directors’ report Bismillahir Rahmanir Rahim Dear Fellow Shareholders The Board of Directors is pleased to welcome the honorable shareholders in the 13th Annual General Meeting of the Bank. The Directors' Report along with audited financial statements and auditors' report thereon for the year ended December 31, 2008 are presented before your kind-self. In the report, DBBL's operational performance of 2008 as compared to 2007 have been evaluated and analyzed within the prevailing business environment. The information and analysis may be read in conjunction with the DBBL's audited financial statements which have been prepared in accordance with Bangladesh Accounting Standards and applicable legal and regulatory requirements. ECONOMY AND FINANCIAL MARKET World Economic Environment and Outlook The world economy is facing a major downturn in the face of the most devastating financial shock in mature financial market since 1930s. The financial crises first erupted with the collapse of US sub prime mortgage in August 2007 following major corrections in housing markets in US and a number of advanced countries. The crises deepened further and entered a tumultuous new phase in September 2008, when among other, the insolvency of Lehman Brothers, One of the biggest investment banks in Wall Street threatened collapse of the entire financial system and badly shaken the confidence of consumers and investors so much so that credit market became almost frozen i.e. banks were not lending to consumers and businesses and inter-bank transactions were also stopped. The impact has been felt across the global financial system including emerging markets. US and European authorities have taken extraordinary measures aimed at stabilizing markets, including massive liquidity provision, prompt intervention and to resolve weak institutions, extension of deposit insurance, lower interest rates and big stimulus package to support targeted institutions or groups or public investments to create employments and generate income. However, the situation remains highly uncertain and subject to considerable downside risk. Many advanced economies are already in recession while growth in emerging economies is also weakening. Looking ahead financial conditions are likely to remain very difficult restraining global growth prospects. The world economy registered an unprecedented average growth of 5.0 percent a year for consecutive four years before 2008. The October 2008 issue of the IMF World Economic Outlook (WEO) projected 3.9 percent global output growth in 2008, down from the 5.0 percent rate registered in 2007. The advanced economies as a group (with 56.4 percent share in 2007 global output) are projected to grow by 1.5 percent, while the emerging market and developing countries as a group (with 43.6 percent share in 2007 global output) are projected to grow by 6.9 percent in 2008. Oil prices increased in February and stayed above USD 100 a barrel before declining to around USD 50 a barrel in November 2008 following severe crisis in the international financial markets. The non-fuel commodity price boom picked up at much higher levels in real terms than at any time in the past 20 years, despite some correction since mid-July 2008 amid the slowdown of the global economy. The growth of world trade volume in 2008 is projected to decline to 4.9 percent compared to 7.2 percent in 2007. The growth of exports from both the advanced economies and other emerging markets and developing countries are projected to decline to 4.3 percent and 6.3 percent, respectively, in 2008. The latest Global Financial Stability Report (GFSR) released by the IMF in October 2008 indicates that the global financial system has undoubtedly come under increasing strains and risks to financial stability that erupted in August 2007 have developed into the largest financial shock since the Great Depression. Equity markets have turned downward. Liquidity remains seriously impaired despite aggressive responses by major central banks, while concern about credit risks has intensified. Looking forward in 2009, in the face of financial crisis entering a new, more severe stage in September 2008, the global economy is projected to slow further to 3.0 percent growth, 0.9 percentage point lower than the July 2008 WEO
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directors’ report Bismillahir Rahmanir Rahim Dear Fellow Shareholders The Board of Directors is pleased to welcome the honorable shareholders in the 13th Annual General Meeting of the Bank. The Directors' Report along with audited financial statements and auditors' report thereon for the year ended December 31, 2008 are presented before your kind-self. In the report, DBBL's operational performance of 2008 as compared to 2007 have been evaluated and analyzed within the prevailing business environment. The information and analysis may be read in conjunction with the DBBL's audited financial statements which have been prepared in accordance with Bangladesh Accounting Standards and applicable legal and regulatory requirements. ECONOMY AND FINANCIAL MARKET World Economic Environment and Outlook The world economy is facing a major downturn in the face of the most devastating financial shock in mature financial market since 1930s. The financial crises first erupted with the collapse of US sub prime mortgage in August 2007 following major corrections in housing markets in US and a number of advanced countries. The crises deepened further and entered a tumultuous new phase in September 2008, when among other, the insolvency of Lehman Brothers, One of the biggest investment