Bank Asia Limited: Annual Report 2016

Transcription

3. annual integrated report 2016 The power of a new dream to change the world like dark matter and dark energy www .bankasia-bd.com 01
4. ANNUAL INTEGRATED REPORT 2016 Contents 04 06 08 10 11 13 14 15 17 20 25 32 36 38 41 47 51 Notice Awards and Recognition Vision , Mission and Core Values Bank Asia at a Glance Business Ethics and Codes of Conduct Goals DuPont Analysis Corporate Structure and Corporate Information Corporate Organogram Directors’ Profile Key Events 2016 Five Years Performance Horizontal Analysis Vertical Analysis Chairman’s Statement President and Managing Director’s Review Segment Analysis 52-60 DIRECTORS’ REPORT 91-171 INTEGRATED REPORTING FRAMEWORK 98-121 RISK MANAGEMENT DISCLOSURES 02 www.bankasia-bd.com 54 56 59 60 World Economy Bangladesh Economy Banking Industry Review of Operations of Bank Asia 91 92 93 94 95 96 171 Our Approach to Integrated Report Deposits and Advances Strategies Import & Export Strategies Future Orientation Strategic Focus Our Activities and Values Our Business Model 98 100 104 121 Risk Management Report From Chief Risk Officer’s Desk Statement on Non-Performing Loan (NPL) Management Basel lII - Pillar 3: Market Discipline
5. 144-190 SUMMARY SUSTAINABILITY REPORT 192-250 CORPORATE GOVERNANCE 254-397 FINANCIALS 194-411 STANDARD DISCLOSURES CHECKLIST 144 145 146 148 149 150 152 158 162 166 174 181 184 188 190 Achievement for Sustainability Report Sustainable Banking Operations Key Highlights-2016 Message from the President and Managing Director Report Parameter Strategic Focus for Sustainability Corporate Profile Primary Brands , School Banking, Products and Services Stakeholders’ Engagement Environmental Performance Economic Performance Sustainable HR Development Corporate Social Responsibility (CSR) Customer satisfaction survey Market Performance Stakeholders Relationship/Grievance Redressal 192 196 244 245 246 250 Corporate Governance Report on the Activities of the Audit Committee Bank Asia Shariah Supervisory Committee Report of Bank Asia Shariah Supervisory Committee Chief Financial Officer’s Report Balance Sheet including Human Capital 254 256 258 259 260 346 348 360 372 388 396 397 Auditor’s Report Consolidated Balance Sheet Consolidated Profit and Loss Statement Consolidated Cash Flow Statement Consolidated Statement of Changes in Equity Islamic Banking Unit Off-shore Banking Unit Subsidiary 1: Bank Asia Securities Limited Subsidiary 2: BA Exchange Company(UK) Limited Subsidiary 3: BA Express USA Inc. Managements and Executives Branches at a Glance 194 222 223 231 233 405 406 411 SAFA Corporate Governance Disclosure Checklist Corporate Governance Compliance Certificate Corporate Governance Compliance Checklist in line with BSEC Compliance Checklist in line with the Companies Act, 1994 Corporate Governance Compliance Checklist in line with Bangladesh Bank Integrated Reporting Checklist SAFA Standard Disclosure Checklist Proxy Form & Attendance Slip www.bankasia-bd.com 03
6. ANNUAL INTEGRATED REPORT 2016 Notice of the Eighteenth Annual General Meeting Notice is hereby given to all members of Bank Asia Limited (“the Company”) that the Eighteenth Annual General Meeting of the members of the Company will be held at 11.00 AM on Monday the 3rd July, 2017 at the Dhaka Ladies Club, 36 Eskaton Garden Road, Dhaka-1000, to transact the following business and to adopt necessary resolutions: Agenda 1. To receive, consider and adopt the Profit and Loss Account of the Company for the year ended December 31, 2016 and the Balance Sheet as at that date together with the Reports of the Directors and the Auditors thereon. 2. To declare dividend out of the profits for the year ended December 31, 2016. 3. To elect Directors in accordance with the provisions of law and the Articles of Association of the Company. 4. To appoint Auditors of the Company for the term until the conclusion of the next Annual General Meeting and to fix their remuneration. 