BRAC Bank PLC. (BRACBANK) Earnings Call Transcript & Summary

Are we live?

Yes.

Okay. Thank you. Ladies and gentlemen, good evening, and welcome to BRAC Bank's 2023 Earnings Disclosure Program, which is also going to be a discussion about the first quarter of '24. Let me take you quickly through those initial statements. This is a live webcast in our earnings disclosure portal. This link has been shared with all relevant stakeholders through press advertisement, website posts and also on social media. We are also live with this presentation on our Facebook page. As we come to the usual forward-looking statements, I don't think I need to get into that. We've done this before. Let's look quickly at our content. And we'll have an update on the economic outlook and the market update as well. We have a quick recap of important highlights for '23 and then get into also the business highlights of the first quarter. We'll as usual, do it through 3 different lenses, SME, corporate, retail and of course, treasury as well. Have a quick update from our Chief Risk Officer and also a little bit of a discussion on -- if we have time around our branch network and alternate banking channels. Again, people initiatives, technology initiatives, sustainable finance, all this is if we have time, but the entire presentation will be uploaded. So you're welcome to go through it at your own sweet time as well. Deb, shall we move to the next slide. And we'll have an update from our Treasurer, Shaheen Iqbal, Deputy Managing Director and Head of Treasury and Financial institutions on the market and the overall economic update as well. Shaheen Iqbal?

Thank you, Selim bhai. Good evening, everyone. I think as you all know, Bangladesh economy is going through a challenging period. So after significant depreciation of local currency, we are seeing a limited level of inflation. To contain that inflation, we have to go through a restrictive monetary policy for which we'll have to sacrifice some growth. So the economy is going through a slower growth period, which we expect gradual to recover in 2025 and beyond. And I think the one growth in general, positive [indiscernible] growth, expectation will also support our recovery in a better growth trajectory. Next slide, please. So on the FX side, we have seen there is significant improvement on trade balance and current account balance, which has been nullified by the negative growth of -- in financial account. Our reserve is still depleting, but we expect with the adjustment in exchange rate, the situation gradually improve. And we think by the end of this year, probably we'll be moving to a positive growth territory as well in terms of reserve. So overall situation is gradually improving and we expect better recovery in 2024. That's a small brief on my side.

Thanks very much, Shaheen. Let's look at some highlights of '23. Deb? Customer numbers have been growing strongly both in the full year, January to December '23, and that momentum has continued into the first quarter of '24 as well. Customer numbers have grown almost 30% since 20 -- full year '23. Roughly 2,000 new customers are being onboarded every day. That, I think, is an enormous positive for BRAC Bank. Overall, deposit growth is, again, very strong. Deposits growing more than 3x that of the average of the market. And as we will show you later on as well, the market share has increased in terms of deposits to 3.11%. Customer loans grew more than double that of market in '23. Although '24 growth is relatively muted. We'll talk about that later as well. Overall, financial performance strong. Very well-managed foreign exchange flows during an extremely difficult time, and that has helped in us growing trade finance very strongly obviously, in the corporate commercial business, but also in the larger SME business as well. Overall throughput of $4.4 billion in '23 and a very good $1.3 billion already in the first quarter of '24. Overall net interest income and the fee base has grown very, very well. Portfolios have been managed very, very well. Overall portfolio quality has improved. We will show more of this when our Chief Risk Officer, Ahmed Rashid Joy gives you an update. Capital is strong at over 14% and international credit ratings from S&P, Moody's and the local credit rating from Crab very well-recognized local rating agency are all very, very strong. The international ratings for BRAC Bank are easily the strongest in the market. If you look at market share, a very important reflection of '23 and also includes '24, you'll see how that has continued to grow. Customer loans have grown to 3.33%, and that compares to 2.91% in '22 Customer deposits have also grown from 2.58% to 3.11%. So our market share growth strategy that we launched in N '21 is working out very well. We are quite happy with that. Although it seems to have plateaued slightly in the first quarter of '24, our expectation is that by the full year, we will again grow by another 30, 40 bps in this important area. Next slide, a quick look at what we call the wheel of Asta, Asta is -- means trust in Bangla, and is actually the name of our retail banking app. So the wheel of Asta showed some important indicators, 25% increase in customer numbers. Deposits have been grown 34%, customer loans, 26%. yields have improved slightly about 60 bps on customer lending, customer deposits have gone down by 70 bps. Overall spread is pretty much in line with '22 as well. Revenue -- total revenue, 19% growth positive jaws of 4.5% and a small improvement in cost-income ratio as well. Credit cost, we've taken a little bit of a buffer over '22, but NPL overall has gone down from 3.7% to 3.4%. Overall, I think a pretty positive result. Thank you, Deb, next slide, please. Deb, next -- sorry, here it is. So the first quarter -- sorry, let's look at the first quarter of '24. This is, again, comparing to the first quarter of '23 and another significant improvement year-on-year. 25% growth in customer numbers, 35% growth in deposit numbers, 22% growth in customer lending, customer yields a big positive, almost 1% and a drop in both customer -- sorry, cost of deposits and overall spreads because the customer deposits have grown -- interest rates on customer deposits have grown faster than they have on customer lending. Strong growth in revenue mainly pushed by what we call non fees and investment income. Total expenses have grown over last year. Despite that, the jaw of 35% is very, very satisfactory indeed. And you can see the cost-to-income ratio for the first time ever has dropped well below 50%. At 46%, this is an all-time best that we have. We've taken again a little bit of a buffer in terms of credit cost, but NPL is 50 bps better than where it was same time last year. Overall, very strong first quarter results. And from what figures we've seen in the media significantly superior to that of any other financial institution in the country. I'm talking about the local financial institutions. we are not comparing our results with any of the foreign banks, which is a slightly different market. Thanks very much, Deb. Let's move into the business segments. We have SME next and Deputy Managing Director and Head of SME. Mr. Tomal will now give us an update on this very important part of our bank.

