009 they are trying to enhancing their number of branches. At the present time they have 65 branches in Bangladesh (BD) . MBL main branch is Dhaka, Dilkusha. Now MBL is trying to give banking service all over the country.
| Particulars | Number of Branches |
| Dhaka | 28 |
| Gazipur | 2 |
| Khulna | 3 |
| Feni | 2 |
| Noakhali | 3 |
| Chittagong | 6 |
| Cox’s Bazar | 5 |
| Rajshahi | 3 |
| Moulavi Bazar | 1 |
| Sylhet | 3 |
| Naogaon | 2 |
| Rangpur | 2 |
| Barisal | 2 |
| Shariatpur | 1 |
| Comilla | 1 |
| Total | 65 |
Table 1: Branch Network of MBL
Coverage of MBL (Site Map)
Figure 2: Site Map
2.3 Function of MBL:
A bank has a lot of function in different ways. A Bank means an institution, which borrows money from the surplus unit of the society and lends money to the deficit unit for earning profit. The deposits are mainly accepted by the banker through current and saving account that is withdrawal by cheques. A bank includes a body of person’s weather incorporated or not who carry on business of banking. Thus a bank is a profit intuition which deals in money and credit.
The functions of Commercial banks are now wide and varied. However, the functions of Commercial Banks may broadly be classified under the following two categories:
· Primary Function
· Secondary Function
Primary Function:
The primary functions of Mercantile Bank Limited are same as other Commercial Banks. These functions includes-
i. Accepts deposits;
ii. Lends money;
iii. Creates credit;
iv. Creates medium of exchange.
Accepts Deposits:
The first primary functions of bank are to accept deposits of money from the public
or sever group. The total deposits held by the banker are broadly classified as-
Demand Deposit:
Demand deposits are withdrawn able on demand and thus no prior notice is needed. Deposits in Current Account and Saving Account fall in this category.
Time Deposit:
Time deposits are repayable on the expiry of a fixed period of time only. Fixes deposit Accounts, recurring Deposit Accounts and deposit payable at specified notice fall in this category.
Lends Money:
Banking system essentially involves lending. Depending on the requirements of the borrower, banks lend money in the forms following:
Loans:
In case of loan, the entire amount is paid to the borrower in lump sump, either in cash or way of transfer to his account. The borrower can withdraw the amount at any time. Interest is calculated and charged on the debit balance usually with quarterly rests. A loan once repaid in full or in part cannot be withdrawn further. Thus, no cheque book is issued against the loan account.
Overdraft:
Overdraft is usually a temporary arrangement where the customer is allowed to withdraw money exceeding the credit balance of the current account up to an agreed limit. Interest in charged only for the amount drawn.
Cash Credit:
A cash credit is an arrangement where the customer is allowed to withdraw money up to the sanctioned limit. Unlike overdraft this is a permanent arrangement and usually used to meet the working capital needs of business housed, industries etc. in cash credit account withdrawals and deposits may be effected frequently. Interest is charged on the daily balanced. Cash credit arrangement is usually made against pledge or goods but this could also be extended against personal security.
Bill Discounted and Purchase:
Another mode of advancing money is discounting of the issuance bill of exchange. The banks buy the bill before its maturity at a price less than the face value. The amount, which the bank deducts from the face value of the instrument, is actually the interest calculated up to the date of maturity of the bills.
Creates Credit:
The creation of credit is one of the important functions of Commercial Bank. The bank accepts deposits from the public and lends money to its customers. When a bank extends loan, it does not pay the amount in the bank account of the borrower and allow withdrawing the required amount by cheques. In this way the bank creates credit or deposit which is regarded as money and can be used for the purchase goods and services and also for the payment of debt just like currency notes.
Creates medium of Exchange:
Commercial bank usually issues cheque which circulates like money in the society and creates the medium of exchange
Secondary Function:
Modern commercial bank like MBL, besides performing the primary functions, cover a wide range of financial and non-financial services to meet the growing needs of the time. Some of the services are available only to the customer while others are available to the public in general. The subsidiary services provided by a modern banker may be classified into the following three groups:
i. Agency Services
ii. Generally Utility Services
iii. Foreign Exchange Business
i. Agency Services:
In many cases the Commercial Banks acts as the agent of the customers. As agents the banks provide the following services:
· Collection of cheque, draft, bill of exchange, promissory note, dividends, salaries, pension, rent etc. on behalf of the customer.