banks in Wall Street threatened collapse of the entire financial system and badly shaken the confidence of consumers and investors so much so that credit market became almost frozen i.e. banks were not lending to consumers and businesses and inter-bank transactions were also stopped. The impact has been felt across the global financial system including emerging markets. US and European authorities have taken extraordinary measures aimed at stabilizing markets, including massive liquidity provision, prompt intervention and to resolve weak institutions, extension of deposit insurance, lower interest rates and big stimulus package to support targeted institutions or groups or public investments to create employments and generate income. However, the situation remains highly uncertain and subject to considerable downside risk. Many advanced economies are already in recession while growth in emerging economies is also weakening. Looking ahead financial conditions are likely to remain very difficult restraining global growth prospects. The world economy registered an unprecedented average growth of 5.0 percent a year for consecutive four years before 2008. The October 2008 issue of the IMF World Economic Outlook (WEO) projected 3.9 percent global output growth in 2008, down from the 5.0 percent rate registered in 2007. The advanced economies as a group (with 56.4 percent share in 2007 global output) are projected to grow by 1.5 percent, while the emerging market and developing countries as a group (with 43.6 percent share in 2007 global output) are projected to grow by 6.9 percent in 2008. Oil prices increased in February and stayed above USD 100 a barrel before declining to around USD 50 a barrel in November 2008 following severe crisis in the international financial markets. The non-fuel commodity price boom picked up at much higher levels in real terms than at any time in the past 20 years, despite some correction since mid-July 2008 amid the slowdown of the global economy. The growth of world trade volume in 2008 is projected to decline to 4.9 percent compared to 7.2 percent in 2007. The growth of exports from both the advanced economies and other emerging markets and developing countries are projected to decline to 4.3 percent and 6.3 percent, respectively, in 2008. The latest Global Financial Stability Report (GFSR) released by the IMF in October 2008 indicates that the global
financial system has undoubtedly come under increasing strains and risks to financial stability that erupted in August
2007 have developed into the largest financial shock since the Great Depression. Equity markets have turned
downward. Liquidity remains seriously impaired despite aggressive responses by major central banks, while concern
about credit risks has intensified.
Looking forward in 2009, in the face of financial crisis entering a new, more severe stage in September 2008, the global economy is projected to slow further to 3.0 percent growth, 0.9 percentage point lower than the July 2008 WEO
projection, with slowed activity in the advanced economies, while growth will also be moderate in the emerging and developing economies. The major downside risks include the risk arising from the still-unfolding events in financial markets. Global financial markets continue to be fragile and indicators of systemic risk remain strong. There is a need to continue strong efforts by the policymakers to deal with financial market turmoil in order to avoid a full-blown crisis of confidence or a credit crunch. The immediate priorities are to rebuild counterparty confidence, reinforce the capital and financial soundness of institutions, and ease liquidity strains. Longer-term reforms will be needed including improving mortgage market regulation, promoting the independence of rating agencies, broadening supervision, strengthening the framework of supervisory cooperation, and improving crisis resolution mechanisms. The key actions for adjustment in the imbalances suggested by the IMF include measures to increase savings in the United States; exchange rate appreciation, along with measures to boost domestic demand in emerging Asia; structural reform to boost domestic demand and growth in the euro area and Japan; and measures to increase demand in oil exporting countries. Monetary policymakers in the advanced economies face a delicate balancing act between alleviating the downside risks to growth and guarding against a buildup in inflation. In the United States, rising downside risks to output, amid considerable uncertainty about the financial turbulence and the deterioration in labor market conditions, justifies the Federal Reserve's interest rate cuts and a continuing bias toward monetary easing. Despite the weaker growth prospects for advanced economies, a number of emerging market economies still face overheating pressures and rising food prices, and further tightening may be required to contain inflation. With a flexible exchange rate regime, currency appreciation will tend to provide useful support for monetary tightening. Negotiations under WTO's Doha Development Round, restarted in August 2008 and ended without agreement because of sharp divisions among the US, India and China about access to agricultural markets in the developing world. A successful outcome to the negotiations is needed to strengthen the multilateral trading system and provide impetus to global economic growth.
▲ A partial view of a Blowroom section of a modern Spinning Mill at Narshingdi, financed by DBBL.
▲ A partial view of a fully compliant Ring Spinning Mill at Bhaluka, Mymensingh financed by DBBL.
