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

Good evening and Salam Alaikum from Dhaka, Bangladesh. Ladies and gentlemen, this is BRAC Bank PLC's earnings disclosure program for the Quarter Ending September 30, 2024. Thank you for joining us. Ladies and gentlemen, this is a live webcast, and it's in our earnings disclosure portal. This link has been shared with all relevant stakeholders through press ads, website posts and Facebook post as well. We are also live with this presentation on our Facebook page. If we can get into the presentation, ladies and gentlemen, we expect this to be a 1-hour program. And I just took you through that opening statement. Then we have the traditional forward-looking statements. Next slide, please, Deb. I don't think we need to talk much about this. Everybody knows what it's all about. Let's get into the agenda. As I said, this should take roughly 60 minutes. And the agenda is, starting off with -- Deb? We're not seeing anything on the screen, Deb.

We are starting with the economic update outlook.

Let's move to the next slide.

Selim Bhai, we can see the slides.

I'm sorry, I can't see the slides, but there's something wrong at my end. But this is -- we're starting with an economic outlook and a market update and then we'll get into the business highlights for the quarter and also year-to-date figures. We'll also give you a quick update on our sustainable finance initiatives, a financial update, an update from our mobile financial service partner, bKash, and then we'll have an open Q&A. I'll ask our Deputy Managing Director and Head of Treasury and Financial Institutions, Mr. Shaheen Iqbal, to take it from here. Shaheen, over to you.

Yes. Thank you, Selim Bhai. Good evening, everyone. I think all of you know that like Bangladesh has gone through a massive change. We have a new interim government led by Dr. Muhammad Yunus with a strong team of technocrats. The new government has already started with a lot of reforms initiative. Initially, they formed 6 commissions. Later, they have formed another 3 commissions as well. And there is a big change in terms of Bangladesh Bank recruitment as well, like Dr. Ahsan Mansur, a renowned economist, Senior Executive from IMF. He has joined Bangladesh Bank as a Governor, and he has taken a lot of initiative as well. Like they have formed 3 task force like to assess financial situation of the banking sector, 1 transports and other strengthening the Bangladesh Bank operation. And the third one is for asset recovery. I think there -- apart from this, Bangladesh Bank has already taken a lot of initiative in terms of easing regulations and making necessary policy changes to drive market and market-related reforms. So I think this is giving a lot of benefit to the market as well. We have seen like exchange is stabilizing and also interest rate has moved up significantly. So there are a lot of changes and a lot of initiatives from Central Bank, which is giving a lot of benefits for the market development. In the meantime, with these initiatives, government has already got something like BDT 12 billion of commitments from various multi-laterals. So this is again showing that there are lot of confidence on this new government from various donors and multi-laterals. Next slide, please. Economy is passing through a rough patch. The next year's forecast, like the financial year's forecast, which is going to close in June next year is lower than the previous years. And this is mainly because we have been passing through a challenging period in terms of inflation. And also because of high inflation, Central Bank is pursuing contractionary monetary policy. Then government also passing through a tighter budget and trying to pursue a lower budget deficit. So altogether, economy is growing slowly and it probably continue to grow slowly for the remaining part of the next year. So inflation, again, is a big concern. Central Bank has raised policy rate few times from 6% to now 10% by 400 basis points. Interest rate probably is at the peak level. Inflation still to come down. Still it is more than 10%. And in a recent statement, Central Bank Governor has mentioned like it may take more time. So we probably have to pass through most of the next year with the high inflation and high interest rate regime. Next slide, please. On the external segment, like we are seeing some improvement. For the first time in last 2 years, we are seeing current account has moved to positive for the first 2 months of the financial year. And even though our reserve is still on the negative side, but we are seeing stability on that front with strong [ remittance ] flow, it is growing more than 16% now. Reserve is stabilizing. But again, the major concern still inflation and the lower pace of GDP growth. I think we have to pass through a little lower growth and higher inflation for next year as well. So this is a new reality we have to pass through. And with the reform initiative that has been taken, I think we can again move to a higher growth trajectory by the end of next year. That's a small brief from my side. I think back to Selim Bhai.