Thank you, Selim bhai, and good evening, everyone. I'm delighted to share the remarkable achievements of BRAC Bank's team SME in the year 2023. Our customer base experienced a remarkable growth of 22% in 2023. The significant increase in customer number speaks about the volume and the trust and confidence that our entrepreneurs placed in our services. Furthermore, our asset growth momentum continued to show in the year 2023, reaching an impressive 27% growth full year. The robust growth underscores our ability to capitalize on the emerging opportunities in the market. One of the most notable achievement of 2023 is the transformation of our division from a mere lender to a comprehensive banking partner for SMEs. For the first time in our history, deposit growth percentage suppressed our asset growth percentage. SME deposits grew by 39%. This milestone is a testament to our success in building trust and credibility among our SME clientele. And it underscores our commitment to offering comprehensive banking solutions tailored to the need of the unique customer segment. Most importantly, our portfolio quality has also improved significantly, reflecting our unwavering commitment to prudent risk management practices. The 30-day overdue percentage reduced by 1%. It is now -- it became in December 2.9% from 3.9%. NPLs decreased again by another 1%. It came down to 2.7% from 3.7%. These improvements are also a testament to our proactive approach to risk management and our relentless focus on maintaining a healthy and sustainable portfolio. In line with our commitment to innovation and digital transformation, our journey continued in 2023. We have successfully rolled out our loan origination system across the country. leading to a remarkable increase in per staff productivity by 1.42 files. Additionally, our efforts to bring our SME customers into digital ecosystem have started producing results. More and more customers and our customers, meaning SME customers have started using our banking app user. The monthly transaction volume in our Asta app have crossed BDT 10,000 crores. per month. And you will be happy to know that SME customers contribute to more than 60% of this transaction volume. This significant milestone highlights our success in leveraging technology to enhance our customer experience and drive operational efficiency. In conclusion, we have reached remarkable success, but our journey is far from over as we look ahead, let us remain committed to excellence, innovation and sustainable growth. So this is the highlight of SME business for the year 2023. Now I will move to the SME business highlights in quarter ,1, 2023. The performance of SME banking in quarter 1, 2023 continues like the full year 2024, in the face of a challenging economic condition. Our division has not only perceived but thrived achieving remarkable results with the commitment to excellence and resilience. Our customer base experienced a 22% growth in first quarter also. And our assets have also grown by an impressive 20% despite various challenges that we have faced during quarter 1. This sustained growth trajectory underscores our ability to capitalize on emerging opportunities in the market and drive sustainable value for our stakeholders. One of the most notable achievements in quarter 1 also is the SME deposit growth. This growth was even more than the first quarter. We experienced a 47% growth in SME deposits. Moreover, I'm pleased to report that the portfolio quality among these difficult times have also in a downward trend. 30-day overdue percentage reduced from 3.58% year-on-year to 2.8%. While NPLs decreased from 2.96% to 2.11%. These improvements, as I said before, is a testament to the proactive risk management approach that we apply in assessing our SME customers. Also, our trade volumes in Q1 grew by 23%. This robust growth in trade volume demonstrates our ability to capitalize our opportunities in this difficult market. And commitment to facilitating trade and commerce to our valid client segment. In conclusion, I would like to say that we have achieved remarkable success in first quarter of 2024, and I'm very confident that this will continue, and we will continue to thrive in the quarters ahead. Thank you very much. Over to you, Selim bhai.

Thanks, Tomal. Let's have a quick look at Corporate Banking division. I would request Tareq Refat Ullah Khan, Director and Head of Corporate Banking to update us.

Thank you, Selim bhai. Good evening, ladies and gentlemen. I'm pleased to share the outstanding achievements of the Corporate Banking division of BRAC Bank PLC for 2023. This past year. We have not only met but exceeded the main marks of our success within our industry, thanks to our irrigation and innovative strategies. Our division excel in managing liquidity in both local and foreign currencies, merging our wealth of resources with unmatched expertises. We have introduced a selection of tailored products and digital solutions, all designed to meet the evolving needs of our customers. These initiatives have down on top-tier plans from various industries establishing us as their go-to bank for corporate banking services. If you look in -- in terms of deposit. Our dynamic transaction banking services and extensive networks have significantly boosted our deposits by 35% from last year. Thanks to our focused engagement in key market segments and competitive products offerings. In terms of loans and advance, we have achieved a remote 37% year-on-year growth, reflecting our strong risk management and commitment to supporting our major industry players in tough market environment. Our ability to indicate our offshore banking capabilities and excellent relationship management has brought 74 leading industry accounts into our fold. If you go to our portfolio management side, we have made great steps in refining our portfolio management, enhancing credit standards and operational oversight. Our strategic focus on reducing this has lowered our portfolio at risk by 42 basis points and cut the year-on-year nonperforming notes by 27 basis points. We are confident that in our ability to further improve these metrics in the coming years. In terms of trade, our robust handling of foreign currencies, liquidity and enhanced trade capabilities have allowed us to support both long standing and new customers. This year -- I mean, the last year, we outpaced our competitors in trade growth, and we are aiming to reach $5 billion in 2024. In regional banking side, our ongoing innovation and customer digital services have successfully attracted over 1,000 new clients with transaction surpassing BDT 130,000 crore in 2023, making a 52% increase from last year. Our digital platform continues to retain a solid base of regular users. Can you go to next, please, Deb? So you can see in the next slide that all indicators are positive, excepting CASA mix and CAR, it is in line with the market practice actually. So looking ahead, we are committed to maintain these working loans, deposit and trade aiming to strengthen our standing as a substantial and delever banking partners in the industry. The results from the first quarter of 2024 already indicate that we are on track to achieve our goals. Thank you for your continued trust and partnership as we move forward together. Thank you. Selim bhai, over to you.

