Mercantile Bank aims to strengthen footprint by balancing risk & profit

Mercantile Bank Limited (MBL) plans to further strengthen its footprint in the banking industry through up-skilling human resources while maintaining a balance between risks and profits, said the bank's Managing Director (MD) and Chief Executive Officer (CEO) Md. Quamrul Islam Chowdhury.

To achieve the goal, the conventional bank that came into the market in early June of 1999 has set four priorities - expediting customer-centric services, boosting operational efficiency, intensifying risk-management, and adopting digital transformation.

Mr Chowdhury shared the bank's current and future plan of actions in an interview with The Financial Express (FE) ahead of the former's 24th founding anniversary, to be celebrated on June 02, 2023.

"We want to further intensify our position in the country's banking industry through raising the skills of our human resources while striking a balance between risks and profits," he said.

Simultaneously, the MD said, the bank will continue its efforts to make a balanced deposit structure in the liquidity management.

As part of the initiative, the bank would lessen its dependency on corporate deposits with giving more focus to retail deposits as well as broaden the capital base and bring down the volume of non-performing loans (NPLs).

Terming growing volume of bad loans or classified loans a major obstacle for the banking business here, he said the NPL has myriad adverse consequences, such as falling capacity to provide loans to good borrowers, destroying depositors' trust resulting in deposit growth reduction, pressure on liquidity and profitability.

The MBL managing director has laid emphasis on three priority areas that the banks should focus on to stop the flow of bad loans.

These are: doing a proper feasibility analysis of the project with enough securities and proper documentation, employing efficient and knowledgeable persons in lending procedure, and enhancing monitoring and controlling.

"These are the priority areas our bank is now focusing on," underscored Mr Chowdhury, a banker having 40 years of experience in the sector.

Despite all the challenges, he said they have been intensifying their focus on sustainability and strong fundamentals that allowed them to achieve Mercantile Bank's 2022 performance.

The bank's operating profit has increased to Tk 7.14 billion with a growth of 16.7 per cent from last year. The ratio of high, low and no cost deposits in 2022 was 54 per cent, 27 per cent and 19 per cent, respectively.

"The increase in income ensured a more favourable cost-income ratio for 2022 as compared to the immediate last year," he said.

While sharing the future plan of actions, the MBL top executive said the future target of the bank is to achieve the best position as a sustainable financial institution.

"Our business plans are concentrated on focusing on sustainable long-term growth of business, lower cost of deposit and lower lending rate, improving the quality of assets, rationalising operating cost, improving operational efficiency and productivity of resources," he said.

Alongside providing better and faster customer services with expanding its network, the bank continues efforts to strengthen the overall risk management and corporate governance system, said the banker. "We are focusing on reducing the cost of deposit and the cost of funds. We diversify our loan portfolio to reduce risk. The prime focus of MBL would be the recovery of bad loans."

When his attention was drawn on the existing volatility in global macroeconomic fronts and its domino effect on Bangladesh's banking industry, Mr Chowdhury said the sector is confronting a very challenging situation as it is predicted that the ongoing global financial meltdown will worsen the asset quality, capital and profitability.

The volume of import-export business, foreign remittance inflow and foreign direct investment has started to plummet in comparison with the previous periods, affecting the fee-based income of the banks, he said.

There are 61 banks in our country - different banks are at different stages in their key performance indicators, he said. "But, I think the overall banking sector is capable enough of tackling the challenges. There are potential opportunities in every problem. We just need to discover and focus on those potentialities."

"So, if we all work together, we will be able to fix it by removing the obstacles with our own resources," he added.

Regarding the central bank's new policy of benchmark reference rate and interest rate corridor that are expected to be implemented from July next, he said this new interest rate regime will be good for the financial sector as banks will get a space for the price adjustment.

It is also expected that this policy will contribute to check inflation in the economy, the CEO pointed out.

The bank serves a large customer base comprising individuals and institutions through a network of 152 branches, 196 ATM booths, 187 agent banking outlets and 45 Islamic Banking Windows.

Until 2022, the deposit portfolio of the bank stood at Tk 294.06 billion while the volume of loans and advances was Tk 280.87 billion.

It earned export proceeds amounting to Tk 254.94 billion and paid import bills equivalent to Tk 209.22 billion. It also received inward remittance amounting to Tk 68.27 billion in 2022.

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