Despite the macro market slowness, we didn't refrain from expanding our network
We have built upon the progress we made last year by further strengthening our governance arrangements, particularly in the areas of risk management, corporate culture, and engagement with shareholders.
Today I feel privileged once again to be standing before you as the CEO of this Bank that has surely reached some new heights in the year in question. When I assumed the role nearly 3 years ago, I outlined a mid-term plan that focused more on productivity and goal-orientation than anything else. At the very outset, I set a three-fold objective paradigm then, which consisted of: i. improving asset quality; ii. maintaining adequate liquidity; and iii. offering innovative & advanced banking solutions to customers. The significance of those paradigmatic projections has only got enhanced in recent years; and today it has become more important for the Bank and the industry as a whole than ever before. So, it will be nothing but obvious on my part to let you know that when one knows what is at stake, one takes care of the matter at hand better; therefore, most of our efforts go into achieving our core objectives as a financial institution in the most challenging of times. The insinuation embedded in the foregoing statement also tells us that we must not move away from retaining a top of the line risk management framework, maintaining sound corporate governance and staying faithful to what we commit to our shareholders and our community.
The country witnessed, at the start of the year 2015, some serious political upheavals. The environment became relatively stable only at the end of the secondquarter of the year when, once again, the macro-factors affecting banking business - such as transportation, exports & investment scenarios - started to ease up, albeit gradually. It's amazing that in a year where almost the first four months were spent away in political turmoil, the GDP of the country, overall situation notwithstanding, still saw a growth reaching 6.5% mark. This fact amazes us more when seen in the context of slow growth in Industrial & Service sectors in 2015. A few macro economic factors played their own positive parts in it too, for example, there was lower inflation, higher exports, and higher remittance; and all three combined, there naturally was an upward push to the FX reserves.
If I may be allowed to say a few words on the industry trend of 2015, I will firstly point out that continuous downward pressure on interest on loans & advances exerted by regulators has driven financial institutions to settle with thinner interest spreads. Introduction of rebate to good borrowers at a rate of 10% of interest already received was another phenomenon that drove further reduction of interest income. The capital market seemed still some time away from gaining investors' confidence. Excess liquidity in the money market exceeded BDT 1,000 billion during the year. However, the industry NPL dropped to 8.8% at year-end 2015 from 9.7% of the 2014 year end figure. But there is another side to this story as well: a huge number of loan rescheduling and write-offs was executed by the banks during the last quarter of the year.
Now coming to City Bank. Keeping the macro market conditions - political and geo political including - as a backdrop, I must say, of course in a positive sense, that City Bank has invested itself in an ‘eventful' year in 2015. On one hand, we generated way above average growth in our portfolios along with strong profitability ratios. On the other, we fell short of delivering a reduced NPL ratio that was one of our core objectives. Our total asset size stood at BDT 214.8 billion at year end 2015 against BDT 177.2 billion at year end 2014. In 2015, our loan book increased by BDT 26,467 million (22.7%) and deposit book rose by BDT 25,002 million (21.1%). PBT stood at BDT 4,495 million registering a growth of BDT 899 million (25.0%) over 2014, which shows consistency with the balance sheet growth. BDT 3,579 million of PAT in 2015, with a growth of BDT 1,364 million (61.6%) over 2014, showed higher growth rate compared to PBT, but this was mainly due to lower tax provisioning requirements.
To go a little deeper, we were successful in managing our deposit mix along with respective Cost of Funds so that the reduced Yield on Assets would not hurt our profitability as much as it could. We registered a Cost of Deposit (COD) of 6.5% in 2015 compared to 6.9% in 2014. On the other hand, Yield on Assets (YOA) decreased to 11.3% in 2015 from 13.1% of 2014. As a result of the efficient deposit mixture and reduced cost of funds, we were able to record a Net Interest Margin (NIM) of 4.8% in 2015, which was 1.3% lower than that of 2014 (which was 6.1%). This should however tell you that we were able to somehow defuse the impact of the reduced rates on loans & advances through effective management of cost of funds and mix of deposits.
We managed to bring down our Cost to Income ratio to 47.8% in 2015, compared to 51.3% in 2014. This is an indicator of our year-long effort to manage costs across the organisation through efficient monitoring and awareness building. Our revenue growth (21.3%) was consistent with our asset growth, whereas our expenditure growth was substantially below at 13.1%. Without effective use of both human capital and technology driven tools, achieving this number would not have been possible.
Capital is the base on which we built our sustainable growth platform, risk management framework and also our long term objectives in order to maximise the stakeholders' wealth. Keeping these in mind along with the fact that the Basel III regulations are approaching, we created an equity-partnership with International Finance Corporation (IFC) very recently where IFC will invest in common shares of our Bank worth of 5% of total outstanding shares and join the Bank's Board.
Once obtained - I am hoping the regulators will accord their approvals in time - the total value of shares to be subscribed by IFC would be BDT 1,310 million. An additional USD 20 million of convertible loan facility will also be taken from IFC under the same agreement. This will surely add great value in our capital strengthening process, especially when Basel III puts more emphasis on the increase of core capital compared to the enhancement of Tier-II capital.
I'm glad to let you know that we've recorded Earnings per Share (EPS) of BDT 4.1 in 2015 against EPS of BDT 2.5 in 2014. Return on Equity (ROE) in 2015 was 14.7% with an increase of 4.1% over that of 2014. Return on Assets (ROA) in 2015 was 1.8% with an increase of 0.5% over that of 2014. These indicators testify to our continuous effort to maximise shareholders' value through increased efficiency over the years.
