It is you who inspire us to become what we want to become
Let me begin by congratulating everyone on the Bank’s historic best performance recorded in 2015, which has actually been the most superior so far in the long 33 years of journey of the bank. It makes me immensely proud as the Chairman to have witnessed such a glorious performance. Today I’m honored to present this Annual Report of City Bank Limited for such a special year when nothing short of history has been created by the professional bankers in our management and the Board of Directors together. It was indeed a pleasure and a privilege to have been present amongst you for another year. I would like to take the opportunity on this auspicious occasion to convey my heartfelt thanks to you all for your continuous support and confidence in this organization and in the team that’s persistently driving towards excellence and building a proud history for City Bank.
“Another name of City Bank, inarguably, is ‘innovation’ in the context of local banking industry. It started with our launching of the first online core banking in the market and then the first dual currency credit cards long ago… and the journey has continued ever since.”
Let me come to City Bank and its performance in a roundabout way. Like all major financial institutions across the globe, this Bank is very much part of a much larger national and global network of business and commerce. I will highlight here few of the core attributes of the current global economy and present a few diagnostics on the national economy as well.
Undoubtedly we are still going through a phase where the world economy is yet to fully recover from the last Global Financial Crisis. But definitely things are looking more upbeat in the recent years. The improvements and growth scenarios show greater divergence across economies. Nonetheless, the worldwide economic environment seems to be eyeing a healthier prospect with the recent sharp fall in international price of crude oil, which is expected to boost global aggregate demand. Emerging economies will undoubtedly play a critical role in this upward global economic shift. Growth in the emerging markets and developing economies is expected to accelerate modestly in 2016 at 4.5% compared to 4.0% in 2015.
Operating environment in Bangladesh is expected to be favorable in the coming years. Projected GDP of Bangladesh in 2016 is 6.7% as per Asian Development Bank (ADB), against actual GDP growth of 6.5% in 2015. Government’s “budget” in recent times has heavily concentrated on infrastructural development, which will surely facilitate better business operating climate. Utility production capacity build-up (along with reduced fuel price) is also expected to contribute to industrial growth. Political stability is expected to be maintained. Remittance inflows are likely to grow 9.0% in fiscal 2015-16 from 7.7% a year earlier. Reduced Bank rates (flooring down to single-digit for the first time in our national history) are to increase funds flowing into entrepreneurship development. Cautious Monetary Policy is containing low inflation (reduced to 6.4% in 2014-15 from 7.4% in the earlier year). Steady foreign exchange rates are also pointing towards higher supply of liquid money.
Although our national economy is showing signs of growth and prosperity, the banking industry will still be tested for its resilience against slow moving private sector investments and excess liquidity situation of the recent years. The reduced interest spread due to declining rates on loans and advances compared to cost of deposits will squeeze down profitability. Banks will have to be resourceful and competent in using their Balance Sheet more efficiently to generate revenue from all possible earning sources while, on the other hand, they also need to be extra vigilant in implementing effective cost management strategies. Conversely, regulatory changes and advancements, ever increasing emphasis on risk management, corporate governance, Green Banking initiatives and focus on IT security and fraud prevention are becoming more and more imperatives for sustainable banking operations.
STRIVING TO GENERATE MAXIMUM VALUE FOR STAKEHOLDERS
Now let me focus on City Bank. Last year, we were successfully able to beat the industry growth indicators in most cases. I feel glad to inform you that our growth took place at a very healthy rate despite the sluggish private sector investments in national economy. In 2015, we registered a 22.7% (BDT 26,467 million) growth in Loans & Advances over 2014. On the other hand, a 21.1% (BDT 25,002 million) growth was achieved on deposits over 2014.
Pitting against 2014, I am delighted to say that our total operating income increased by 21.3% while total operating expenses increased by 13.1% in 2015. This shows that our efficiency has increased both in generating revenue and in managing expenditure. In 2015, our Operating Profit per branch and per employee increased by 21.3% over the preceding year. And finally – this
is where I am afraid I may sound too jubilant in my expression – we recorded a Profit After Tax of BDT 3579 M (2014 was BDT 2215 M) which, in the process, generated BDT 4.1 Earning per Share (2014 was BDT 2.5) with a Return on Equity of 14.7% (2014: 10.6%) and Return on Assets of 1.8% (2014: 1.4%). These indicators clearly show signs of our improved competence in managing the resources available to us, both human and capital. Our stride towards maximizing shareholders’ wealth is clearly noticeable in these excellent performance highlights.