State of the Bangladesh economy GDP growth The performance of the Bangladesh Economy in the face of a number of unfavorable factors in FY 2008 was remarkable showing signs of resilience of the economy and its strong growth potential. Despite political uncertainty, shaken business confidence, labor unrest in RMG sector and a spike in prices of oil, rice and most commodities in the international market real GDP grew by 6.2 percent in FY 2008, slightly lower than 6.4 percent of FY 2007. At current market price GDP of Bangladesh in FY 2008 was estimated at Taka 5,419.0 billion (Taka 4,675.0 billion in FY 2007). The strong growth was underpinned, on the supply side, by a moderate growth in the agricultural sector and continued strong growth in the industry sector and in the service sector. Economic growth was also aided by rapid growth in exports and surging remittances. The industry sector attained a satisfactory growth of 6.9% in FY 2008, lower than 8.4% of FY 2007. The growth was supported mainly by sustained growth in export-oriented manufacturing activities and expansion in domestic demand and sustained growth in the mining and quarrying sub sector as well as power, gas and water sub sector. Overall, the service sector grew by 6.7% in FY 2008, slightly lower than 6.9% recorded in FY 2007 and remaining well above the trend level. Agriculture sector achieved a moderate growth of 3.6% in FY 2008 following two consecutive floods, cyclone Sidr and a widespread outbreak of the avian flu in the country resulting mainly from a lower growth in animal farming and crops and horticulture sub-sector. The long term trend showing a shift of sectoral composition of GDP away from agriculture towards industry continued in FY 2008 while the share of industry sector increased to 29.7% from 29.4%, the share of agriculture sector in GDP came down to 20.9% from 21.4 % ; the share of the service sector in GDP increased to 49.4% from 49.2%. Government and Bangladesh Bank policy towards economic development With a view to achieving higher economic growth, the Government and Bangladesh Bank (BB) continued to adopt policies in bringing the economy back to its growth momentum. The Government’s growth stimulating and poverty reduction programs coupled with prudent monetary policies of Bangladesh Bank contributed toward a strong GDP growth of 6.2% in FY 2008.
The fiscal policy in FY 2008 was meant for pro-poor economic growth and supporting private sector investment. The Government pursued a set of objectives which were attuned to poverty reduction. These strategies included, among others, creation of employment opportunities, removal of infrastructure constraints, improvement of law and order situation, establishment of fiscal discipline, unfettered development of private sector, human resources development, social sector investment, further widening of social safety net programs, and strengthening of financial management. Bangladesh Bank pursued growth supportive and prudent monetary policy stance during FY 2008 to ease the uptrend in inflationary tendency and to provide support for the highest sustainable real output growth.
External sector Exports and imports achieved robust growth in FY 2008, and remittances from workers abroad showed a strong and steady growth. Export increased by 15.7% from US$ 12,053 .0 million in FY 2007 to US$ 13,945.0 million in FY 2008 while imports increased by 25.6% from US$ 15,511.0 million to US$ 19,486.0 million. At the same time remittance increased by 32.4% from US$ 5,979.0 million in FY 2007 to US$ 7,915.0 million in FY 2008. As a result, country's current account balance exhibited a notable surplus of US$ 672.0 million in FY 2008 compared to surplus of US$ 936.0 million in FY 2007. The current account balance as a percentage of GDP stood at 0.85% in FY 2008 against 1.37% in FY 2007. The surplus in overall balance of payments came down to US $ 604.0 million in FY 2008 from US$ 1,493.0 million in FY 2007. Gross foreign exchange reserve increased by US$ 1,072.0 million to US$ 6,149.0 million at the end of FY 2008 that was equivalent to 3.8 months' import. Inflation The rising trend of inflation measured by CPI continued throughout FY 2008 mainly due to higher prices of oil, food and some other imported goods in the international market, disruptions of productions and supply caused by repeated floods and cyclone, higher domestic production cost of essential goods and business syndications. Annual average inflation measured by 12-months average movements in CPI, increased from 7.2% in June 2007 to 9.9% in june 2008. There was a notable increase in food prices component of CPI inflation from 8.1% in June 2007 to 12.3% in June 2008 and non-food component of CPI also increased from 5.9% in June 2007 to 6.3% in June 2008. Savings and investments Domestic savings -GDP ratio decreased from 20.4% in FY 2007 to 20.1% in FY 2008 while investment -GDP ratio decreased marginally from 24.5% of FY 2007 to 24.2% in FY 2008. The savings -investment gap, correspondingly, remained the same at 4.1% in FY 2008 and FY 2007, financed by net factor income from abroad. Public finance Revenue receipts in FY 2008 were Taka 605.4 billion, 22.4% higher than revenue of Taka 494.7 billion in FY 2007. Tax revenue was 79.3% within total revenue. Public expenditure amounted to Taka 936.1 billion in FY 2008, 40.1% higher than Taka 668.4 billion in FY 2007. Public expenditure comprised of Taka 522.5 billion current expenditure, Taka 188.6 billion other expenditure and Taka 225.0 billion development expenditure which was reduced by 15.1% from original target of Taka 265.0 billion. Consistent with the growth and poverty reduction objectives, 29.1 % of total outlay was spent for the infrastructure sector and 24.7 % for the social sector. The deficit in revised FY 2008 budget stood at Taka 330.7 billion or 6.2% of GDP at current prices. The domestic borrowing component of the deficit financing was Taka 199.2 billion (3.7% of GDP) in FY 2008 in which bank borrowing was Taka 104.0 billion (1.9% of GDP). Revenue as a percentage of GDP increased to 11.3% as compared to 10.6% in FY 2007, while public expenditure as a percentage of GDP increased from 14.3% in FY 2007 to 17.5 % in FY 2008. Accordingly, overall budget deficit increased from 3.7% of GDP in FY 2007 to 6.2% in FY 2008.