· Acting as correspondent and representative of its customers, other banks, and financial institutions.
· Conducting stock exchange transaction i.e. purchase and sale of share and securities for the customers.
· Functioning as trustee, executor or administrator of estate of a customer.
ii. General Utility Services:
Commercial banksprovide a variety of general utility services to the customers. They are given below:
· Issue letter of credit (L/C)
· Accepts valuables for safe custody
· Conducts in foreign exchange business
· Lease financing
· Provides Internet banking services
· Provides specialized advisory services
· Issues debit and credit cards
· Underwrites of share and securities
· Merchant Banking
· Serving as a referee as to the financial standing business reputation and respectability of their customers
iii. Foreign Exchange business:
A commercial Bank/MBL is involved in financing foreign trade apart from financing internal credit requirement in the economy. This involves handling of import business through opening L/C and handling of export business. As banking has become very keenly competitive, banks find it convenient to involve in foreign exchange business as a lucrative source of earning income and profit.
Apart from financing foreign trade, Commercial Banks also provide guarantees of various types to their clients. While these facilities clients to undertake jobs assigned to them by various corporations and organization, this enables the bank to earn commission.
A commercial Bank also provides the facilities of remittance to its clients for transfer of funds to various traded centers within the country and also outside the country in keeping with the foreign restrictions of the Central Bank.
2.4 Division of MBL
MBL, being one of the best financial intermediaries in the country, blended in operation in conventional banking, Merchant banking and Retail banking. The blending has been done with the objective of diversifying the operations for catering to the needs of the customers of the different sterna of the society from one viewpoint and for having sustainable growth in profitability and business with the least possible risk. The bank’s operations were diversified into the following areas of activities as a dynamic financial intermediary.
- Lease finance operation
- Conventional Banking operation
- Merchant banking
- Retail banking
In order to carry out the above operations of Mercantile Bank Ltd has set up the following divisions, departments and units in its head office. For the operations by the above-mentioned divisions, the bank has established the following divisions to provide support and internal services.
| Human resource division | General service division |
| Information Technology division | Marketing division |
| Public relation division | Share/customer care division |
| Financial administration division | Branches control division |
Table 2: Division of MBL
2.5 Product & Services of Mercantile Bank Limited
The Bank does believe that it has differentiated itself from other banks through its products and services. It is banking for the people to fulfill their needs conceptualizing product and services to meet their aspiration. The bank is proud to have exemplified the true concept as ‘Banglar Bank’. The Bank launched several financial products and services among them are:
Figure 3 : Product&ServicesofMBL
2.5.1 Online Banking
Online Banking have so far been activated with 42 Branches of the Bank from January 01,2006. Online service is now available for all customers –Both Cash deposit and withdrawals, Cheque Deposits and Transfer in CD, SB, STD, Loan accounts (Cheque Bearing within limit) and Monthly Savings Scheme (MSS) .
Online Banking Times:
Sunday to Thursday, Hours – 9:00 am to 3:00 pm
Saturday ,Hours – 9:00 am to 12:00 noon (only in open branches on Saturday)
For Monthly Savings Scheme (MSS) TK. 10 ( Ten Only )including 15% VAT per transaction. Yearly service charge is not applicable.
Account wise Online Banking Limit (cash withdrawal, deposit and transfer):
Maximum Deposit Limit : No Limit for Online Cash Deposit Transaction per day per Client.