Tareq, let's look at retail banking, and we will be updated by Mahiul Islam. Mahi is Deputy Managing Director and Head of Retail Banking. Mahi, over to you.

Thank you, sir. I'm pleased to share the updates on our retail banking, in full year 2023, we continued our growth momentum, particularly in customer acquisition and deposits. I will cover the key areas. Our total customer numbers grew by 27% year-on-year to 1.2 million mark with more than 260,000 net inclusion. Our customer deposits portfolio also grew by 24% at the same -- almost at the same base. However, due to the ongoing rise in interest rate, our customers were more inclined towards fixed deposits, which reduced our CASA mix to 40%, and the cost of deposits also increased to 4.2%. We continued our focus on digitalization, thereby making 80% of our eligible accounts fully opened digitally. And the mobile app Asta users crossed 500,000 into 2023. As Tomal covered, the Asta transaction volume side where SME contributes to more than 60%, resulting in the BDT 10,000 crore mark. While the retail contributes more than 60% on the total number of transactions. So that's again a big milestone that we have done. We -- in terms of digitalization, we also disbursed 8,500 digital loans with a portfolio of 70 last year. As a result of rising inflation, we were selective on lending in specific customer segments such as employee banking, government sector. And so our customer portfolio assets portfolio was limited to 9% year-on-year growth, while our credit cards group grew consistently at 19%, and the overall asset yield improved to 8.6%. Despite our continued strong efforts in portfolio monitoring and collection, customers struggled, particularly last year due to macroeconomic stress that resulted in par increased by 40 basis points to 4.8% and NPL increased by 30 basis points to 2.9%. Compared to the industry, our retail assets portfolio remained in a much better position. In terms of merchant acquiring business, we had a strong 34% year-on-year growth, touching BDT 72 billion mark, and we extended our collaboration with bKash by rolling out ad money and pass-through transaction features using Visa secured platform, Cybersource. Finally, as a result of our sustainable relationships with exchange houses and continued digitalization efforts, our regional remittence business had outstanding growth of 131% year-on-year and reach the USD 819 million volume. That's all from the full year 2023 side. Now, Deb, if you can move on to the next slide. So -- as you see that from the year-on-year highlights, the CASA mix and COD continue to remain a challenge, while the other KPIs have shown sustainable growth starting from customer deposits, which again, continued a sustainable growth of 25% year-on-year based on the assets where we had -- we also remain cautious and selective on lending, thereby the asset growth were similar -- remained at similar level year-on-year at 8%, and the cards would be wide by 15%. We expect -- we have taken some measures to regain our asset momentum, and we expect our assets disbursement to pick up in the second quarter of this year. We still continue to face challenges in portfolio monitoring where the par increased to 5.5%. But due to the strong collections and recovery efforts, our NPL reduced by 11 bps to 2.6%. So overall, we had maintained the growth momentum, and we believe that 2024 will be another big year for retail banking. Thank you. That's all from my side. Selim Bhai?

Thanks much, Mahi. Let's get an update from our treasury our Deputy Managing Director and Head of Treasury and Financial Institutions, Shaheen Iqbal.

Thank you, Selim bhai, again. I think in 2023, we build liquidity buffer and capitalize on investment in government securities. We managed through efficiently optimizing the deviation of commerce securities, and there why we make sure that we have sufficient return from the securities portfolio. And we also optimize that through use of derivatives so that we can optimize return. In 2023 as well, like we managed FX very efficiently. Our overall FX management was proper so that we can support our business growth. And in this process, we grew our trade portfolio by 22%. We announced long-term funding by BDT 200 million plus from various sources. So overall, FX management was pretty efficient, and we could support banks business growth as well. On the risk management side, like -- BRAC Bank efficiently managed it's -- to derisk. At the same time, it ensured that it had better risk what had returned. By doing this, I think we are in a better position in terms of managing risk in a difficult market situation. overall, like, if we see like from liquidity, FX management and risk management, the 2023 and quarter 2024 was a pretty successful period for BRAC Bank. Thank you very much.

Thanks, Shaheen Iqbal. Indeed, a very stressful 2023 in terms of foreign exchange, I think BRAC Bank has been able to come out of the with very, very strong results and much of that is based on our strong foreign exchange and Taka liquidity. Thanks again, Shaheen Iqbal. Let's get an update from our Chief Risk Officer, Deputy Managing Director, Ahmed Rashid Joy. He will talk about our portfolio quality. Joy?