A partial view of a Ring Spinning Mill at Bhaluka, Mymensingh financed by DBBL.
Future outlook for the Bangladesh economy By maintaining macroeconomic stability through prudent fiscal and monetary policy with supportive external sector policy and progress in advancing structural reforms, against the backdrop of recent natural disasters and food crisis, the near and medium term economic prospects of Bangladesh appear favorable. In the updated Medium Term Macroeconomic Framework (MTMF) of Poverty Reduction Strategy Paper (PRSP) under the base case scenario, the real GDP growth has been projected to increase gradually to 6.5 percent in FY09, 7.0 percent in FY10, and 7.2 percent in FY11, aided by sustained macroeconomic stability, increased business and investment facility, increased growth in the industry and services sector, buoyancy in the overall agricultural sector growth, expansion and diversification of the export base, increased efficiency and technological progress, and ongoing implementation of economic reform programs.
partial view of export oriented Knit Composite Factory at Kanchpur, Rupganj, Narayanganj financed by DBBL.
To support the pro-poor growth targets envisaged in the MTMF, the gross domestic investment is projected to increase gradually from 24.4 percent of GDP in FY09 to 26.3 percent in FY10 and 27.0 percent in FY11 supported by introduction and implementation of pro-industrialization and investment friendly economic policies and strategies. Inflation is projected to decline gradually from 9.0 percent in FY09 to 7.0 percent in FY11, with an appropriately monetary policy stance aimed at ensuring reasonable price stability and providing support to sustainable and high output growth. The outlook envisaged in the MTMF faces several near and medium term downside risks and uncertainties originating from (i) the probable rising inflationary pressures, (ii) the probable volatility in prices of oil and other commodities in the world market, (iii) floods and other natural disasters, and climate change, (iv) infrastructure constraints (especially power, gas, ports, and transportation), (v) probable adverse effects in the RMG export growth due to falling growth prospects in U.S. and the country's other major trade partners, and (vi) probable adverse impact of global slowdown on aid inflow and workers' remittances. Besides, failure to meet following challenges may add to the problems: (i) ensuring food security, (ii) increasing productivity, (iii) diversifying export products and markets, and (iv) smooth transition to democracy. The depth and severity of the recent global financial crisis as well as its impact on Bangladesh Economy is still unfolding. However, Bangladesh is relatively insulated from the financial slide, but the global growth outlook, especially the growth prospect in the U.S. and the country's other major trade partners, has weakened which could create adverse impact on foreign aid, remittances and export growth, particularly export growth of RMGs.
Bangladesh needs to remain alert regarding its competitiveness of exports especially in the price-sensitive RMGs.
Therefore, for survival in the increasingly competitive global garment trade, a competitive RMG sector needs to be
built with upgrading infrastructures, developing financial capacity of manufacturers, labour compliance standards,
design and product development capability, advanced production facilities, long term business relationship, and the
development of internationally reputed customer bases. Efforts need to be made for larger access for our RMG
products in the markets where access still remains limited such as Australia and Japan. On the other- hand, to reduce
the overwhelming dependence on RMG, measures need to be taken to diversify the exports.