Maximum Withdrawal Limit : Tk. 300,000.00 per transaction
Cumulative withdrawal shall not be more than TK.600,000.00 per day
Charges for Online Banking:
| Intra City* | Inter City** | Mode of realization |
| Free | Upto BDT 1,00000 – TK. 50.00
Upto BDT 2,00000 – TK. 100.00 Upto BDT 3,00000 – TK. 150.00 Upto BDT 4,00000 – TK. 200.00 Upto BDT 5,00000 – TK. 250.00 |
Up front Cash |
*Intra City Transaction : Branches under Same City Corporation Areas
**Inter City Transaction : Branches outside City Corporation Areas
Service Charge Applicable
2.5.2 SMS Banking
The telecommunications industry worldwide has scrambled to bring what is available to networked computers to mobile devices. Presently, the use of electronic banking is considerably high and as more and more users sign up for electronic- banking, the maturity as regards remote banking (i.e. banking outside the banking hall) is on the increase. With electronic banking, users can now conveniently carry out banking transactions, but this convenience cannot be achieved if the user does not have access to the internet, hence, in other words, the user cannot carry out a banking transaction while waiting for a bus, or perhaps while having lunch in a restaurant. With SMS banking, convenience can be achieved 24 hours a day. This is because a user has access to his mobile phone all day, at all times. So, to effectively achieve a truly convenient banking
mode, a truly mobile mode of banking has to be explored, hence the need for SMS Banking.
The SMS banking solution targets the retail banking industry and enables customers to make account enquiries and transact bank accounts through mobile phones. Banks can automatically send transaction notifications and alerts to mobile phones, if specific events in the banking business work-flow occur. The solution provides convenient and latest front-end technology and a flexible architecture to support an SMS based delivery channel and to provide significant benefits for both the bank and the customer.
As the time goes by, life style changes. To keep up, MBL welcomes to SMS Banking Service, one of the most modern banking services. MBL SMS banking Service is convenient, safe, low-cost, fast and available round the clock. Mercantile Bank provides the following SMS banking services.
i. Access to account balance
ii. Last 3 transaction inquiry
iii. Cheque status inquiry
2.5.3 Cards
· Dual Card (two in one):
Single card with double benefits. No hassle to carry two cards (local and international). A single credit card can be used both locally and internationally to withdraw cash from ATM for POS transaction. This is the special feature of MBL Visa card.
· Debit Card:
Visa debit card is mainly tagged with deposit account (CD/SB/STD) that is automatically debited from the A/C having available balance. Debit card can also be used for purchasing goods, services, payment of utility bills etc as well as withdrawal of cash from ATM.
· Pre-Paid Card:
Those who have no account with MBL may avail Pre-Paid card facilities. The Pre-Paid
cardholders pay first buy later. Pre-Paid card offers the convenience and security of electronic payment in situations where one might otherwise use cash, such as birthday gift or a monthly allowance for a young adult. Examples include gift cards and salary payment etc.
MBL CARDHOLDER CAN ENJOY THE FOLLOWING BENEFITS AND MUCH MORE:
No Cash Withdrawal Fee: For withdrawals of cash from MBL ATM by MBL cardholders no cash advance fee is necessary and from any other Q-cash ATM the fee is Tk.10 only. MBL is the only bank offering such unique facility. Moreover, our VISA Cardholders can also withdraw cash from any Visa logo ATM locally and internationally.
Acceptability: International/Dual card is accepted all over the world at millions of outlets and ATMs. A Dual card is also accepted in most of the big cities like Dhaka, Chittagong, Khulna, Rajshahi, Sylhet at more than 10,000 outlets including 4500 POS. It covers various kinds of merchants like hospital, hotel, restaurant, department store and the card has accessibility to any outlet having VISA logo.
Credit Facility: Mercantile Bank Ltd. Visa Credit card offers maximum 45 days credit facilities free of interest and minimum payment is 5% of outstanding billing payment for easy repayment and convenience of the customers.
Supplementary Card: A Principal cardholder (local) may apply for more than one supplementary card where one supplementary card is free. Expenses made by supplementary card will be charged to the principal card.
\Advance against Credit card: MBL cardholder can take advance as term loan up to 50% of the card limit to be repaid on the monthly installment basis.Any POS transaction over TK. 20000 but not exceeding 50% of the credit limit is convertible to Personal loan/CCS and to be repaid on monthly installment basis. Repayment period of such loan may be from 6 months to 36 months.
Overdraft Facilities: Overdraft facilities up to 80% of the credit card limit may also be allowed for payment of the installment of scheme deposit with our Bank.
