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To pass the test of time and competition, it is always important to reassess the business model in light of current and anticipated changes. Being advised by the Board, the management has undertaken the big leap in the "restructuring" direction at the end of 2012. It has already presented a business model restructuring plan to the Board, which was accordingly approved. The implementation of the new business model is currently underway.

The overall business environment in the banking sector in 2012 was significantly more challenging than which was originally predicted. Owing to the most difficult circumstances faced by the banking sector in 2012, our overall business performance for the year dropped, true, but at the end of the day we survived through the crisis with a praiseworthy bottom-line. The few factors that affected the climate adversely for us were: sluggish trend in the country's capital market; higher deposit rates; cautious monetary policy; changes in the loan provisioning policy of Bangladesh Bank; and increase in non-performing loans. This resulted in some reduction in our profitability, but despite all these, we remained committed to our core vision. 2012 was the year when we were awarded the full ISO certification on our entire back-end processes and technology and also initiated operational process reengineering with PricewaterhouseCoopers. That proves, we know how to manage success and how to stay on the road in the face of wider economic and business challenges. I am confident we will do so again.

The operating profits of the country's Private Commercial Banks (PCB) showed a mixed trend in 2012, mainly due to declining weighted average spread between lending and deposit rates, sluggish trend in the country's capital market, lower import payments and huge provisioning against non-performing loans. A number of PCBs have been able to record only a modest growth of their operating profits in 2012 over the previous year's. For City Bank it was Tk. 4,567 million in 2012 against Tk. 4,196 million in 2011. That is 9% growth rate, which naturally falls short of making the shareholders fully happy. Still, given the general economic outlook, we perhaps cannot be unhappy either and can only be optimistic about a better 2013.

However, the growth rates of some other key business areas have not been all bad. Our deposit and advance growth shows a better picture and indicates to the bank's sound liquidity management. Bank's total deposit rose to Tk. 10.2 billion in 2012 which was 12% higher than the preceding year's. Loans and advances registered a growth of 8% by reaching Tk. 6.5 billion in the year under review. Foreign Trade (import & export) was Tk. 72.2 billion in 2012 against Tk. 65.5 billion in 2011, portraying a growth of 10%.

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Unlike many of our peers and competitors in financial services industry, City Bank remains well capitalized, deposit-funded and extremely liquid. We have one of the largest and broadest client bases in the industry. We have a diverse collection of market-leading businesses that help support one another through economic cycles. Our capital management framework is intended to ensure best composition capital in relation to business growth and its judicious use through a mix of investment options. The Authorized Capital of the Bank was Tk. 10.00 billion while its Paid Up Capital was Tk. 6.3 billion as on December 31,2012. We are always keen to maintain sufficient capital consistent with the Bank's risk profile, Basell-II compliance and other regulatory requirements. City Bank has maintained capital adequacy ratio at 11.7%, which is above the regulatory requirement of 10%.

During 2012, the Bank went for extensive renovation of our old branches with the aim to serving the customers in a better environment. Expansion of ATM network in 2012 saw an addition of 41 new ATMs in different geographical locations. As part of the strategic vision of the Bank, we initiated to enhance its service through putting in and launching Cash Deposit Machines, new POS terminals, Internet Banking, AMEX Cards Customer centers, 24 hour call center for our 600,000+ retail customers etc.

We are surely not immune to the impact on the consumers of a volatile economy; however, we believe our consumer portfolios will continue to perform better than the industry as a whole, particularly with regard to credit cards thanks to its diversified range of products spanning across Amex, Visa and MasterCard networks. We have already launched the country's first B2B card, and also the Asia's first hybrid debit card called Amex CityMaxx debit card, which amazingly pays interest on the spent amount and offers 5% cash back on shopping transactions. Now we are in the process of launching Amex Platinum card soon too.