Recently, the World Bank in its report "Doing Business 2009" ranked Bangladesh above China, India, Pakistan and
the median Low Income Country (LIC) for required time and procedures to start a business. Simplifying foreign
borrowing by the private sector, rationalizing the foreign exchange transactions to encourage increased FDI and
foreign portfolio investment, particularly in medium and large-scale industries and enterprises, including infrastructure
building, and above all sound macro-economic management and positive political developments with a sound
economic environment would make Bangladesh a middle income economy by the end of the next decade.
Money, Credit and Financial Market
Money and credit growth
Bangladesh Bank pursued prudent monetary policy in FY 2008. Broad money grew by 17.6% in FY 2008 which was
higher than 17.0% growth in FY 2007 while domestic credit grew by 21.8% higher than 14.4% growth in FY 2007.
Credit to the private sector increased by 24.9% compared to 15.0% in FY 2007 reflecting increased activities in real
sector. On the other hand, public sector credit grew by 11.9 % compared to 12.4% in FY 2007 mainly due to
downsizing of ADP.
Monetary policy stance and interest rate scenario
Bangladesh Bank pursued growth supportive and prudent monetary policy stance during FY08 to ease the uptrend in
inflationary tendency and to provide support for the highest sustainable output growth. To adhere to its pro-growth
monetary policy stance, BB prudently used monetary policy instruments at its disposal during FY08. As part of its
policy stance BB emphasized more on increased credit flow to the agriculture, SMEs and housing sector. The major
policy rates remained unchanged at preceding year’s level. The spread between short term and long-term rates of
government securities narrowed down reflecting BB’s commitment to reduce inflationary pressure. Moreover, BB’s
continuous efforts to rationalize lending rate also succeeded in FY 2008.
The declining trend of interest rates continued in FY08. Weighted average interest rate on bank advances recorded a
decrease to 12.3 percent as of end June 2008 from 12.8 percent as of end June 2007, while that on bank deposits
increased slightly to 7.0 percent from 6.9 percent in FY 2007. As a result, net spread between advances and deposits
declined to 5.3% from 5.9%.
A partial view of export oriented Knit Composite Factory
having kintting, dyeing, finishing and garments facitiles
at Jarun, Konabari, Gazipur financed by DBBL.
Money market
A healthy, transparent and dynamically evolving
financial system helps mobilize savings and allocate
resources, ensure safe and efficient payment and
settlement arrangements and ease financial crisis
management. Efforts continued in FY 2008 to establish
a healthy and transparent financial system in the
country. There were signs of strain both in the inter-
bank call market and forex market. Volatility in these
two markets was tamed through repo operation and
intervention by BB.
Efficient monetary operation, especially use of shorter
term monetary instruments such as repo , reverse
repo, collateralized continuous liquidity support from
Bangladesh Bank to the primary dealers and
Bangladesh Bank Bills helped to keep the money
market sound and stable during the FY 2008. A
A partial view of a dyeing section of an export oriented
Textile Industry at Bhobanipur, Gazipur financed by
DBBL.
number of steps were taken for activation of secondary
markets of bills/bonds. As a result, the overall money
market situation was moderate during FY 2008. The
weighted average interest rates in call money market
started increasing from March 2008 to come down by
June 2008. Credit growth driven by growing economic
and business activities created some liquidity pressure
in the banking system. BB provided liquidity support to
keep call money rate reasonably stable in FY 2008. As
a result, the weighted average interest rate in the call
money market moved within the range of 6.9% to
14.8% during FY 2008.
The repo injects required money in the system and
provides banks with necessary funds to maintain their
liquidity. While pursuing a cautious monetary policy,
Bangladesh Bank kept this window open for the banks
to maintain the market liquidity at desired level. The
interest rate on repo auctions was 8.5% in FY 2008 as
against 8.0% - 9.0% in FY 2007. While repo injects
money in the system, the reverse repo takes it away
from the system. As a counterpart of repo auctions,
the daily reverse repo auctions were held in FY 2008. The reverse repo auctions were used to maintain intended level
of liquidity in the market as well as to contain credit growth. The interest rate on reverse repo auctions remained
unchanged at the previous year level of 6.5% per annum during FY 2008.
A carefully coordinated use of repo and reverse repo transactions, liquidity support to primary dealers and auction of
Bangladesh Bank bills played key role in stabilizing the money market and interest rates in banking sector during FY
2008.