STAYING RESILIENT UNDER CHALLENGING ENVIRONS
Now again to go back to macro economic matters: I believe that thinner interest spread, slower investment growth, uncertain GSP facility and slow-moving credit growth will remain as major roadblocks for banks for now and in the foresceable future. Not to forget, the rise of classified loans in the small & medium entrepreneurs sector is another problem. But, I can confidently say that City Bank has overcome difficult times in the past and we are, as a team, better equipped now to face the challenges that are forthcoming. Capital has been the keystone behind defense against the scenarios generated by risky environments such as the banking system itself. Regardless of whether it is a regulatory imperative, or it is to be maintained under upcoming Basel III requirements, or simply it’s required for sustainable business growth, Capital is an element of the balance sheet that has no substitutes. Keeping that in mind, we have extended our reach by creating an equitypartnership with International Finance Corporation (IFC). City Bank has signed an agreement on February 9, 2016 with IFC, where IFC will invest in the bank’s Equity Shares to hold 5.0% of the outstanding number of Bank's common shares and join our Board of Directors. Subject to the final approval from regulatory authorities, the total value of shares to be subscribed by IFC would be BDT 1,304.47 million and, additionally, IFC will also offer us a Convertible Loan facility of USD 20 million. All this bodes well for the future of the bank.
Now talking about challenges, let us come to acknowledge the most recent and the fastest growing threat of the recent times: the IT security risk. This has become a global concern lately and resistances made of technology-based firewalls are being built across the globe, along with awareness, which needs to come at every level of the system. Our Internet banking platform, Citytouch, has been fitted with state-of-the-art security system since the commencement of its journey two and half years ago. Still we did not stop just there. Recently, we have launched the new version of Citytouch with a completely redesigned mobile app; and this version offers multilayered security protection along with TFA (two factor authentication), which offers a great protection against fraud attempts.
In the same vein, we have successfully completed the “Payment Card Industry Data Security Standard (PCI DSS)” implementation for our card business. PCI DSS is a widely accepted set of policies and procedures intended to optimize the security of credit, debit and cash card transactions and to protect cardholders against misuse of their personal information. Being compliant with PCIDSS means that the bank is doing its very best to keep the customers’ valuable data safe and secure and out
of the hands of people who could use those data in a fraudulent way. I am again proud to say that we are the first bank in Bangladesh to have achieved the PCI DSS certification. On the heels of it, we have also introduced chip-based credit cards, which offer other security features. Recently we have taken initiatives to set up anti-skimming devices in all ATMs of the Bank to ensure customers’ data security at the transaction points as well.
The regulatory environment has been ever evolving keeping the economic and risk management context under consideration. Implementing Basel III, establishing the revised Asset-Liability Management guidelines and reducing Banks’ capital market exposures have become some prime regulatory objectives for our regulators in current years. And we have kept up well with these changes, sometimes even going ahead of the curve with continuous monitoring efforts, automation of reporting and processes and setting strategies keeping sustainable business growth and risk environments in mind.
COMMITING TO DELIVER THE BEST TO THE MARKET
Another name of City Bank, inarguably, is “innovation” in the context of local banking industry. It started with our launching of the first online core banking in the market and then the first dual currency credit card long ago… and the journey has continued ever since in the form of launching the country’s first airport lounge, the first global class Priority Banking lounges, the first global class Internet Banking, the first B2B card and so on.
I can give you assurance that we never compromise when it comes to investing in “innovation”. We are always vigilant in seeking new opportunities, be it in creating new markets or products or discovering new ways of serving our clients. A prime example of such a service is the “Virtual Office” concept, which we have implemented for our valued Citygem Priority Banking clients already.
Now, to talk a little about our business segments: Corporate Banking, as always, has been the segment of our key strength that never failed to deliver growth, value and creativity of service. The team achieved significant jump in portfolio in 2015, serving as a single point solution provider for all banking services to the corporate clients. Treasury, too, continued the tradition of growth and opportunistic trading by taking advantage of market conditions in 2015 and they in fact have contributed significantly in the Bank’s profitability in the year in question. Commercial Banking, the relatively new segment of ours, is growing rapidly with its newly designed products keeping an eye on creating a well-balanced and diversified portfolio.
With one of the largest distribution networks in the country, our Branch Banking is expanding fast to reach many untapped or under-tapped markets, serving Retail, SME and Cards’ customers with dedication and passion. Of late, we have started giving special focus into developing noteworthy Women’s Banking and Student Banking arms under Branch Banking. Our special attention is very much there on providing agricultural loans also. As for Cards, after becoming the largest Credit Card issuer and acquirer in the country in 2014, we continued our efforts to stay on top of our game by rolling out even better and faster services platforms by introducing innovative products like Hajj Card, Staff Prepaid Card with MasterCard and American Express Gift Card, by widening our POS terminal network and strengthening IT security and – last but not the least – by offering unique value propositions to our cardmembers at all times. Cards, I must say, contributed significantly in the Bank’s 2015 profitability.
After the redesigned model being launched, City Manarah, our Islamic Banking unit, has also gained strong brand preference and attained exceptional business growth in 2015. Beside all this, our two local subsidiaries – which are involved in the capital market and which go by the names City Brokerage Limited & City Bank Capital Resources Limited – are also showing stable business trend despite the market’s recent dull conditions. On the other hand, CBL Money Transfer Sdn Bhd, our other subsidiary in Malaysia, which is involved in remittance business, has recorded a net profit of Malaysian Ringgit 8,847 in 2015 for the first time. I’m glad to let you know that this concern’s business volume has grown at an incredible rate of 174.3% in 2015 over 2014, a sign that augurs well for the concern.