5. To transact any other business with the permission of the Chair. By order of the Board (Md. Kamrul Hasan) Company Secretary Dated: Dhaka May 15, 2017 Notes a) The Record Date of the Company is May 18, 2017. Trading of the Company’s shares in the Stock Exchanges will remain suspended on the Record Date. b) The shareholders whose names will appear in the Register of Members of the Company as at the close of business on the Record Date will be entitled to attend and vote at the Annual General Meeting and to the dividend declared in the AGM, if any. c) Any member of the Company entitled to attend and vote at the Annual General Meeting may appoint a proxy to attend and vote on his/her behalf. The proxy must be a member of the Company. d) The instrument appointing a proxy duly stamped and signed by the Member must be submitted at the Registered Office of the Company at least 48 (forty eight) hours before the meeting. Proxy form is enclosed. e) Election of Directors will be held in the vacant offices of Directors. Election schedule will be displayed in the notice board at the Registered Office in due course. Election rules will be available at the Registered Office of the Company. f) Annual Integrated Report 2016 along with Directors Report and Audited Financial Statements of the Bank for the year ended December 31, 2016 will be available at the Bank’s website www.bankasia-bd.com 04 www.bankasia-bd.com
7. Prelude Bank Asia has been playing the pioneering role for producing Annual Integrated Report in Bangladesh since 2013 and I am pleased to inform that last year we won second prize under Integrated Reporting category from the Institute of Chartered Accountants of Bangladesh (ICAB) for Best Presented Annual Reports in Bangladesh. This award will obviously act as catalyst for further inclusion of necessary information and analysis on financial and non-financial data in this Report. Every year we select a theme that symbolizes our philosophy in business strategy. This year’s theme of the Report is dark matter and dark energy. We resemblance this concept to our Bank as we are working hard to unearth new opportunities that will bring a radical change in the business through dynamism in business models like agent banking, micro banking, virtual banking and other alternative channels. Our ICT will be of prime driver for imparting this technology driven business models. Bank Asia always gives more emphasis in information dissemination to the stakeholders. Our persistent endeavor is to present accurate, true and fair description of the activities of the Bank in all operational areas including futuristic approach. Disclosure on related party transactions, financial statements along with major policies and explanatory notes were elaborated to cater the information needs of stakeholders, researchers, regulatory bodies and international financiers etc. As part of integrated report a summary sustainability report has been included that exhibited Bank’s impacts on economic, environmental, governance and social aspects. The Report aims to give you the proper tool for doing necessary research and analysis for your investment and other needs. Md. Arfan Ali President and Managing Director www.bankasia-bd.com 05
8. ANNUAL INTEGRATED REPORT 2016 Awards and Recognition Mr . Md. Arfan Ali, President and Managing Director of Bank Asia Limited received the trophy for Best Presented Annual Reports (BPAR) 2015 from Hon’ble Commerce Minister Mr. Tofail Ahmed, MP for winning Second prize under Integrated Reporting category 06 www.bankasia-bd.com
9. 2016 2015 Bank Asia was awarded second prize under Integrated Reporting category from the Institute of Chartered Accountants of Bangladesh (ICAB) for Best Presented Annual Reports (BPAR) in Bangladesh. Certificate of Merit from ICAB for Best Presented Annual Reports 2015 in the Private Sector Banks including cooperative banks. Bank Asia has garnered Bronze Award under Banking Companies category in 3rd ICSB National Award for Corporate Governance for its Annual Integrated Report 2015 by Institute of Chartered Secretaries of Bangladesh (ICSB). Bank Asia achieved Best Sustainability Report in Bangladesh in the 12th Sustainability Reporting Awards (SRA) 2016 by NCSR, Jakarta, Indonesia for Sustainability Report 2015 of Bank Asia. Bank Asia secured 1st Runner up position in the Private Sector Banks (including co-operative Bank) from SAFA (South Asian Federation of Accountants) for Best Presented Annual Report Awards and SAARC Anniversary Award for Corporate Governance Disclosures 2014. Bank Asia was awarded second prize from the Institute of Chartered Accountants of Bangladesh (ICAB) for Best Presented Annual Reports (BPAR) 2014 among all the private sector banks in Bangladesh. Bank Asia achieved Best Sustainability Reporting Award 2015, Runner Up 1 in Overseas Category for Sustainability Report 2014 by NCSR (National Centre for Sustainability Reporting) Jakarta, Indonesia. Bank Asia has achieved Award of Excellence on Banking Fair Bangladesh 2015 as a top performer bank for Customer service, Discipline & Branding organized by Bangladesh Bank. Bank Asia, the only Bank in Bangladesh was awarded as ‘Best Trade Partner in South Asia’ by IFC (International Finance Corporation) for 2015 www.bankasia-bd.com 07