Foreign exchange market
Bangladesh Bank introduced floating exchange rate in May 2003 for Taka. Under the arrangement, the banks are free
to set their own rates for inter-bank and customer level transactions. Taka is convertible for current international
transactions. Repatriation of profits or disinvestment proceeds on non-resident FDI and portfolio investments are
freely permitted. The exchange rate is being determined in the market on the basis of market demand and supply
forces of the respective currencies. However, to avoid any unusual volatility in the exchange rate BB occasionally
intervenes in the market when it deems necessary to maintain stability in the foreign exchange market designed to
ensuring the competitiveness of Bangladeshi products in the international markets, encouraging inflow of remittances,
maintaining internal price stability and maintaining balance in external account position.
Foreign exchange market of the country enjoyed good liquidity in FY 2008 mainly due to more than expected foreign
currency inflow (equivalent to US $ 7.9 billion) throughout the year from Bangladeshi nationals working abroad along
with the usual export proceeds. As a result, the exchange rate of Bangladesh Taka remained almost stable in FY 2008
and moved within the range of Taka 68.48 to 68.85 during FY 2008. However, in 1st quarter of FY 2008 foreign
exchange market experienced modest pressure due to higher demand in the market which subsequently eased .
The exchange rate started at 68.85 in FY 2008 and closed at 68.53 at the close of FY 2008.
Remittance
Inward remittance from Bangladeshi nationals abroad continued to play an important role in strengthening the current
account balance. Over the last few years, various steps have been taken to boost the flow of remittance through the
banking channel. These include expansion of activities of drawing arrangements, review of statements received from
foreign banks /exchange houses, close monitoring and supervision of banks. Besides, scheduled banks have ensured
quick delivery of remittances by reducing lead-time to the beneficiaries in Bangladesh, which brought substantial
development in the delivery system. Drawing arrangements have been made between 39 Bangladeshi banks and 270
foreign banks/exchange houses situated throughout the globe. Annual remittance threshold from various regions of
the world has been refixed upward. For these measures remittances recorded substantial growth by 32.4% from US
$ 5,979 million in FY 2007 to US$ 7,915 milion in FY2008. Remittance as a percentage of GDP increased to 10.02%
in FY 2008 from 8.72% in FY 2007.
Development in banking sector
During FY 2008, Bangladesh Bank continued ongoing reforms in financial market by tightening of prudential
regulations, improvement of supervisory oversight, expanding transparency and market disclosures with a view to
improving overall efficiency and stability of the financial system. The banking sector in the country is mainly divided
into three segmentsState-owned banks, private commercial banks and foreign commercial banks. PCBs are the
fastest growing segment in the market, having more than 50% market share.
Capital market
The capital market passed another year of growth in 2008 raising the total market capitalization to GDP ratio to 19.26
% against 15.88% of 2007. Dhaka Stock Exchange (DSE) total market capitalization crossed Taka 1.0 trillion -mark in
2008 for the first time. DSE Market capitalization stood at Taka 1,043.8 billion on December 30, 2008 while it was
Taka 759.6 billion on January 01, 2008. The daily average turnover at DSE recorded its highest achievement at Taka
2.818 billion in 2008 against Taka 1.362 billion in 2007. Turnover at the DSE recorded its highest mark with total
transaction of Taka 5.905 billion on October 12, 2008. The benchmark General Index declined by 7.10 % to 2,795.34
points on the closing session from 3,008.91 of the opening session.
A partial view of dyeing, printing and finishing section of
an export oriented home textile industry at QC Nagar,
Pagar, Tongi, Gazipur financed by DBBL.
A partial view of embroidery unit of a composite knit
garments industry at Fatullah, Narayanganj financed
by DBBL.
The following policy measures were taken in FY 2008 by
Bangladesh Bank to improve corporate governance and
stability of the banking sector and to extend services of
banking companies towards customers and SMEs:
Total capital requirement of banking companies
increased from Taka 2.0 billion to Taka 4.0 billion
that should be maintained on or before August 11,
2011 that is over & above 10% capital adequacy
ratio.
.50% of revaluation reserve against held to
maturity securities has been also accepted as
Tier-2 capital.
General provision against off balance sheet items
was increased from 0.5% to 1.0% in 2008.
During the year opening of SME centers were
allowed with a view to support growing and high
potential SMEs in the country with permission to
receive application, disburse, monitor and recover
SME loans and receive foreign remittance &
deliver the same in local currency. Priority will be
given to women entrepreneurs involved in the
promotion of SMEs.