Thank you, Selim bhai. Good evening, everyone. Certainly, the growth that we are all talking about is exemplary in the industry, especially during the tight situations that we witnessed in the last year. And despite all of that, we could maintain our asset quality. -- thanks to our improved and structured approaches in credit risk, I would say. You can see on this slide, that our nonperforming loans in 2023 decreased by 30 basis points from 3.7% to 3.4%, with reduction of portfolio at report, which is on 30 days past due basis from 4.9% to 4.3%, if compared with the last year. In the same way, our first quarter in period 2024 improved to 3.3% while the par also improved to 4.2%. What we want to highlight is in 2023, our portfolio increased by more than BDT 10,000 crores take in a single year alone, whereas our part amount increased by mere BDT 250 crore and NPL amount increased by around BDT 230 crores. Whereas as you all know, in 2023, what we experienced turmoil like foreign exchange crisis, higher inflation, higher interest rate and in falling reserves. But despite of all this, we could maintain our portfolio quality. And also note that since 2017, that is in the last 6 years, our portfolio grew by 2.5x. And whereas you can see, our NPL ratio is hovering around 4%. So our asset quality has been very much consistent across the year in the last 7 years. Next slide. As of December 2023, our credit coverage stands at 115%, which we maintained historically other than 2020. And during the year, we provided BDT 301 crores provisions, which resulted in cost of credit to 58 bps. In Q1 2024, credit coverage increased to 117%, while the cost of the credit also increased by 80 bps. Essentially, we remain conservative and get some additional buffer in Q1, as Selim bhai already mentioned to you. Next slide. We have some highlights is that on the portfolio that you can see, 96.7% of our portfolio is under regular repayment terms, while 3.3% is in NPL, as you all know. Within the regular repayment portfolio, only 0.5% is rescheduled, which is the conventional rescheduled, while COVID-19 restructured portfolio is 2.9%. So if we had this total, these 2, the total restructuring stands at 3.46 percentage. But most of this portfolio, even the restructured portfolio is also performing as reflected in our 30 DPD part issue, which is only 4.2%. So you will understand how performing even the restructured portfolio is also performing. Ladies and gentlemen, in last year, we started developing some econometric models. With the guidance of our Independent Director, Dr. Zahid Hussain, as you all know, who was the former lead economist of World Bank. So what we try to do is to find out correlations of our bank's NPL with macroeconomic variables like interest rate, exchange rates, export, import and FX reserves. And based on such models, what we are trying to do is build our capacity to forecast our NPL in these difficult times when we are having these difficult times with regards to macro economic variables. And all these models are currently under development, and we are continuously working on them. Apart from this, we have also developed some models like we are working on the [indiscernible] for the corporate clients. the credit bureau score cards, the behavioral scorecards for SCB and retail and early warning signals for the retail loans. With all these risk models in operations, we will be more confident in managing our risk and credit loss more sophistically I believe. That's all from me, Selim bhai. Thank you once again.

Thanks very much, Joy. Let's move into the financial updates, and we will start off by giving you a sense of how the balance sheet has grown in terms of customer deposits and customer loans over the last 3 or 4 years. Next slide, please. And you can see on the left side in purple, we have the full bank then green is SME, Blue is retail and corporate is golden. You can see how the bank has grown 30% year-on-year, and it has grown continuously over the last 4 years as well, last 3 years, 2021 and '22. Same for all 3 businesses, particularly strong growth in the corporate banking over the last year. But I'd also like to mention that the SME business, as our Head of SME mentioned, is now really starting to give -- show very good traction. And the first quarter, we'll talk about that a little later, has again shown great momentum in SME. On the next slide, is the first quarter of '24 similar to that -- the earlier slide, consistent growth across all segments, particularly significant in SME, where this quarter has been 47% higher than the last quarter, the same time last year. And also for the corporate banking business where the transaction banking business is really paying dividends now. Again, strong 40% growth over last year. Retail continues to grow strongly. It, of course, represents more than 50% of total customer deposits. Next, please. A sense of how the 3 businesses contribute to customer deposits. Today, end of '23, 19% was SME. That's a significant improvement also going forward, 30% plus from corporate, 48% from retail. So a good spread that helps us diversify our business cross-sell from one segment to another and gives the overall portfolio, a lot of stability. Next slide. And we're looking at the first quarter mix pretty similar to the full year as well. Again, 47% retail, 30% plus corporate, 20% in SME. Next slide, and the CASA mix has come down from 21%, which is pretty natural in the sense that interest rates have grown significantly over '22 and '23, and it just doesn't make sense to hold surplus funds in a CASA account today when the interest differential can be as high as 7%, 8%. So we're seeing lower CASA composition, but -- this is a key driver for us going forward. And our attempt will be to end '24 with something closer to 50%. Next slide. You can see it's come down further from 47% end of last year to 46%. But as I said, the expectation is that the raft of different initiatives that we've just put in place will give us value over the next 3 quarters, and we will be able to closer to the 50% mark. Next slide. Customer lending. So 26% growth year-on-year, and you can see the 3 businesses, SME and corporate growing strongly. Retail is much more subdued, very much a function of high inflation rates and also representing our more conservative risk management or risk appetite. We very naturally had to be very careful in this area. Look at '24 first quarter and good growth over last year, but slightly subdued again in SME and retail as well, strong growth in corporate, again, very much aligned to our risk appetite. But we can see signs that high inflation rates are now discouraging customers from borrowing money, both in the businesses and also in consumer finance. Next slide, this is a composition of the lending mix. You can see 45% SME, 39% is corporate, 16% retail, roughly 5% of the corporate book is actually managed by SME. That's mainly what we call microfinance institutions, but we are showing it as part of corporate because that's the way the Central Bank requires the reporting. But that business is managed by SME. Next slide, please. If you look at the first quarter, not very different from end of last year as well. But again, as you can see, our book, both the customer deposits and customer lending is very well diversified and the customer deposit book is just -- is the opposite of customer lending. So you see strong customer deposits are mainly from retail, 45% 50%, yet customer lending is mainly from SME. It is one of the reasons why BRAC Bank has such a stable revenue growth is because of this platform, this model. I would dare say that no other bank in this country is as diversified as BRAC Bank is in terms of corporate and retail banking businesses. Thank you. Deb, next slide. I will now ask our Chief Financial Officer and Deputy Managing Director, Masud Rana, to take us through the P&L and balance sheet. Masud, over to you.