10. ANNUAL INTEGRATED REPORT 2016 Vision Bank Asia ’s vision is to have a poverty free Bangladesh in course of a generation in the new millennium, reflecting the national dream. Our vision is to build a society where human dignity and human rights receive the highest consideration along with reduction of poverty. Mission To assist in bringing high quality service to our customers and to participate in the growth and expansion of our national economy. To set high standards of integrity and bring total satisfaction to our clients, shareholders and employees. To become the most sought after Bank in the country, rendering technology driven innovative services by our dedicated team of professionals. 08 www.bankasia-bd.com
11. Core Values Place customer interest and satisfaction as first priority and provide customized banking products and services . Value addition to the stakeholders through attaining excellence in banking operation. Maintain high ethical standard and transparency in dealings. Be a compliant institution through adhering to all regulatory requirements. Contribute significantly for the betterment of society. Ensure higher degree of motivation and dignified working environment for our human capital and respect optimal work-life balance. Committed to protect the environment and go green. www.bankasia-bd.com 09
12. ANNUAL INTEGRATED REPORT 2016 Bank Asia at a Glance A Dream Comes True Bank Asia started its journey on November 27 , 1999 with a view to providing the best quality technology driven services in banking sector. Since inception banks’ business horizon covers major parts of the country by extending and expanding its network through opening of branches, agent banking outlets etc. The Bank started its Islamic banking operation in 2008. It established the 1st subsidiary company ‘Bank Asia Securities Limited’ on March 16, 2011, then ‘BA Exchange Company (UK) Limited’ in London, United Kingdom on May, 2011 and ‘BA Express USA Inc.’ in Jamaica, New York, USA on June 01, 2014. At present Bank Asia has 105 Branches, 5 Islamic Windows, 6 SME Service Centers, 1 Off-shore Banking Unit and 3 Subsidiaries. With an aim to serve the unbanked people, Bank Asia is now operating EBEK (Ektee Bari Ektee Khamar) banking services to 35 districts having 252 upazillas and 1,266,930 beneficiaries. The Bank has implemented 1,150 agent banking outlets in 49 districts to provide banking services to geographically dispersed rural poor segment of the society. Faithful and Efficient Workforce Bank Asia has the right blending of talented youth and experienced senior workforce which is truly efficient and dynamic. Mr. Md. Arfan Ali who has more than 25 (twenty five) years’ of multifarious experience in banking profession leads the team from the forefront as President and Managing Director. At the end of 2016, 10 www.bankasia-bd.com the bank has 1,970 employees including 366 executives and 1,589 officers to serve its clients across the country. Bank Asia provides a work friendly elegant environment to its employees. Its unique reward and performance appraisal system encourage employees to give their best to serve the Bank and its stakeholders. Giving Back to the under Privileged & Concern to Ecology Bank Asia always tries to make a better society by working and donating in different sectors such as education, health, disaster management, sports and some other sectors including the free eye camp and ophthalmological operation facility. The Bank also providing services to senior citizen, widow, and disable beneficiaries through the government’s project of Social Safety net Program. Bank Asia has been recognized as one of the top 10 commercial banks for its contribution to green banking by Bangladesh Bank. In addition, it streamlines green banking initiatives in its in-house management and investing in environment friendly projects and participating in environment protecting activities. As a Bank, we play an intermediary role between economic development and conservation of the environment. Eagerness for High-Tech Solution Bank Asia always welcomes innovation for the operation of banking activities as well as reporting systems. Bank Asia has associated Islamic banking, Off-shore banking, SME financing, Agent Banking, EBEK, Remittance channeling & many more specialized services with its core banking activities. To excel in this new era of technological triumph, Bank Asia has successfully introduced Utility bill payment and Fees collection through Online, cutting edge ICT, state of the art network solution, 24/7 ATM service & many other e-products. Credit Rating Credit Rating Agency of Bangladesh Limited (CRAB) awarded Bank Asia Limited “AA2” in the Long Term and ‘ST-2’ rating in the Short Term