Oriental Bank was reconstructed under "The
Oriental Bank Ltd (Reconstruction) Scheme,
2007" and renamed as ICB Islamic Bank Limited
to safeguard the interest of depositors and
banking sector as a whole. It may be noted that
the bank had been suffering from a huge shortfall
in capital and provision, large amount of classified
loans, inefficient management and acute liquidity
crises which brought it on the brink of collapse.
.SCBs were further strengthened in 2008 to allow
them to operate on a prudent and commercial
basis to make them efficient, profitable and
accountable to the respective authorities and to
make the banking sector more competitive.
.Bangladesh Bank continued to strengthen
corporate governance system in commercial
banks by making a provision for appointing two
depositor directors in every bank.
Global stock markets have taken a beating in the year 2008 due to global financial crises. Stock prices in all the major
stock exchanges in USA, EU, Japan and regional exchanges like India and Pakistan have fallen sharply. In
comparison, DSE has performed reasonably well. According to Bloomberg, New York based prestigious information
services company, for the first eleven months of 2008, the DSE was the sixth best performing exchange in the world
on a currency-adjusted basis. According to 23 world indices, DSE has performed the best.
Investors remained enthusiastic on the securities market until last quarter as their confidence was restored due to
concerted efforts by SEC and DSE to develop the securities market. Institutional investors channeled huge funds into
the market. However, in the last quarter of 2008 performance of DSE (both price and turnover) remained depressed
due to lack of confidence for uncertainty in global financial crises which may adversely affect our export, remittance
and foreign aid flow.
The securities market has been facing some fundamental problems due to lack of adequate shares in the market. As
a result, some of the issues marked unusual rise in 2008 only to decline later in the year. Under this background, the
DSE sees investors’ awareness as cornerstone of the country’s growing securities market. It is advised that investors
should make their investment decision based on company fundamentals, price level and disclosed information
avoiding rumor based speculation. It is expected that the momentum in country's stock market will be sustained with
growing awareness of investors, enabling policy environment pursued by the authority and listing of fresh securities
from attractive sectors like telecommunications, power, gas, energy and other infrastructure sectors.
REVIEW OF BUSINESS OPERATIONS AND STRATEGY
Principal activities
The principal activities of DBBL are to provide all kinds of commercial banking products and services to the customers
including project finance, working capital finance and trade finance for corporate customers, SME loans to small
traders & businesses; and house building loan, car loan and wide range of life style and need based loans for retail
customers. There are various deposit products particularly suitable for retail and institutional customers. DBBL's state
of the art IT platform and online banking system provide the largest ATM network and POS services of the country
through which customers are getting any branch and anytime banking. IT network also provides SMS banking, alert
banking and internet banking services. EMV compliant various Debit and Credit cards of MasterCard Worldwide and
VISA International, and DBBL's propriety cards are in operation. The EMV feature shields DBBL customers from any
kind of frauds as per the guidelines provided by MasterCard and VISA. In addition, international cards (VISA and
MasterCard) of different local and international banks are accepted at DBBL's ATMs for withdrawal of money and at
POS terminals for payments of shopping, hotel and dining bills etc.
A partial view of an export oriented composite knit
garments industry at Bhobanipur, Gazipur financed by
DBBL.
A partial view of an export oriented Cycle Manufacturing
Industry at Mawna, Sreepur, Gazipur financed by DBBL.
Strategic plan for positioning the company for future
growth through capacity building
As part of its strategic plan, DBBL continued to invest
heavily to improve and expand IT network, ATM services
and card services along with branch network, business
promotion and CSR activities. Though expenses on such
investments in 2008 apparently reduced expected profit
growth, however, these will substantially improve our
capacity to deliver customer services with a wide range of
products and services that can be matched with the best
in the industry by strengthening IT platform, expanding
distribution channels and communication networks and
improving productivity. DBBL's strategic objective is to
have a clear competitive advantage over its competitors
to provide the full range of banking services via multiple
delivery channels through state-of-the-art-technology at
the lowest cost.
Brand positioning
Throughout its operation for last 13 years, DBBL has
established itself as a different bank from others. It has
differentiated itself as a leader in technology by reaching
the latest banking services to its customers through
largest ATM network in the country at free or affordable
cost. DBBL has created an unprecedented example by
providing this unique service at subsidized cost not only
to its own customers but also to customers of many other
banks. It has also established itself as a Bank that cares
for the society. All the business activities of DBBL are
done in full conformity with social, ethical and
environmental standards. DBBL is the pioneer in CSR
programs in the country. It has been intensifying its
resources and efforts on a continuous basis to reach the
distressed & needy people of the society to bring smile on
their face and to improve their quality of living.