Thank you, Selim bhai. Good evening, And [Foreign Language] to everyone. 2023 has been a great year for the bank, followed by a very strong Q1. As you have heard from my colleagues, all across, all the business divisions Support division, everybody contributed. I think we must thank you to our 11,000 colleagues who have actually made it possible. I think of this success, the main reason is our Unity, the way we work. It's a collaborative approach, and it actually really worked pretty well. Looking back to 2023, it was extremely challenging as Selim bhai was mentioning. But at the same time, there were also opportunity. If we look at the -- in general, the banking sector, good banks actually reported a pretty good performance. But I think Better Bank actually does well -- but at the same time, BRAC Bank relatively did much, much better. Why? I would like to start with the growth strategy that we have undertaken. Last 2 years, our balance sheet has grown by about 62%. So that extra volume, both in terms of loans and the deposits helped us to cash in. I think we have been very successful in reading the market pretty highly and taking that position, and we have benefited out of it. Since last July '23, we have started -- we are getting to the smart [ regime ] and all our new acquisitions have been priced, I would say, competitively better appropriately -- risk priced. It also included the supervision fee because about 61% of our book is granular, SME and retail, which did have this supervision fee. But please note, we did manage our operation within the pretty stable net interest margin. We have maintained AD ratio of sub-80s during 2023, which has actually helped to being very liquid, both in terms of local and foreign currency which has actually helped us to support our customers and particularly in the foreign currency space. And also, we have seen a big growth in our new clientele in the corporate side. I think our technology investment is started paying off, which -- I'll talk about it, the efficiency is evident. It's paying off clearly. While our cost-to-income ratio has been pretty high. But I must say, we have been continuing and investing in our people, our infrastructure and also in technology. And finally, the most importantly, as our [ CRA ] book quality has significantly improved. If we had not had that legacy book of the last 4 years is acquiring or origination, the NPL is around 2% only or I think if not less. So I think many of the things already been discussed. I'll just quickly highlight our revenue has grown in the full year, 19% year-on-year. We have 27% growth in our profit after tax. I think it's a function of our growth in our revenue, better cost management, better ally while we have buffered a bit our balance sheet grew by about 29%, which actually is about 72,000. ROE improved from 10.2% to almost 12% return on asset now is 113% by the year-end 2023. EPS per share earnings has gone up by BDT 1 almost. We maintained very high 15 coverage. Our cost-to-income ratio has gone down by about 2%. We maintained a very strong despite growing our balance sheet at the rate of around 26%, 27%. It's still 14%. Our NAV is now 39%. As I said, we have maintained a 4% margin pretty much similar what we reported in 2022. If we look at Q1, next slide, please. The growth journey continues, except for the loan side, which is, yes, of course, the market -- it's a function of the overall market and all. So in the loan side, annualized 4% growth I think we will definitely see traction in the coming quarters. Our revenue from -- it has grown by about 47% year-on-year. I'll come to the detail we have reported a PAT of solo basis BDT 272, which is around 101% more than last year. Balance sheet has grown in the first quarter about by BDT 5000 crore and regulatory capital equitably. While reported ROE is 16%, but on an underlying basis, it is slightly above 14%. ROA reported is 1.45%. On an underlying basis, it would be around 1.25%. EPS, by the way, it's not restated because our stock recorded is a bit later when we publish this data is comparable to the last year. So on that base, it's 169 per share. We maintained very high NPL coverage. And during the Q1, we have actually buffered much more than about 80 basis point credit cost. The most significant one is 46% cost-income ratio. However, because of the -- our promotion and other expense cycle -- on an underlying basis, we are looking at about around 50%. And we hope by the year-end, we can share with you a very strong CIR by the year-end. Capital adequacy also improved because of the first quarter numbers, bottom line, our NAV also improved to 41 in cheaper 2.93%, a bit subdued spread because interest was moved. But okay, if you look at the consolidated piece, I think more or less similar story, but where I'll detail about our subsidiary share of this consolidated performance, I think I'd like to touch upon the overall group performance of BDT 820 profit after tax, mainly contributed by bKash. bKash did report about BDT 70 crores, BDT 75 crores PAT last year. So overall, I think we had very great year in 2023. But if you look at the quarter 1, more or less similar like what has been the solo sign, a bit, we have to take into consideration, the ROE, the underlying basis will be roughly 14%. And the ROA would be on a consolidated group basis, would be around 118%. I think we are on the right track. The cost-to-income ratio, the capital adequacy, everything looks pretty well. But yes, we are moving into a different rate regime and et cetera. So we have to be careful, but we believe and I'm quite confident that these most of will hold. If we look at the -- next slide, please. Balance sheet in terms of proportion of the balance sheet. It remained as is with the continuing growth, as I said, 62% over the last 2 years. And from last year, it's 29%. If we look at the quarter 1 -- next slide. It's about 7% from the last December. While year-on-year, it's 34%. I mean if we look at one thing that's actually highlighted is that we have launched a subordinate bond and the substation is going on. We have already onboarded about BDT 85 crores. And with the time line, we believe we'll be able to onboard the rest of the amount, and it will help our capital adequacy to even further stronger. If we go to the next slide, please. Overall, the numbers say so, and it actually continues. Let's go to the subsidiary shares I think I'd like to highlight that -- I'll come back to the P&L. If we look at -- I mean, of this -- on the overall basis, we have got 4 subsidiaries, bKash has contributed BDT 107 crores in the full year, while our 2 capital subsidiaries contributed about BDT 3 crores. And our exchange house, which was actually restarted its business from last year January actually reported a loss. Understandably, after closure, it has opened. So if you look at the quarter 1 all the subsidiaries actually suffered. The capital market subsidiary, it's predominantly from the mark-to-mark losses during the -- from February and March, particularly, I think the stock or the holding that we have should be reversed by the year-end. But most importantly, bKash has reported good bottom line, which has helped to report us about 318 consolidated profit. I think fundamentally, our income in terms of overall NIM, which is a bit soft, but we have compensated by through our early positioning in our investment book. which is actually as much more than what we -- and overall, if we include that investment income to that, it's much above 4%. At the same time, from the growth all our lending fees and also contributed, supervision fee, plus the trade fees. And since our FX flow has been very good, we also benefited out of that. I think we'd like to hear from bKash CFO, Moin bhai, are you there? So I'd like to...