City Bank has also renewed its focus on lending to SMEs and agriculture sector in 2012. Using the branch banking network and capitalizing on the various refinance facilities and initiatives taken by the government, City Bank's SME business segment is going to storm the market in a big way soon. As such, the journey has started already during 2012, our strategy was focused on marketing the Bank's products to wider range of customers and providing working capitaland term loan to different manufacturers, traders and service providers including backward and forward linkage industry that fall into SME bracket.

We continued to be inspired by our employees. We are energized by what they bring to work everyday and share with our clients and we are proud that they represent the Bank. It makes us feel great to know that they, in turn, feel passionate about the work they do here. We now have a team of 2,765 employees having a balanced mix of the young and the experienced. At City Bank, we seek excellence as an organization, for ourselves and for the communities we serve. We actively participate in our neighborhoods by making positive contribution through community development, financial education and volunteerism. We believe, our success is tied directly to the successes of our communities. In 2012, we dedicated nearly Tk 21.2 million to support the projects around the country related to education sustainability and community development.

Recently the Bank became an IFC (International Finance Corporation) and FMO client, the 3rd such bank in the entire banking industry. In order to become their client, we had to go through rigorous checks and due diligence undertaken by IFC and FMO. This in itself is a big testimony to the bank's successful changeover into a global standard financial institution in terms of policies, practices, culture and procedures.

In 2012, your Bank has been recognized as the 'Best Bank in Bangladesh for 2012' by FinanceAsia for adopting global best practices. That was the first year of FinanceAsia's extending the award into local bank category in Bangladesh.

Our shareholders are well aware that BSEC, through a promulgation on the issue of Corporate Governance, inserted few new conditions for compliance by the listed companies within 31 December 2012. Our bank has successfully complied with all the provisions of the BSEC notification except few, which are under consideration of the Board. Board of Directors has agreed to comply the BSEC notification in regard to inclusion of independent directors and accordingly taken steps to include a personality who will be acceptable to all the stakeholders. To pass the test of time and competition, it is always important to reassess the business model in light of current and anticipated changes. Being advised by the Board, the management has undertaken the big leap in the "restructuring" direction in the end of 2012. It has already presented a business model restructuring plan to the Board, which was accordingly approved. The implementation of the new business model is currently underway.

Our shareholders shall be pleased to learn that the action plan for the Bank in 2013 shall be focused on the following priorities, to mention a few, which will eventually lead to improvement and consolidation of the current KPIs:
  • Continuing the diversification of credit portfolio in SME, emphasis on retail, focus on SME agriloan
  • Maintaining strong capital base
  • Improving the deposit mix by undertaking efficient deposit mobilization and by increasing the share of low cost deposit
  • Focusing on non-fund based business
  • Launching of "CityTouch" internet banking; and CityGems Priority Banking; and a sophisticated platform of other alternate delivery channels by introducing drive-through ATMs and by opening in-branch ATMs at all of our 102 branches
  • Maintaining adequate level of liquidity through minimizing asset-liability mismatch
  • Recovering substantial amount of past due loans
  • Increasing the share of inward remittances by way of opening bank-owned remittance companies abroad
  • Strengthening internal control and monitoring by implementing PWC recommended action steps under the BPR project
First of all, I like to extend my sincere thanks to our valued shareholders for their continuous support and inspiration. My deepest gratitude goes to our regulators, specially, Bangladesh Bank, Securities & Exchange Commission, Dhaka Stock Exchange, Chittagong Stock Exchange, Registrar of Joint Stock Companies, Large Tax Payers Unit, VAT Commissionarate, and External Auditors. My special thanks go to IFC for their financial assistance and technical guidance in running the bank successfully. I would like to thank the CBL management team for their passion and efforts to attain the corporate vision, mission and strategic objectives and, at the same time, for ensuring that our core value remains consistent. My sincere note of gratitude goes to our dynamic Board of Directors for their valuable and judicious policy support and timely decisions all along. Wishing you all a more successful 2013.

Best regards,


Mr. Rubel Aziz
Chairman
The City Bank Limited

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