based on the financials of 2015. Accolades & Recognition Bank Asia was awarded several times by the reputed organizations. The Bank was awarded second prize under the category of Integrated Reporting from the Institute of Chartered Accountants of Bangladesh (ICAB) among all the private sector banks in Bangladesh. The Bank also achieved ‘Certificate of Merit’ in the Private Sector Banks (including co-operative Bank) for Best Presented Annual Report (BPAR) from ICAB . For Annual Integrated Report 2015 (AIR15) the Bank has garnered Bronze award under Banking companies category in 3rd ICSB National Award for Corporate Governance by ICSB. Moreover, the Bank achieved Best Sustainability Report in Bangladesh in the 12th Sustainability Reporting Awards (SRA) for Sustainability Report 2015 by NCSR (National Centre for Sustainability Reporting) Jakarta, Indonesia. Besides this Bank Asia have been awarded the prestigious ‘Bangladesh Bank Remittance Award’ for highest volume foreign currency drawing through this Bank in 2015.
13. Business Ethics Business Principle Bank Asia goes beyond minimum legal requirements and reflects the Bank ’s long term commitment to building a business that is successful, honest and responsible. Human Worth Bank Asia supports the international human rights as outlined by the UN declaration and convention. No one in the Bank shall in any way cause or contribute to the violation or circumvention of human rights. Human Capital Bank Asia is devoted to human capital initiative connecting with milestone training, performance coaching & development, key talent management, balancing of work/ life choice and human capital reviews. Health, Safety and Working Environment Bank Asia is committed to establish effective arrangement to identify and eliminate or control all work related hazards and risks and promote health at work and continuous improvement of health, safety and working environment. Confidentiality Clear, honest and open communication is maintained in Bank Asia to ensure full accountability but subject to business confidentiality. The use of company confidential information before it is made public for personal gain is strictly prohibited and may constitute a criminal offense. Protection of Personal Data Bank Asia’s processing of personal data shall be subject to care and awareness, which is required according to laws and regulation and relevant for information that might be sensitive, regardless of the data refer to customers, employees or others. Intellectual Property Intellectual property such as know-how, methodology, concepts and ideas are important to Bank Asia’s successes in the market. Unless otherwise specified by law or orders from other public authorities, no employee shall make corporate secret or other information available to unauthorized persons. Nature and the Environment Bank Asia is very much aware regarding environmental protection, by minimizing environmental damages and by developing, promoting and utilizing environment friendly technology. Information that may Affect the Share Price As a publicly listed company, Bank Asia is subject to strict rules concerning the handling the non-public information that may affect the market price of Bank Asia’s shares or other financial instruments issued by the Bank. Accounting Bank Asia has the highest regard for truth, completeness and accuracy in the recording of business transactions in full compliance with applicable Bangladesh laws & regulation, financial reporting standards, good accounting practices as well as maintaining valid authorization and ensuring complete documentation. The annual accounts and interim accounts shall be in accordance with the law, BFRS and good accounting practices. Competition Bank Asia is committed to staying over and above the prevailing market competition through constant innovation of technology based products and efficiency enhancement; being responsive to the requirements of our customers and partners. Corruption and Bribery Bank Asia is firmly opposed to all forms of corruption. Bribery is fundamentally inconsistent with the Bank’s values; any direct and indirect promise of payment to gain any perceived personal advantage is totally unacceptable. Money Laundering Bank Asia is firmly opposed to all forms of money laundering and shall take steps to prevent its financial transactions from being used by others to launder money. Political Activity Bank Asia does not give support to political parties, either in the form of direct financial support or paid working time. Employees may exercise their right to take part in politics as long as there is no conflict of interest situation with Bank Asia. www.bankasia-bd.com 11