Payment of Utility Bill: Payment of utility bills like telephone bills, gas bills, electric bills, water bills, may be settled by card.
2.6 Corporate Social Responsibility
Corporate Social Responsibility (CSR) has been described as corporate citizenship, moral and transparent business values, ecological sustainability or corporate charity. It is a business practice to deliver sustainable and ethical values to the equity holders, employees, customers, environment, society, government and other stakeholders at large.
Mercantile Bank Limited (MBL) is fully committed to conduct its business activities in an economically, environmentally and socially sustainable manner. The Bank always fosters the motive in mind to build a ever-lasting warm relationship with the customers, employees, capital providers, community people, regulatory bodies and other stakeholders. Keeping this motive in mind, MBL always cares all of its stakeholders and the community people since its inception.
· For Community
As we all know that banks act as a ‘Trustee’ for the society. Therefore, MBL behaves in a responsible and ethical manner with the community people. The Bank always contributes towards changing the quality of life of the people as the Bank wishes to see them leading their life in a standard way. The Bank serves by adhering closely the national policies and thereby contributing towards the progress of the nation. In maintaining its responsibilities to the society where it operates its business activities, MBL focuses in the areas of employment, education, professional development and contribution to the underprivileged people.
· Employment
MBL plays an important role in creating job opportunities for the people. Each year, the Bank creates employment opportunities for fresh graduates as well as experienced officials. In 2008, a total of 169 fresh graduates have joined with MBL family. The new recruits have joined as Probationary Officers (82) and Assistant Officer (87). Besides, experienced bankers are also being appointed in the Bank as and when required. At the end of 2008, the Bank has 1,115 officials in its payroll. Moreover, Bank’s financing to the SME sector will indeed promote employment generation.
CSR Activities of the Bank in 2010 and one year back :
| (Amount in BDT) | ||
| Sector Wise Spending | 2010 | 2009 |
| Donation to Mercantile Bank | ||
| Foundation | 100,00,000 | 40,00,000 |
| Education | 390,000 | 100,000 |
| Health | 200,000 | 25,000 |
| Disaster/Relief | 1,530,000 | 10,400,000 |
| Others | 50,000 | 90,000 |
| Total | 12,170,000 | 14,615,000 |
· Education
MBL desires for an educated nation. The Bank through its Foundation, patronizes the education sector of the country. The Bank provides scholarship to the needy and brilliant students of different educational institutions. Best two MBM graduates of BIBM gets financial awards from the Bank. In the year under review, the Bank has provided scholarship worth BDT 1 lakh in this regard. The children of the employees of the Bank also get scholarship for brilliant results. MBL has also donated BDT 1.00 million to Bangla Academy for research in Bengali Literature with a view to aid academic research, which would eventually uphold Bangladeshi culture across the Globe.
· Professional Development
Professional education has been encouraged in MBL. The Bank believes that to be more professional one should gather professional knowledge. The Bank is continuing its supports to the professional bodies as it continued earlier. The Bank encourages it employees to complete Banking Diploma by rewarding BDT 5,000 for completion of part-I and BDT 7,000 for completion of part-II.
· Support to Destitute
MBL always shares the well and woe of the distressed people. Mercantile Bank Foundation has been set up to give financial support to the underprivileged communities. Through this Foundation, the Bank concentrates on addressing the needs of physically disable people such as blind, acid victims etc. The people of our country are used to be the victims of natural calamities every now and then. The Bank strives to assist the victims of natural disaster by providing financial help in rehabilitation and rescue purpose. In the year 2008, the Bank donated BDT15.30 lakh for helping the disaster victims.
· For Customers
MBL provides the most efficient and need-based services in every aspect of its business by being more innovative and professional. The needs and expectations of the customers drive us to the development of new banking products and services. MBL uses trained personnel and state-of-art technology for delivering prompt services to the customers.
The Bank has high reputation for delivering better customer service and is also committed to uphold its image in coming days. Customer Service Excellence is an integral part of its strategy to stay ahead in an extremely competitive banking industry. To attain a continuous improvement in customer service, all branches of our Bank have established ‘Customer Complain and Suggestion Box’. At branch level, officials are deployed to assist and interact with customers on banking queries and provide prompt solutions of the queries.