Yes, Masud, thank you. Good evening, everyone. I will like Masud bhai just try and quickly give you a performance update on bKash for 2023 and also for the first quarter of this year. So I'll begin with 2023 on the left-hand side. So we have -- we finished the year with 74.1 million customers, which was up by 8.8 million customers over prior year. In terms of active customers, we were at 39.3%, which translates to an active customer ratio of about 53%. In terms of market share, we finished off with 64.7%. Merchants, we finished with 793.6000 merchants that accepted bKash as payment. I've always mentioned to you in previous occasions, that merchant payment was one of the -- it continues to be one of the key focus areas for bKash because this is where the future of the wallet lies. So if you compare this with the end of 2022, the same number was around 506. So we acquired about -- sorry, the same number was 287 and we acquired about 6,000 merchants over the course of 2023. This has been the highest ever acquisition for us in terms of merchant payments outlooks. Coming to average monthly transactions volume, 723.6 billion translates to a daily average of about 2 billion -- 1.9 billion on a daily basis, this was up by 22% over last year. In terms of agents, we finished the year with 364,000 agents being enrolled in the bKash platform. This was up by 23,000 more agents compared to the same time last year. And as I mentioned to you before, this number -- although you can find a bKash agent every village in Bangladesh, but there's a gradual increase of 20,000, 21,000 agents adding -- being added on to the network every year. Moving on to the performance in the first quarter of 2024. So 75.2 million customers, we added 1.1 million customers more in 2000 -- first 3 months of 2024 of the 75.240.4, which translates to about 53% were active clients. Market share, we had a loss of market share, and we finished -- this is the numbers as at January at 62.7%. There were certain government disbursement that was done, which bKash was not involved. So that's why the market share went down. In terms of merchant, 855,000. So -- you can see a further increase from 793,000 from December to 855. We added about 62,000 merchants in the first 3 months of the year. So merchant continues to be a big focus area for us. In terms of average monthly transaction volumes, 8415, that translates to a BDT 2.3 billion worth of transactions being done every day on the platform. Agents slightly went up from 364 in December '23 to 378.9 in March 2024. So that was the summary of the health parameters of bKash. If I could start off with the financials. So -- in terms of financials, just give you a summary. So bKash started to make a profit in 2014 and '15 -- and then '14 to 2018, we started to make profit and then -- sorry, '14 to 2017, we started to make a profit. And in 2018 to 2021 we poured a lot of investments into technology, into our apps or so forth, and hence, we were not making profits. However, from 2022 onwards, we went into the positive territory. And we've been increasing our bottom line ever since 2022. In terms of -- if you look at the top line, we've been growing steadily at about 22%. And we've always -- over the past 5, 6 years, we have been in the early 20 growth areas. So I'll just dwell on the performance 2023. Gross revenue grew by 22%, as -- and so this revenue is in line with the volume growth. And this is -- this gross revenue of 22% being primarily driven by 3 factors. One is the increase in cash out, which increased by 18% year-on-year. And our peer-to-peer transfers also increased by 17%. The other component of revenue increase is the interest on trust cum settlement account. That increase because of our interest rates increasing. The interest -- bKash invest about 80% of our -- of the customer balance and government bills and bonds, and the yield, as we all know, was high at the back end of 2023. So we took advantage of that. Moving on to the net revenue, an increase of 24%. Cost of services really means the commission that we pay to our agents and our distributors. And if you notice that our revenue increased by 22%, our net revenue increased by 22%. However, our cost of services increased by 18%. So while we progress ahead with our volumes increase, we're also trying to optimize our costs, and we're trying to focus more on the more value-adding services like merchant payments, and so on and so forth. And as a result, our cost of services increase is lower than our net revenue increase, which is really one of the biggest drivers of our increases in profitability. Gross profit as a result increased by 34%. Operating and administrative expenses. This is really -- the driver of increase is 3 -- to be -- the big drivers are 3. One is the -- our head count increased. So over the course of 2023, our head count addition was 120. That's one factor. Depreciation increase, this is the impact of investments in all the capital expenditures and technology that we have done. And the other one, the other big increase was the increase due to the exchange loss. We -- this is the cost of importing software and hardware. So those are 3 big reasons why our expenses increased. That led to an operating profit of BDT 31 crores, which is up by 140% over last year. Net finance income is the interest earnings from our own capital. That increased by 34%, this is, again, the backdrop of interest income, interest rates increasing both in fixed deposits and in government securities. That leads us to profit before workers part is profit participation fund. And this profit before tax is 183. Income tax, obviously increased for 2 reasons. One is the backdrop of higher income. And the other one is we've incorporated the effect of the Finance Act 2023. And so as -- as a result our profit after tax is BDT 104 crores. up from BDT 17 crores at the same time last year. If we can move to the next slide. Okay. So quarter 1 performance, again, quarter 1 performance -- compared to the same time last year, we grew by 24%. As I mentioned to you before, we're continuously growing. Our top lines are growing at the rate of early 20s. This time, it's 24%. And at the -- our cost of services increased by 15%. And we made some -- we made another few optimization initiatives at the distributor and the agent level, which resulted in a cost of services increase of only 15% at the backdrop of a net revenue increase of 24%, thus resulting in a gross profit increase of 46%. Our operating expenses increased. We've had the Eid festival here, which there was a fair bit of advertising expenses, communication expenses during the festive season, leading to an operating profit increase of BDT 76 crores as opposed to BDT 13 crores same time last year. there's a marginal increase of net finance income of BDT 4 crore or other 10%, because we are making money, we're generating cash. That's why you see this margin increase. That leads us to a profit before tax of BDT 116 crores. And taking into account income tax, the bottom line is BDT 70 crores. as opposed to same time last year, profit of BDT 36 crores. Yes. That really is from bKash.

