Dhaka Bank approves cash, stock dividends

Posted by BankInfo on Sat, Apr 19 2014 10:45 am

Abdul Hai Sarker, Chairman of Dhaka Bank Ltd, presides over the 19th annual general meeting of the bank in Dhaka on Thursday. Dhaka Bank approved 17 percent cash and 5 percent stock dividends for its shareholders for the year ended on 31st December, 2013.
The approval came at the 19th Annual General Meeting (AGM) of the bank held in Dhaka on Thursday, said a press release.
Abdul Hai Sarker, Chairman of Dhaka Bank, presided over the meeting.
Founder and Director Mirza Abbas Uddin Ahmed, former vice-chairperson and sponsor shareholder Afroza Abbas, former chairman and Director Reshadur Rahman, Directors Altaf Hossain Sarker, Mohammed Hanif, Md Amirullah, Abdullah Al Ahsan, Tahidul Hossain Chowdhury, Khondoker Jamil Uddin, Mirza Yasser Abbas, Amanullah Sarker, Independent Director Suez Islam and Syed Abu Naser Bukhtear Ahmed, Managing Director Niaz Habib and former managing director Khondker Fazle Rashid attended the meeting.
Deputy Managing Directors Neaz Mohammad Khan, Emranul Huq, Khan Shahadat Hossain, Company Secretary Arham Masudul Huq and a good number of shareholders were present on the occasion.

News:Daily Sun/18-Apr-2014

UCB approves 20pc dividends

Posted by BankInfo on Sat, Apr 19 2014 10:26 am

M A Hashem, Chairman, United Commercial Bank Limited, is seen at the 31st Annual General Meeting of the bank at Hotel Ocean Paradise in Cox’s Bazar on Thursday.

 The 31st Annual General Meeting (AGM) of United Commercial Bank Limited was held at Hotel Ocean Paradise in Cox’s Bazar on Thursday.

M A Hashem, Chairman of the bank presided over the AGM, said a press release.

During the AGM, 20 percent cash dividend was approved for the shareholders of the bank for the year 2013.

Chairman said that UCB had generated attractive financial results in previous years. The bank gained a tremendous growth in every arena like operating profit, loans and advances, deposit etc, he added.

He also expressed that UCB will be continuing to serve the interest of shareholders, clients and the communities as well.

Sharif Zahir, Vice Chairman, Anisuzzaman Chowdhury, Chairman, Executive Committee, Lt. Gen. (Retd.) Abu Tayeb Muhammad Zahirul Alam, Chairman, Audit Committee, M. A. Sabur, Chairman, Risk Management Committee, Showkat Aziz Russell, Md. Jahangir Alam Khan, Yunus Ahmed, M. A. Kalam, Md. Tanvir Khan, Asifuzzaman Chowdhury, Sultana Rezia Begum, Shabbir Ahmed and Ahmed Arif Billah, Directors of the bank were present at the AGM.

UCB Managing Director, Muhammed Ali, in his speech, sketched the backdrop of success and the cumulative scenario of achievement of the bank. He told that UCB developed a balanced and sustainable business model against all obstacles through organic growth.

The AGM was conducted by Mirza Mahmud Rafiqur Rahman, Additional Managing Director and Company Secretary of the bank. 

News:Daily Sun/18-Apr-2014

Kazi Alamgir made Agrani Bank GM

Posted by BankInfo on Sat, Apr 19 2014 10:14 am

Kazi Alamgir, Deputy General Manager of Agrani Bank Limited has been promoted to General Manager of the bank.

He is now working at the IT and MIS Division of the bank, said a press release. Prior to his promotion, he was the DGM and Chief of IT division.

After obtaining Masters degree in Soil Science, Water and Environment from Dhaka University, he joined Agrani Bank as a senior officer in 1986.

During his career, he visited Thailand, Qatar, Singapore, Dubai and USA.

He comes from an aristocratic Muslim family of Jampur upazila in Narayanganj district in 1960. He is a father of three daughters.

News:Daily Sun/18-Apr-2014

Consumer credit soars as BB overlooked

Posted by BankInfo on Thu, Apr 17 2014 12:03 pm

Dull industrial credit demand forces banks to resort to provide unproductive loans

The commercial banks have relied heavily on consumer financing last year as industrial credit disbursement suffered a setback in the wake of the political unrest ahead of the national election held on January 5.