A number of banking products has been launched for the people who have traditionally been excluded from the banking services. ‘Women Entrepreneurs Development Scheme’ has been introduced in the Bank for the women who are experienced but dearth of capital is hindering their initiatives to start business. An agreement with Women Entrepreneurs’ Association, Bangladesh (WEA) has been signed to encourage women entrepreneurs to come forward in the business. We have also introduced SME services for the marginal people of our country.
· For Employees
MBL, which has 1,115 employees provides due importance for promoting the well-being of its employees by offering attractive remuneration and other fringe benefits. Employees’ remuneration and benefits packages are monitored and regularly reviewed to ensure a competitive package in the industry. Incentive bonus from yearly profit is also rewarded to the employees on performance basis. Employees are awarded all sorts of supports to pursue professional educations. The Bank provides its employees personal loan facilities such as car loan, furniture loan and other loan to make their life easier and comfortable. Growth and progression opportunities for employees are available in the Bank. With competitive remuneration packages and employees’ well-being is looked after through attractive benefits such as medical coverage, loans at lower rate of interest for housing and car as well as other forms of financial assistance. MBL seeks to provide a standard quality of life to its employees.
The Bank ensures a hygienic and convenient work environment for its employees. Performance and merit are the basis of promotion for the employees. The Bank respects the worth and dignity of individual employees. Importance has been given for building skill and efficiency of the employees to do their assigned day-to-day jobs with due confidence by bringing them in the ‘Training Net’. For this purpose,Training Institute of the Bank has been refurbished in a large and well-equipped premise located in Swedesh Tower, 41/6 Purana Paltan, Dhaka, which has a well-resourced library. The trainees are being provided residential amenities in the Training Institution.
· For Equity Holders
Maximization of wealth of the equity holders gets top listed priority in the Bank. MBL is committed to its capital providers to deliver fair returns on their investment. Equity holders are always concerned to see their institution progressive. The Bank runs its business activities keeping in mind as its shareholders wish to see it. MBL is consistently delivering a superior return to its shareholders and investors. In 2008, Dividend Payout Ratio was 58.41%.The Bank has achieved BDT 34.24 as EPS and declared Stock Dividend @ 20% in the year 2008.
· For Environment
MBL is concerned with conservation and preservation of the environment. There is a rising level of awareness and demand to address the issue of sustainability of the environment because the whole world is increasingly experiencing the devastating effects of environmental changes for Green House affects due to Global Warming. The Bank is mindful of its responsibilities to the future generations by playing its part in promoting environmental awareness and in the conservation of the environment.
The Bank takes environmental issue very cautiously while financing new projects. It finances only in those projects, which are environment-friendly. Early detection of environmental risks is an integral part of credit appraisal system of the Bank. Ecological damage will sooner or later harm not only the society but also the Bank in the form of loan losses or image problems. In this regard, the Bank sent two officials to the Hague, Netherlands for training on ‘Environment and Social Management Course for Financial Institutions’ conducted by FMO, Netherlands. The Bank creates awareness among people of the community about the effects of environmental pollution and its consequences
· For Cultural Activities
MBL fosters the culture of various communities. The Bank is relentlessly supporting traditional games and sports by taking some non-profit initiatives. As a recognized benefactor of culture, the Bank provides funding for the publication of art books that familiarize the Bank. A variety of cultural institutions have been benefited by the initiatives of the Bank. The Bank also supports the writers, musicians and other performers in their inventive activities.
The Bank patronizes different cultural activities. A number of cultural programs encouraging different communities have been sponsored by the Bank. The Bank has sponsored National Chess Championship, Tennis competition and Swimming competition in different times. In 2008, the Bank was the Official Sponsor of ’23rd National Swimming Championship Competition’ arranged by Bangladesh Swimming Federation. BDT 1 (one) million has been donated to celebrate this ceremony.