14. ANNUAL INTEGRATED REPORT 2016 Code of Conduct Employees must be open and loyal to the Bank and Bank ’s interest. Employees must keep confidential all bank and other matters that could provide other third parties unauthorized access to confidential information. Employees must observe the Bank’s security requirements concerning access to electronic resources and documents. All information and communication with the media, the public and financial markets shall be reliable and correct, maintain high professional and ethical standards and in accordance with established guidelines and regulations. Customers shall be met with insight, respect, and understanding. Employees must always try to fulfill the needs of the customer in the best possible manner, within the guidelines for corporate ethics that apply to business. Under no circumstances, employees shall or be a part of any activity that prohibits open and fair competition of Bank Asia in breach of relevant business laws. Employees shall never offer or accept illegal or inappropriate gifts or other remuneration in order to achieve business or personal advantages. Employee’s engagement in external duties must not affect his/her working relationship with Bank Asia or come into conflict with Bank Asia’s business interest. Should an employee become aware of an infringement of Bank Asia’s rules and guidelines, he/she should blow whistle raising the issue to the line management or to Human Resource Department. 12 www.bankasia-bd.com
15. Goals Sustainable Growth Synergies between new knowledge and human capital for sustainable economic growth Capital Stewardship Accelerating Financial Inclusion Accelerate progress towards financial inclusion with technology like ATM , mobile phone, smart card based banking services and renewable energy generation projects especially in rural areas. Preservation and enlargement of Differentiating Value multiple forms of Added Services capital; like intellectual, Strong focus on extremely costnatural, financial, efficient and green services through organizational, social; all of which internet banking, electronic fund contribute to long term value transfer, automated cheques clearing, creation. e-bank statement, SMS alert etc. Going Green Quantification of in-house facilities and energy consumption to promote paperless office and enhance energy efficiency. Greater emphasis on green banking projects. Leader in Business Create new dimension in the syndication and structured financing. Grow with export. Well diversified portfolio. www.bankasia-bd.com 13
16. ANNUAL INTEGRATED REPORT 2016 Dupont Analysis-5 Factors Model DuPont 2016 ROE First Level Breakdown Total Asset Turnover Net Profit Margin Operating Profit Margin Tax E ffect Effect of NonOperating Items Second Level Breakdown Particulars 2016 2015 2014 ROE 8.13% 14.36% 14.09% Net Profit Margin 7.28% 11.97% 10.88% Total Asset Turnover 0.0890 0.1056 0.1177 Financial Leverage 12.5610 11.3570 11.0065 Operating Profit Margin 27.87% 27.94% 28.35% Effect of Non-operating Items 0.5552 0.6867 0.7297 Tax Effect 0.4703 0.6241 0.5261 The higher the value of all components of DuPont analysis the higher the positive impact on return on equity. Net profit margin consists of three important components namely operating profit margin, effects on non-operating items and tax effects as mentioned in second level break down. Operating profit margin slightly decreased to 27.87% compared to previous year’s 27.94%. Effects on nonoperating items include loan loss and 14 Financial Leverage DuPont analysis is an approach to decomposing return on equity for better understanding about which factor contributed to the ROE most and which factor caused the ROE to move. For broader analysis, we used 5 factors model that covers net profit margin, total asset turnover and financial leverage. Net profit margin is further broken down to operating profit margin, effect of nonoperating items and tax effects. www.bankasia-bd.com other provision which decreased to 0.5552 from 0.6867 for the increase of Provision by 40% which resulted from higher Classified loan. Tax effect decreased to 0.4703 from 0.6241.The combined effects of these three components resulted in downward of net profit margin to 7.28% from 11.97% in 2015. Efficiency of utilization of assets as implied by average total assets turnover was in declining trend as the growth of revenue is less proportionate to the growth of total assets. Bank Asia’s financial leverage increased to 12.5610 from last year’s 11.3570 mainly for the higher growth in deposit which helped to keep return on equity higher although it increases default risk as well.