Thank you, Moin Bhai. Selim bhai, over to you.

Thanks. Thanks, Moin. Thank you, Masud. We have a few minutes talking about the outlook over the remainder of '24. But before we do that, let's look at any questions that our views may have sent us. Deb, have we received anything?

Yes, we have received a couple of questions. So should I start with the bKash first?

Yes, please, let Moin leave after he finishes with the questions for bKash.

Okay, sir. So we have received Couple of questions regarding bKash performance. If we accumulate all those if there are questions come that bKash is doing great in 2023, and that is continued in 2024 as well. So the question is that is this profit sustainable over the period over the period? Moin bhai?

Yes. Thanks, Deb. So -- as I mentioned to you earlier, we were in the negative territory, and we're now edging towards -- we have consistently made profits for the past 2 years. And yes, the short answer to your question is yes. But the growth of profit should not be interpreted because we still are in the investment phase. There's a lot that needs to be -- like we have laid out the cash in, cash out network, a lot needs to be done in terms of laying out the merchant network. So significant investments will go into the merchant network. And then -- so yes, we will be in the black, but the growth in profits will not be in the -- in the same rate. Please bear in mind that we are moving away from a negative territory to a positive territory. So relativity is something that we must keep in mind.

The last question is on bKash is that please comment on the present competition landscape of MFS industry. Has it become less intense nowadays?

No. As a numbers you see, we -- our market share, we were at 60, 65, we lost about 2%. So no competition has not -- is no less intense as it was.

Thank you, Moin bhai. That's all from the bKash part. Back to Selim, sir?

Questions on BRAC Bank? Deb?

Yes, sir. We have received a couple of questions. I'm just starting with the first one. That -- given inflation is still high, presently over 9.5%. What do you think bank lending rate might go from present level.

So the highest lending rate until recently under the smart interest rate restrictions was about 13.55 -- something like that 13.55. We do not expect that the rates will increase beyond 14 over the next few months. It's a question of both banks trying their best to maintain spreads but also not passing on such interest rates to their lending customers, which would result in delinquencies. So it's a balance between maintaining a good portfolio, a balanced portfolio, growing customer numbers, balance sheet and also managing a reasonable spread. I sense that going forward, spreads may come down across the banking sector. Currently, they are roughly around 4%. That is likely to come down.

Thank you, sir. Subsequently, the second question is can you make a comment on the potential NIM impact of the new Bangla Bank regulation for banks to price loan at market rate?

As I just suggested because of the overall subdued macroeconomic environment, as you heard, Shaheen Iqbal also start off with his update. I think overall lending growth will be muted. And it will be difficult for the banking sector to maintain spreads comparable to 23% or certainly comparable to, say, the first quarter of as well. So finding an appropriate balance for growth, for growing customer numbers, balance sheet and also maintaining a reasonable spread and reasonable return on equity. All this will require a lot of fine-tuning over the next few months. As we move into free market interest rate regime. We will have to -- all these banks will have to analyze their business, their projections are much better than they have done so in the past because all the holes are off now. So interest rates can spike, they can go down and banks will have to set their own targets themselves. It will be an exciting time, I think.

The next question on our financial partners of quarter 1, 2024. The -- those -- our CFO has highlighted this thing, but the questions come at, what is the reason for the fall in spread in Q1 '24?