· Mercantile Bank Foundation
Mercantile Bank Foundation has been established to act as a helping hand to the community people and Bank’s commitment towards CSR. The Foundation always plays its role by extending charitable and beneficial social services. The Foundation has been promoting a dialogue between the Bank and its community for over nine years. Through its programs, the Foundation strives to preserve and promote cultural heritage and support artistic expression. It also provides funding for state-of-art research, as well as for innovative projects in the areas of education, social insertion and disability.
Objectives of Mercantile Bank Foundation
Mercantile Bank Foundation has been formed with the aim of achieving some objectives, which has been stated below:
1. To take possible initiatives in increasing social well-being and alleviating poverty
from the country.
2. To support the education by establishing new educational institutions, providing
stipends/ scholarship to the poor and brilliant students.
3. To provide awards to the Scholars in eight significant arenas for their outstanding
contribution. These arenas are:
· Bengali Language and Literature
· Education and Culture
· Research on Liberation War
· Economy and Economic Research.
· Commerce and Industry
· Medicine, Science and Technology
· Journalism and
· Sports
4. To assist research activities on Bengali Literature through Bangla Academy.
5. To support the writers and publishers through purchasing their books and distributing
these to different educational institutions on the occasion of national and historical
days.
6. To assist the unemployed young to make them self-sufficient.
7. To assist the rootless and distressed orphans through taking appropriate steps for
their mental perfection and self-support.
8. To support in establishing hospitals, clinics, etc. for the improvement of the health
sector, to donate one time financial endowment to the poor artiste, literature-patron
and fatal disease-affected poor patients, to support the poor father for arranging his
daughter’s marriage, to help poor but bright students.
Financing of the Foundation
· The Bank contributes 1% of Operating Profit or BDT 4.00 million, which one is
maximum.
· The Sponsors of the Bank donates to the Foundation a lump sum amount at a time or
amount on yearly- basis from their own funds or their own business source.
· Grants and Donations from persons/ organizations of home and overseas.
2.7 Others:
2.7.1 Research & Development (R&D):
Excellence in banking operation depends largely on a well-equipped and efficient Research and Development Division. Such activities require the investment of substantial resources and a set of qualified personnel with multidisciplinary background. Although it is not possible at this stage to undertake R&D activities similar to those of the banks in the developed countries, Mercantile Bank’ has established a core Research and Planning Division comprising skilled persons from the very inception of the Bank.
2.7.2 Human Resources Development (HRD):
In today’s competitive business environment, the quality of human resources makes the difference. The Bank’s commitment to attract high quality persons to work for it is reflected in the efforts of the Bank. In the face of today’s globalization, the Bank envisages to develop highly motivated workforce and equip them with latest skills and technologies. The Bank evolves human resources development strategy with a view to ensuring good working environment, a high level of loyalty and commitment, devotion and dedication on the part of the empoyees.
2.7.3 Training Division:
The Bank has set up Training Institute for providing training facilities to its executives/officers. The Training Institute has already conducted a number of foundations and specialized training courses. A number of officers were sent to Bangladesh Institute of Bank Management (BIBM) and other training institutes at home and abroad for specialized training on various aspects of banking. The Bank believes in professional excellence and considers its working force as its most valuable asset and the basis of its efficiency and strength.