They had to go beyond Bangladesh Bank’s instruction to increase credit exposure in the productive sector instead of consumer financing, bankers said.

The consumer credit started growing from the beginning of last year due to lack of loan demand by the big entrepreneurs, said a senior executive of the central bank. 

He said the commercial banks are also interested in consumer financing as it helps increase interest earnings more than that of industrial term-loan.

“The consumer financing increased rapidly last year as industrial expansion and business activities remained almost stuck up and credit growth slowed down amid political turmoil,” said a senior executive of private bank.

In order to achieve credit growth target bank focused on agriculture sector and consumer financing last year, he added.

He said Bangladesh Bank had verbally asked the commercial banks to disburse loan focusing on agriculture and other sector as loan demand in industrial sector was very shy.

The consumer financing registered a substantial 32% growth in the first quarter (January-March) of 2013 compared to a negative growth of 5% in previous quarter (October-December) of 2012. During the same period total loan growth increased by 0.83% from 3.06%, according to the central bank data.

The consumer loan increased by 10.5% to Tk28,021 crore in April-June quarter of 2013 and over 18% to Tk33,140 crore in July-September quarter.

The industrial loan growth was negative by 3% to Tk1,47,361 crore in July-September quarter compared to the growth of 1.76% in the preceding quarter.

In January 2012, Bangladesh Bank had slashed the loan margin ratio to 70:30 from 80:20 in housing finance and the ratio for car loans and all other consumer financing to 30:70 from 50:50.

It brought the changes in the margin ratios against the backdrop of the rising trend of consumer loans despite repeated attempts by the regulator to discourage consumer loans.

The average credit growth of the banking sector was 15% in 2011 while the growth of consumer loan was 19%.

Consumer financing growth came down in 2012 due to the strong monitoring of Bangladesh Bank.

Credit growth to the agriculture sector increased by 7.34% in July-September of 2013 compared to the growth by 3.03% in the previous quarter.

Bangladesh Bank had issued a circular on April 25, 2012 asking the commercial banks not to exceed the consumer credit growth more than its total average growth of loan portfolios.

It took the measure to achieve a sustainable economic growth through increasing credit flow to the productive sectors by slashing loans from unproductive sectors, including consumer financing.

The central bank, however, overlooked the rising trend of consumer financing than industrial loan growth so the banks could achieve the credit target, said a senior executive of Bangladesh Bank. 