Q1 '24 was all about the smart interest rate regime, where customer deposits were free but customer lending was restricted to a margin given by the Central Bank plus the weighted average of the last 6 months treasury bill. So that was a benchmark. And the latest rate was about 13.55%. But overall, what has happened since Smart was launched about 9 months ago is that customer deposit rates were free from day 1. And therefore, our interest rates were able to rise very quickly as a result of which our bank's deposit portfolio was repriced very quickly, whereas the asset portfolio was repriced at a much slower rate. that resulted in overall NIMs for the industry going down.

Thank you, sir. We have received a couple of questions on the foreign exchange part. So the first question is that, has the transaction in the interval FX market resumed following last week depreciation.

Yes, it has. But I'll ask our Treasurer to respond to that. It's only been a couple of days really. Shaheen Iqbal?

Yes, yes. I think we are seeing good momentum in the internal market. we are seeing more transaction volume as well. I think these are early days, like after assumption, there are a lot of transactions, a lot of demand supply. So gradually, to stabilize it. But activity is really encouraging.

Yes. We think this is a big positive for the entire industry. And as Shaheen said, while there may be a certain amount of volatility in the first few weeks, our expectation is that this will stabilize very quickly within a month or so.

Thank you. Shaheen Bhai, Thank you. The next question is do you have any clarity on how the Central Bank derived the midpoint of BDT 117 per dollar and how frequently they will revise this midpoint?

A couple of things. This would -- is obviously the result of a lot of analysis that the Central Bank's own economic have done and their engagement with the IMF team as well. We, honestly speaking, expected something closer to BDT 16. And the Central Bank surprised us with BDT 117. I think their expectation is that the BDT 117 is put forward to accommodate movements over the next few months. Exactly how and when they will make changes remains to be seen, but it will be derived from the same analysis that generates the benchmark. So this is, I believe, a comparison of interest rates, inflation rates and exchange rates between Bangladesh and 15 or 18 different major trading partners. So that kind of analysis will be done from time to time. We don't know exactly when, but I'm sure the Central Bank will monitor exchange rates very, very carefully and will step in as and when needed.

Thank you, sir. The next question is that with the rising cost of fund and an increased loan base, can BRAC Bank maintain a sustainable spread and profitability and how might this affect the interest rate or fees for customers in coming days?

We've just moved into this pre interest rate environment. So we'll have to wait and see how rates stabilize. Our plan is -- our aspiration is to continue to manage our spreads around this 4% rate. If we can increase that, we will. But our expectation is that the strategy to generate better NIMs will be focused on increasing CASA using our transaction banking capabilities in the corporate bank and the commercial banking businesses rather than simply increasing customer lending rates. In an environment where inflation rates are high, overall economy is subdued. We do not want to charge the customer with very high rates and thereby generate instability amongst our customers and who knows generate more portfolio at risk or NPLs. So we need to be careful there as well. But if we can go beyond 4%, obviously, we'll do it. But the strategy to do that, as I said earlier, is to reduce our cost of funds. That would be our biggest strategy. let's wait and see how that works out over the next 3 or 4 months.

The next question is on asset quality. So do you anticipate that NPL will increase proportionately as the lending book grows? And how might this impact the bank's ability to offer loans or other services to our customers?

Firstly, portfolio quality is a key objective for us. and our efforts will be focused on ensuring that we remain where we are or we continue to improve our 30-day delinquencies and our overall NPLs. So that's first. We are not going to grow at any cost. You will already have seen that we have significantly become significantly conservative in the consumer finance area for close to a year now. And if necessary, we will become more conservative, both in wholesale corporate commercial banking and also in SME assets. If we see signs of any major stress in those customer segments as well. So growth is based on us being able to continue to improve the portfolio. And we are not going to grow at a cost to the portfolio.

We come down to our last question, and this is regarding our sustainability part. So one of our investor congratulating for publishing the reach sustained that we published recently. The question is that do you have any nature target? And if as then is there any baseline year?

So we've just started on this journey on reporting our sustainability capacity in our results. This was the first time. Hopefully, you will see '23 results reported in the next few months. We don't have a net 0 target immediately right now. Because it needs a much more analysis than we have actually put in place at the moment. But last year, we did analyze our GHG emissions on a portfolio level, and I believe that is also reported in our sustainability report, which is also endorsed by [ PKR ]. This year, we are planning to improve the overall disclosure. And -- but at the same time, I think I have to emphasize that our decarbonization plans may not be entirely in line with what many stakeholders require in the Western world. Bangladesh is a developing country. We have large energy needs and for us to move completely away from fossil fuel to renewals is not possible at the moment. Therefore, we will have more of a hybrid plan going forward. The end game, of course, destination model for us is renewables complete 100%. That is going to take time in a country like Bangladesh. There are many needs of the economy and the people. This is a large population of 170-odd million people located on a very small piece of land. So those needs -- those economic and social needs have to be taken care of first.

Thank you, sir. That's all from my side. Thank you.

Ladies and gentlemen, thank you for joining us today. We tried our best to finishing in an hour taking about 10 minutes, 15 minutes longer. You will have noticed that the first year '23 results are quite strong and '24 results are very, very strong. It is -- remains to be seen if we can continue this kind of strong financial performance at plus the remaining 3 quarters of '24. We are quite confident. One of the strengths of BRAC Bank is its ability to respond to the different challenges and stresses of our market and come out with better results than earlier. I say, because I'm sure there will be many challenges going forward, but we are confident in being continually agile and being able to respond to those challenges and still grow customer acquisition and overall balance sheet. I look forward to meeting you again in 3 months' time when we have the half yearly declaration. Thank you very much for joining us, ladies and gentlemen, [Foreign Language], and good night.