2.7.4 MBL At a Glance
| Name | Mercantile Bank Limited |
| Date of incorporation | 20th May, 1999 |
| Date of inauguration of operation | 2nd June, 1999 |
Registered Office |
61, Dilkusha Commercial Area
Dhaka –1000, Bangladesh Tel-02-9559333, 0171-1535960 Fax: 880-2-09561213 Telex: 642480 MBLMB BI |
| Logo | Mercantile Bank Limited
efficiency Is our strength |
| Name of the Chairman of the Board | Md. Abdul Jalil |
| Name of the managing Director | Shah Md. Nurul Alam |
| Number of branches | 65 |
| Services provided | Deposit Scheme, credit facility and foreign exchange services |
| Diversification of Product And Services | Corporate banking, Retail Banking |
| Paid up capital | 1,498.90(Million) |
| Profit after tax & provision | 540.50(Million) |
| Publicly Traded Company | Shared quoted daily in DSE & CSE |
| Credit Card | Member of Master Card |
| Banking operation system | Both conventional and foreign exchange system |
| Technology used | Member of SWIFT, online banking, UNIX based computer system |
| Market value per share | 415.61 |
| Earning per share | 36.06 |
| mbl@bol-online.com | |
| Website | www.mblbd.com |
| SWIFT | MBLBBDDH |
Table 3: MBL at a Glance
2.8 Financial Summary
2.8.1 Balance Sheet of MBL
Mercantile Bank Limited
Balance Sheet as at December 31, 2009
| PROPERTY AND ASSETS |
Notes |
2009
(BDT) |
2008
(BDT) |
| Cash | 3 | 4,374,119,340 | 3,717,354,095 |
| Cash in hand (Including Foreign Currencies) | 443,342,558 | 452,062,448 | |
| Balance with Bangladesh Bank and Sonali Bank Limited (Including Foreign Currencies) | 3,930,776,782 | 3,265,291,647 | |
| Balance with Other Banks and Financial Institutions | 4 | 327,911,508 | 209,201,299 |
| In Bangladesh | 177,928,388 | 126,848,623 | |
| Outside Bangladesh | 149,983,120 | 82,352,676 | |
| Money at Call and Short Notice | 5 | – | 520,000,000 |
| Investments | 6 | 7,690,121,767 | 7,099,966,878 |
| Government | 5,681,107,430 | 4,875,680,349 | |
| Others | 2,009,014,337 | 2,224,286,529 | |
| Loans and Advances | 7 | 41,993,945,814 | 31,877,860,104 |
| Loans, Cash Credit, Overdraft etc. | 7.A | 37,362,451,991 | 28,799,208,279 |
| Bills Purchased and Discounted | 7.B | 4,631,493,823 | 3,078,651;825 |
| Fixed Assets Including Premises,Furniture and Fixtures | 8 | 682,999,856 | 593,203,096 |
| Other Assets | 9 | 859,623,164 | 922,951,636 |
| Non-Banking Assets | – | – | |
| Total Assets | 55,928,721,449 | 44,940,537,108 | |
| LIABILITIES AND CAPITAL
Liabilities |
|||
| Borrowings from other Banks, Financial Institutions and Agents | 10 | 2,326,325,000 | 774,250,000 |
| Deposits and other Accounts | 11 | 46,374,178,833 | 38,139,901,767 |
| Current Accounts and Other Accounts | 11.1 | 5,831,638,358 | 5,220,658,499 |
| Bills Payable | 11.2 | 677,763,825 | 889,880,108 |
| Savings Bank Deposits | 11.3 | 3,020,870,440 | 2,344,752,184 |
| Fixed Deposits | 11.4 | 17,501,418,866 | 14,632,634,933 |
| Bearer Certificate of Deposits | 11.5 | – | 25,939,840 |
| Deposits Under Schemes | 11.6 | 19,342,487,344 | 15,026,036,203 |
| Other Liabilities | 12 | 3,610,885,506 | 3,097,081,462 |
| Total Liabilities | 52,311,389,339 | 42,011,233,229 | |
| Capital/ Shareholders’ Equity | |||
| Paid-up Capital | 13.1 | 1,798,677,900 | 1,498,898,300 |
| Statutory Reserve | 14 | 1,222,833,902 | 966,496,902 |
| Other Reserves | 15 | 233,183,099 | 161,038,249 |
| Surplus in Profit & Loss Account | 16 | 362,637,209 | 302,870,428 |
| Total Shareholders’ Equity | 3,617,332,110 | 2,929,303,879 | |