News:Dhaka Tribune/17-Apr-2014


Challenges for new banks

Posted by BankInfo on Thu, Apr 17 2014 11:53 am

Over the past decade, Bangladesh economy enjoyed favourable economic environment and grew at approximately 6 percent with tolerable inflation. Major economic indicators like GDP, exports and imports have tripled in the last 10 years; industrialisation and trade have soared to unprecedented heights.
Growth in the “real” economy has fuelled the growth of the country's banking sector which has seen an increase in deposits by over 400 percent and assets by around 500 percent in the last 10 years. Simultaneously, per capita GDP has more than doubled and yet more than half the population is still unbanked.
The central bank's decision to allow licences to nine new banks has the merit. Regardless of political motivations, a logical argument can be made beyond the unbanked population argument that more competition will improve service quality and ultimately benefit the consumers.
From the sponsors standpoint, a logical argument can be made about the potential economic benefit for the sponsors based upon past record, which is estimated to be 25 percent+ over 10 years from inception of a bank approximately 15 percent higher than the risk free rate in Bangladesh.
Past performance do not guarantee future returns
These all sound great theoretically but the ground reality is different, and challenges faced by the management and shareholders of new banks cannot be minimised. The banking industry is already highly competitive. Therefore, unless these new banks get their act together fast, shareholders could suffer a major setback and even some could face extinction.
Show me the money
Let us refresh our memory about how banks make profit. Banks make money primarily in three ways. Firstly, from the spread between the deposit and lending rates; Secondly, from the fees they charge for various products and services, and thirdly from proprietary investments.
This is obviously overly simplified; however, all these modes of earnings potential are possible to some extent provided that the demand is growing, banks are well capitalised and have the proper human resource; and the rest happens automatically. So what are the challenges?
It is all about people
At present, the banking sector is suffering from an acute shortage of skilled and adept professionals.
Except for a few foreign and local banks, unfortunately the quality of staff beyond the CEO, managing director and DMD levels drops drastically. Depth and breadth of knowledge unfortunately is poor. This is an ominous sign for the industry since professional human resource is essential for the growth and development of the industry. These weaknesses obviously facilitate frauds, mismanagement, and value destruction for shareholders and encourage and breed substandard corporate governance culture in the financial sector.
The first challenge for new banks will be attracting the right leadership. It will not be easy to attract talents for a newly established entity. The most likely outcomes are - either you end up recruiting an unqualified team due to budget constraints or you end up paying a significant premium for talents.
If you recruit weak managers, then they end up attracting even weaker subordinates and we all know how that works.
Attracting deposits
While most banks offer similar commodity type products, they are combating with each other in most cases on price/yield, realistically, the new entrants can gain an initial advantage and capture market share by offering higher deposit rates.
Falling deposit rates at present driven by recent political uncertainty, risk averseness, lack of demand for loans and recent spike in demand for short-term government securities provide a lower rate environment, nevertheless provide no relative advantage to the new banks.
Lending to the right clients
Contrary to popular believe that aggressive marketing or in this case aggressive lending may help quickly capture market share and drive banks' profitability, in reality success of these new banks in the long-run depends on ensuring that they lend to the right clients. Most of us are aware of the result of aggressive growth in the lending portfolios.
As a lender, you only get the stated interest and the principal within the maturity date at best and you have no upside like equity investors. This is why one must wonder why many banks even today lend to entities with no real capital or a sliver of capital created from revaluation and other financial engineering.
If the new banks fall into this temptation, this could be the first nail in the coffin. Chasing yield and risking principal is the fastest way to go bankrupt.
Tapping the untapped
With around half the population unbanked, the biggest opportunity for new banks exists for targeting unbanked rural populations with the right products and services. Opening cost-efficient branches and nimble service centres in suburban and rural areas can substantially boost asset size and simultaneously, bring the much-needed diversification that every lender requires to spread-out its risk.
Last mover advantage
Despite the challenges, new banks have some vantage points comparing to the existing banks. Currently the industry maintains NPL of 8.93 percent+, which is similar to the levels back in 2007. While all the other government and private commercial banks have been working hard to clean their books, new banks have the luxury to formulate carefully thought-out strategies for market penetration.

It is a well-established fact that many of the existing players are required to recapitalisation to maintain minimum capital adequacy. It is a daunting challenge to concentrate both on business expansion and recapitalisation effectively.
For the past 10 years, in the backdrop of consistent economic growth driven by export and remittance, balance sheets of banks have inflated due to aggressive lending, stockmarket and real-estate bubble and finally the head-wind; the sector is now facing serious challenges due to poor balance sheet. All these incidents provide a roadmap of do's and don'ts for a new bank.
Embracing new technology
The biggest advantage for a new bank is the opportunity to embrace technologies to get an edge over the existing players. We expect disruptive technologies to impact banking globally and also, to some extent, in Bangladesh.
For instance, mobile technology now provides the plumbing for delivering products and services unthinkable even a few years back. In Bangladesh, more than 70 percent of the population lives in rural areas, where financial services are generally inaccessible. Furthermore, with the advent of 3G technology in Bangladesh, internet penetration promises to grow exponentially in the coming years.
Lessons can be learnt from organisations such as bKash, which has proven how financial services can be delivered conveniently and at a low-cost. We believe this is just the beginning and more game-changing technologies are expected.
As a proponent of a free market, increased supply of banks is generally good for the consumers. However, the road to success is not smooth at all and expected to be even more challenging in the future. Now it is not an option but essential to invest in intellectual capital, attracting deposits at competitive rates, focusing on unbanked population, selecting right clients, learning from past mistakes, embracing new technology, and most importantly developing effective leadership.
How well these banks execute on these dimensions will finally determine the fate of these banks in the future.

News:The Daily Star/17-Apr-2014
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