LEAVING A MARK OF EXCELLENCE, DEDICATION & ACCOUNTABILITY
As you may have noticed, our financial indicators of growth and profitability testify to our continuous efforts to leave a mark in the industry as one of the strong banks in operation here. Yet, we promise to never stay content with whatever we have already achieved. Rather our efforts are orchestrated around reaching for newer heights all the times. You all know that our achievements have been recognized from time to time by various entities across the globe. 2015 was no exception as well in this regard.
City Bank has been named the ‘Best Bank in Bangladesh’ for the year 2015 at Euromoney’s Awards for Excellence ceremony for the second time. Euromoney’s prestigious Asia Awards are seen as the benchmark for the leading firms in financial services in the region, and – needless to say – these awards are fiercely contested across numerous markets and categories.
Global Finance, one of the world’s leading financial publications, has also named City Bank the ‘Best Consumer Digital Bank in Bangladesh’ for the second time in a row. The award ceremony was held in London, which was attended by many leading banks from across the globe. City Bank received this accolade consecutively for two years for the success of its state-of-the-art Digital Banking platform called Citytouch.
Now to say a few words on an important event of 2015: at the initiative of the Office of the Prime Minister of Bangladesh, two Managing Directors of Edmond de Rothschild Group visited us in September 2015. Edmond de Rothschild Group is a private Swiss banking group established by Baron Edmond de Rothschild of the world-renowned French Rothschild family in 1953. During that visit, City Bank organized a day long Plenary Session, which was attended by more than 100 major entrepreneurs at a hotel in Dhaka. There, the visiting guests explained their investment objectives in Bangladesh. The event was an eye-opener for many and it hastened the process of the Bank’s participation in cross-border investment transactions gradually more frequently in the days to come.
On the Corporate Social Responsibility front, in 2015 the Bank has focused on diverse areas of social development ranging from community health, disaster management, sports, education, culture and support for the underprivileged women and children. The Bank’s CSR activities conducted with MRDI to empower the working women of a village called Basatpur, in Jessore, earned lots of good names in the industry and it was cited as an exemplary CSR program by Bangladesh Bank on number of occasions. The effort reduced human trafficking and smuggling in that particular border area of the country with India. Then to promote science education, we undertook in 2015 a joint collaborative effort with the country’s leading vernacular daily Prothom Alo and organized a science carnival, which was executed nationwide and where more than 120 participants took part in regional competitions held in many districts of the country. The Bank, to offer instantaneous support to disaster management, provided a donation of BDT 5 million to the Prime Minister’s Relief fund in 2015. City Bank, in coordination with Bangladesh Association of Banks, also donated BDT 1.5 million to create a fund to support the victims of Nepal after the devastating earthquake that struck there in April 2015. For the development of national games and sports, at the urging of the Govt of Bangladesh in 2015, we donated BDT 4.5 million to Bangladesh Football Federation to help them execute their national level development plan. Last year, Bangladesh Bank took a noble initiative – along with all the financial institutions – of running a massive CSR program in the former enclaves (Chhitmahal) to ensure the development of those underdeveloped areas’ education, drinking water, farming, public health etc. As part of this program, City Bank installed 25 sanitary latrines in 25 former enclaves in Lalmonirhat district within a month.
THANKING YOU ONCE AGAIN
In 2015, we earned the trust of our stakeholders by delivering on our promises against numerous challenges and roadblocks. The coming years are not going to be cakewalks for sure. But we are up for those. I believe we can strongly have a comeback in 2016 on the major pressing issue, which is the increase in non-performing loans. We are sure that in 2016, despite such challenges, we will deliver a result that will outperform both our historical profitability trend as well as cross-sectional (competitors) performances of the industry. We will make every effort to bring in excellence in service, innovation and control for maintaining a sustainable growth that will increase our shareholders’ wealth in the long run.
I would like to convey my gratitude and thanks to Bangladesh Bank, Securities & Exchange Commission, Central Depositary Bangladesh Limited and other regulatory bodies for their continuous guidance, trust and co-operation. My heartfelt appreciation goes to my dear colleagues in the Board of Directors for their sincere direction and assistance, which they provided me at all times. I have always received their encouragement and blessings wherever we took up any new or challenging initiatives. Let us not forget the day-in-day-out efforts taken by the management to make this Bank a superior one by each day. It’s always the culture that they bring in and nurture that creates the image of the Bank, which we see from outside. And they have undoubtedly done a good job at creating that superior image in the market – both locally and internationally.
To conclude, I thank all the shareholders of the Bank for your ongoing support, show of loyalty and both explicit and implicit faith in us – the faith that we can overcome all odds and move toward a brighter future. It is you who inspire us to become what we want to become – the financial supermarket with a winning culture offering enjoyable experiences.
My best wishes to all of you.