| Total Liabilities and Shareholders’ Equity | 55,928,721,449 | 44,940,537,108 | |
| OFF BALANCE SHEET ITEMS | |||
| CONTINGENT LIABILITIES | A | ||
| Acceptances and Endorsements | 17 | 8,157,477,000 | 5,780,70’1,000 |
| Letters of Guarantee | 17.1 | 3,640,902,808 | 3,225,932,724 |
| Irrevocable Letters of Credit | 17.2 | 7,281,346,277 | 9,287,543,504 |
| Bills for Collection | 17.3 | 73,305,882 | 94,981,372 |
| Other Contingent Liabilities | 17.4 | 764,829,154 | 514,946,142 |
| Total | 19,917,861,121 | 18,904,104,742 | |
| Other Commitments | B | ||
| Documentary credits and short term trade related transactions | |||
| Forward assets purchased and forward deposits placed | |||
| Undrawn note issuance and revolving underwriting facilities | |||
| Undrawn formal standby facilities, credit lines and other commitments | |||
| Total | |||
| TOTAL OFF-BALANCE SHEET ITEMS INCLUDING CONTINGENT LIABILITIES (A+B) | 19,917,861,121 | 18,904,104,742 |
Table 4 : Balance Sheet of MBL
2.8.2 Profit and Loss Account of MBL
Profit and Loss Account
For the year ended December 31, 2009
|
Notes |
2009
(BDT) |
2008
(BDT) |
|
| Interest Income | 18.1 | 4,875,241,879 | 3,686,414,282 |
| Less : Interest Paid on Deposits, Borrowings etc. | 19 | 4,045,970,142 | 3,159,295,227 |
| Net Interest Income | 829,271,737 | 527,119,055 | |
| Investment Income | 18.4 | 751,100,500 | 764,485,995 |
| Commission, Exchange and Brokerage | 20 | 917,199,841 | 790,361,690 |
| Other Operating Income | 21 | 333,960,039 | 319,692,585 |
| 2,002,260,380 | 1,874,540, 270 | ||
| Total Operating Income | 2,831,532,117 | 2,401,659,325 | |
| Salaries and Allowances | 23 | 611,587,111 | 452,854,242 |
| Rent, Taxes, Insurance, Electricity, etc. | 24 | 155,724,646 | 124,305,552 |
| Legal Expenses | 25 | 5,045,236 | 5,955,217 |
| Postage, Stamps, Telecommunication etc. | 27,045,459 | 28,289,005 | |
| Stationery, Printings, Advertisements etc. | 26 | 63,499,399 | 56,743,714 |
| Chief Executive’s Salary and Fees | 23.1 | 6,450,000 | 4,388,203 |
| Directors’ fees | 22 | 2,163,600 | 1,900,700 |
| Auditors’ Fees | 500,000 | 500,000 | |
| Depreciation & Repair of Fixed Assets | 27 | 74,617,737 | 60,174,509 |
| Other expenses | 28 | 303,383,441 | 281,399,317 |
| Total Operating Expenses | 1,250,016,629 | 1,016,510,459 | |
| Profit before Provision | 1,581,515,488 | 1,385,148,866 | |
| Provision against Classified Loans | 12.2 | 117,958,107 | 30,103,390 |
| Provision against Unclassified Loans | 12.2 | 77,174,000 | 61,687,181 |
| Other Provisions | 12.1.2 | 104,700,000 | 94,521,000 |
| Total Provisions | 299,832,107 | 186,311,571 | |
| Total Profit before Taxes | 1,281,683,381 | 1,198,837,295 | |
| Provision for Taxation | 12.1.1 | 665,800,000 | 658,338,000 |
| Net Profit after Taxation | 615,883,381 | 540,499,295 | |
| Retained Surplus brought forward from previous year | 3,090,828 | 2,138,633 | |
| 618,974,209 | 542,637,928 | ||
| Appropriations | |||
| Statutory Reserve | 256,337,000 | 239, 767,500 | |
| Retained Surplus | 362,637,209 | 302,870,428 | |
| 618,974,209 | 542,637,928 | ||
| Earning Per Share (EPS) | 29 | 34.24 | 30.05 |
Table 5: Profit & Loss Account of MBL
2.8.3 Financial Highlights of MBL
Highlights for the year 2009 and 2008
(BDT in million)
| SL NO. | PARTICULARS | 2009 | 2008 |
| 1 | Paid-up Capital | 1,798.68 | 1,498.90 |
| 2 | Total Capital Fund | 4,186.69 | 3,387.17 |
| 3 | Capital Surplus/Deficit | 120.41 | 483.51 |
| 4 | Total Assets | 55,928.72 | 44,940.54 |