In 2015, I engaged myself constantly on improving our asset quality despite the adverse market conditions that, unfortunately enough, eventually proved not to be assatisfactory as expected. Our NPL volume increased to BDT 10,845 million in 2015 compared to BDT 6,859 million in 2014. The NPL percentage also increased from 5.9% to 7.6% in 2015. I can assure you that my prime objective in 2016 will be to bring this number down substantially to a tolerable level.
Now I will bring your focus into the network issue. Despite the macro market slowness, we didn't refrain from expanding our network to an even larger radius. Reaching new markets, localities and people and serving them with our innovative and customised product line have always remained a constant activity throughout the year. Currently, we have extended our reach up to 120 Branches, 287 ATMs, 30 CDMs and 4 Priority Banking Centres across the country. Out of the 8 new branches opened in 2015, 3 were opened in rural areas, portraying our efforts to reach people who are deprived of modern banking solutions. Moving outside Bangladesh, our subsidiary, CBL Money Transfer Sdn. Bhd. has also opened 2 new branches at different locations (Bukit Jambul & Sitiawan) in Malaysia, taking their total no. of branches to 5. Remittance volume of the subsidiary has been growing at a rapid pace (174.3%), recording MYR 219.2 million in 2015 over MYR 79.9 million in 2014. At the end of 2015, the bank's total no. of POS terminals stood at 10,112, covering 5,344 merchants. Of these, 1,112 merchants were signed up in 2015, where we deployed 2,697 POS machines just in a year.
In 2015, our Wholesale Banking division yet again proved to be ever dependable through serving the corporate clients via project financing, working capital, trade, supply chain, cash management solutions, payroll, syndication, merger, acquisition and advisory services. The role of Treasury in profit contribution has increased since the growths in conventional books became harder to come by each day. Commercial Banking division adopted new mode of financing in 2015, such as Off-Shore Financing, IFC remediation financing, Financing from Global Climate Partnership Fund (GCPF) for energy efficient technology and renewable energy, and also financing under Agricultural and Rural Credit Policy of Bangladesh Bank. With greater distribution reach across the country, Branch Banking is looking to focus more in SME markets and Student & Woman's banking segments. Balance sheet size of Off-shore Banking has also grown in 2015 over 2014 significantly. Coming to the Cards business, City Bank achieved a phenomenal 23.4% growth in Cards billing volume, propelled by a number of spend stimulation campaigns run throughout the year where we offered our cardmembers exciting gifts for thespends on their cards. The growth in billing contributed to a sizeable increase in Cards lending portfolio.
While constantly pursuing growth & profitability based goals, we have simultaneously been ever mindful about due diligence, corporate governance, risk management guidelines, regulatory requirements and security concerns. Our control mechanisms have been strengthened in 2015, starting from monitoring and upgrading system-based platforms to building psychological awareness among employees, clients and other close peers. I believe that a healthy cultural platform & environment can help build a compliant structural framework within an organisation. We are committed to build such a culture where ethical codes and standards will be given the highest value when, on the other hand, breach of such conduct will be dealt with utmost strictness. Additionally, we are constantly striving towards building a tighter security, both around and within our IT infrastructure.
Our CSR activities in 2015 focused on diverse areas of social developments including sports, education, community health, culture, disaster management and support for underprivileged women and children. We remained responsible as ever, keeping in mind that without a sustainable social & natural environment around us, which we usually take for granted, all our efforts may render themselves meaningless.
As committed to you already, we never stayed content with the goals met and the accolades earned this far. Such a happy position actually worked as motivators for us to bring in more happiness to our customers and shareholders. Our repeatedly obtained achievements in 2015 provide testaments to that promise. We were named the ‘Best Bank in Bangladesh' for the year 2015 at Euromoney's Awards for Excellence for the second time. Global Finance, one of the world's leading financial publications, named City Bank the ‘Best Consumer Digital Bank in Bangladesh' for the second time in a row as well.
Now to say a few words about our people, we offer competitive remuneration packages to talented, potential job seekers so that the best available resources of the market work here. Our orientation program is designed to make them inherit the bestof cultural attributes along with sound banking knowledge. As for our existing resources, we are always eyeing for the best training programs available, both in-house and external, while the on-the-job training is always encouraged by us highly. Our Management Trainee Program has already attracted potential young and talented young graduates from reputed educational institutions across the country. We are involved in nonstop staff activities throughout the year to build a culture of belongingness in the organisation. Human capital is something that has always generated the best value for the bank. Although the output of investing in this capital is implicit in many ways, there's no way to deny that the returns generated by a well educated, aware, ethical and energetic workforce are indeed very high.
Last but not the least, I would like to thank our most valued clients, well-wishers and most honourable shareholders, in whom we take pride. Without your continuous support and inspiration, we would not be standing where we stand today. Let me also acknowledge the contribution of the regulatory bodies for giving us continuous guidance and support. Thanks to our honourable Chairman Mr. Rubel Aziz for the vision of the company and its mission statements that he has crafted, then disseminated across the organisation and, in the process, inspired everyone of us to reach for those. My heartfelt appreciation and gratitude also go to the honourable Board of Directors, who have always governed us in the right direction and at the same time, gave us operational independence to perform our duties judiciously. I could not have hoped for a better Board of Directors in terms of support and guidance given to the management. I sincerely thank them for their genuine and meaningful show of empathy, patience, compassion and, above all, professionalism.
I have always considered myself to be a proud member of City Bank family, a brand that we all belong to and take pride in. And I'm sure that given the passion and commitment factors, which have over the years become in-built in the DNA of the people of this institution, it's only a matter of time now when this proud franchise reaches heights that are even unimaginable today.