Customer focus and customers' right
DBBL's performance cannot be judged by just looking at profit figures. DBBL considers that it is the customers' right to
get modern, online and full ranges of banking services at an affordable price at anytime and anywhere. DBBL's
service cost is the lowest in the industry and in many cases services provided through ATM are free. DBBL is
committed to put the customers’ interest first. In line with its central vision; DBBL is promise-bound to extend
personalized services to the full satisfaction of the customers that should be the best in the industry.
Capital management plan and capital adequacy ratio
During 2008, Shareholders' equity (Tier-1 capital) increased to Taka 2,911.2 million being 6.91% of risk-weighted
assets (RWA) and supplementary capital (Tier-2 capital) increased to Taka 1,704.8 million being 4.05% of RWA. Tier-
2 capital was also strengthened by revaluation of held to maturity securities as of December 31, 2008. It will
strengthen the capital base of the company and provide long-term growth and stability to the Bank. It may be noted
that as per Bangladesh Bank regulation subordinated loan is eligible as Tier-2 capital up to 30% of Tier-1 capital. 50%
of assets revaluation reserve and 50% of revaluation reserve on held to maturity securities are eligible as Tier-2
capital. In line with long-term capital management plan of the Bank and keeping in view the implementation of Basel II
requirement, strong capital adequacy ratio was maintained in 2008 which reached 10.96% at the end of the year that
was well above statutory requirement of 10.00%.
Expansion of branches
The Bank opened 15 new branches in 2008 to reach 64 branches at the end of the year spreading the branch network
throughout the country. Another 15 branches will be opened in 2009 to expand the branch and distribution network.
These will bring up-to-date banking services to our existing and potential customers. At the same time it will optimize
utilization of our strong delivery channels, increase our resource position and business potentials that will maximize
profitability and shareholders' value. DBBL's strategy is to reach the doorsteps of customers to provide full range of
banking services based on state- of -the- art- technology and IT platform at free or affordable cost.
Further development in Information Technology
Dutch-Bangla Bank is the first and only bank in Bangladesh which invested more than Taka 1.5 billion in developing
the largest ICT infrastructure in the banking sector of the country. Since its inception, the Bank has been continuously
striving towards bringing world-class technology driven banking services, conveniences and satisfaction to its
customers setting a milestone in the banking sector of the country.
As a technology driven bank, we have implemented world reputed online banking software - Flexcube at all its 64
branches and 5 SME Service Centers with the following delivery channels:
Any Branch Banking
Online ATM/POS service
Internet Banking service under the domain www.dbbl.com.bd
SMS and Alert banking service
The Bank has upgraded its IT system successfully for further strengthening and securing the automation of banking
services. The Bank also implemented Online Synchronous Disaster Recovery Site (DRS) to provide uninterrupted and
reliable banking services to the valued customers. DBBL’s synchronous DRS is the first time in Bangladesh.
Dutch-Bangla Bank’s ATM network is the largest ATM network in the country comprising of 350 units of ATMs at the
end of 2008. DBBL has 750 units of POS terminals at various merchant locations. All the ATMs and POS terminals
are made EMV (Europay, MasterCard and VISA)
A partial view of a Pharmaceutical Industry at Tongi,
Gazipur.
A partial view of UAE-Bangladesh joint-venture
pharmaceutical company at Sreepur, Gazipur financed by
DBBL
compliant for the first time in Bangladesh to ensure the
security of our valued customers. The ATM/POS network
of the DBBL accepts the following cards:
EMV compliant chip cards of all the Banks in the
world
Non-EMV Visa and MasterCard Cards of all the
Banks in the world
DBBL’s Proprietary Cards (NEXUS).
DBBL has also introduced EMV compliant Chip based
VISA Credit Card for the first time in Bangladesh which is
the most secured multi-currency card in the world. The
EMV security policy has been introduced by Europay,
MasterCard and VISA jointly to protect capturing card
data and duplication of a card.
DBBL has set another milestone in the history of banking
sector by adding two units of Mobile ATM booths to its
exiting ATM network. DBBL has become the first bank in
the country to provide such unique service and
convenience to the customers. The DBBL Mobile ATM
Booth, which is outfitted in a custom-made van, is