17. Corporate Structure nies Ex Inc . sia Securit press (US A) Exch BA Ltd. ies ng kA nt Bankin BA Ba n A ge g Off- g Isl am ic Banki ge Com ny (UK) Ltd kin an an r y co m pa ore B Sh pa on dia operati . ain i Subs en tional M Conv Ba nking BANK ASIA Million Taka Income Statement Matrix Operating Profit Profit Before Tax Profit After Tax Balance Sheet Matrix Total Shareholders’ Equity Deposits Loans and Advances Investments Fixed Assets Total Assets Capital Measure Capital to Risk Weighted Asset Ratio Basel-III Share Information Matrix Earnings Per Share (Taka) Net Asset Value Per Share (Taka) Credit Quality Ratios Classified Loans Profitability Ratio Return on Equity Return on Assets 2016 (Consolidated) 2016(Bank) 6,187 3,442 1,644 5,921 3,287 1,546 18,863 191,573 166,540 39,712 5,263 254,866 19,038 191,273 163,610 39,365 5,250 253,196 12.28% 12.42% 1.87 21.41 1.75 21.60 5.31% 5.41% 8.75% 0.68% 8.13% 0.65% www.bankasia-bd.com 15
18. ANNUAL INTEGRATED REPORT 2016 Corporate Information 16 www .bankasia-bd.com Letter of intent received First meeting of promoters Certificate of incorporation received Certificate of commencement of business First meeting of board of directors held Banking license received First branch license received Inauguration of bank Date of publication of prospectus Date of IPO subscription Date of first share trading in bourse Date of agreement with CDBL Date of first scripless trading Number of promoters Number of directors Number of branches Number of SME centers Number of Islamic windows 24/02/1999 15/04/1999 28/09/1999 28/09/1999 01/10/1999 06/10/1999 31/10/1999 27/11/1999 29/06/2003 23/09/2003, 24/09/2003 08/01/2004 20/12/2005 30/01/2006 22 12 105 6 5 Auditors Hoda Vasi Chowdhury & Co. Chartered Accountants BTMC Bhaban (7th level) 7-9, Karwan Bazar Dhaka-1215 Tax Advisors S.F Ahmed & Co. (SFACO) Chartered Accountant and tax & Management consultants House# 51 (3rd floor) Road # 9, Block # F Banani , Dhaka-1213 Legal Retainer/ Advisors M. Sakhawat Hossain Road No. 8, House No. B-107 (Ground Floor), New DOHS, Mohakhali Dhaka-1206 Registered Office Rangs Tower 68, Purana Paltan Dhaka-1000 Bangladesh
19. www .bankasia-bd.com 17 Corp Liability Banking & Cash Management Credit Restructuring Unit Export Finance Syndication & Structured Finance Corporate & Large Loan Business Banking Retail ME Consumer Liability Banking Cards Consumer Finance Agri Micro Finance Small Enterprise MSME Small Medium & Retail Business Global Subsidiary Operation Treasury Back Office Central Trade Service Foreign Remitt . Off -Shore Banking Unit UK USA People Management Research & Strategy Corp . Affairs & Event Mgt . PRD Branding Marketing & Communication Support Business & Strategy BAITD Islamic Banking BASL MIS FAD Group Finance MD Secretariat Facility(LSSD) Anti Money Laundering Legal Accounts BACH & EFTN Operation Division Operation Deputy Managing Director Executive Committee President & Managing Director Chairman of the Board Head of Group Treasury Audit Committee International Division International Banking ICCD Corporate Organogram Information Commu . & Tech Special Asset Management CSR & Green Banking Treasury MID Office Mobile Fin . Service Cards Operation Credit Administration Risk Management Credit Risk Management Risk Management EBEK Operation Agent Banking Alternative Delivery Channel Information Tech Channel Banking Share Board Secretariate Risk Management Committee
20. ANNUAL INTEGRATED REPORT 2016 Board of Directors Mashiur Rahman Director 18 Md . Arfan Ali President and Managing Director Md. Nazrul Huda Director Mohd. Safwan Choudhury Vice Chairman www.bankasia-bd.com PS Some of our hon’ble directors are not seen in the picture their names and profile can be seen in the directors’ profile section