Thank you, Shaheen. We would like to focus on a slide depicting our market share. I think this is very important. You can see from where we started focusing on market share growth as our overarching business strategy. We have grown loans almost 1% in the last 3 years. I think that's a significant growth in terms of the overall market, particularly since lending growth has been very subdued for more than 2 years now. When you look at deposits, again, 1% plus growth over the last year or so. Again, very, very positive. So the overall strategy that we articulated back in 2021 to double our business in 4 to 5 years is working very well. We are full steam ahead to reach a 4.5% market share. That is still some way in the future, but we expect to reach that objective in the next year, 12 to 18 months. Deb, if we can move to the next slide. This is an update from Corporate and Institutional Banking. And we'll ask Mr. Tareq Refat Ullah Khan, Deputy Managing Director and Head of C&I, to give us a short update.

Thank you, Selim Bhai. Good evening and Assalamu Alaikum dear viewers. I'm pleased to share that BRAC Bank's Corporate and Institutional Banking division has achieved robust performance across all key parameters in quarter 3, 2024, which is seen on the slides clearly. It is actually surpassing industry trends as well. This strong sustainable growth reflects years of strategic development, prudent liquidity management and a solution-driven approach backed by our dedicated professional team. In terms of deposit, we maintained our focus on transactional deposits, achieving a healthy CASA to term deposit mix and a controlled cost of funds. Our transaction banking approach delivered tailored solution to local, public, multinational and institutional clients, contributing to -- significantly to deposit growth. Our extensive digital and physical network also facilitated new client acquisitions. While costs have slightly increased, they are aligned with our asset deposit growth strategy and market conditions as well. In terms of assets, we onboarded 44 key relationships during this period, including multinationals, public segments and major exporters, driving our asset growth. Our prudent portfolio management actually led to a record low non-performing loan, which is around 3.52%. It is the best in our divisions in the history of BRAC Bank. In terms of trade, in a stagnant market like this, we went the extra mile to support our clients' trade needs, strengthening our position as the key partner. This is also reflected in a significant growth in across import, export and bank guarantee business as well. Our vision is to remain substantially impactful partner in the industry, supporting our clients' financial needs with agility and excellence. We are proud of the progress so far we have achieved this quarter and look forward to sustaining this growth trajectory. Thank you for your continued trust and partnership. Over to you, Selim Bhai. Thank you.

Thank you, Tareq, and thanks to the corporate and institutional team for a very, very good first 9 months of the year. Let's move now to the next business update from our Deputy Managing Director and Head of SME, Syed Abdul Momen, better known as Tomal. Tomal, over to you.

Thank you, Selim Bhai. Good evening, everyone. It's my pleasure to present to you the quarterly earnings update of our SME Banking division. As we are now moving through a very challenging economic landscape, I'm proud to share the robust performance we have seen in the key business areas. This is possible because of our team's dedication, our customers' trust on us and the strategic focus that we have in driving growth and maintaining resilience. First, I am pleased to inform you that our customer base has grown by an impressive 21% year-on-year. This reflects the trust that our clients place in us and is indicative of the increasing demand of our tailored-made financial solutions that we make for the SMEs. We are proud to continue to meet the needs of small and medium enterprises, which is the vital backbone of Bangladesh's economy. Our effort to grow SME deposits have been particularly very successful this year. This quarter, we saw a 46% year-on-year growth on SME deposits. I would like to thank my team and especially the branch network for their continued support in this phenomenal growth. And this is the highest ever SME deposit growth we have achieved in the history of the bank. However, while our focus on deposit is very strong, it has also impacted the CASA mix because there is a very high rate regime being going on. So the SMEs has also booked a lot of term deposits. So -- which has increased our TD volume. And our CASA mix that's why has decreased from 66% to 49%. And this shift of rising interest rate for deposits has led to a rise in cost of deposits as well. So we continue to navigate through our current contractionary monetary policy environment with rising lending interest rate and overall market dynamics. Additionally, you are aware that the country has went through a political unrest in July and August. And then even bigger challenge was the flood -- flash flood, which happened in Comilla, Noakhali and Feni territories. So this -- all of this has impacted our asset growth. So -- but despite these challenges, we have managed to achieve a 10% year-on-year asset growth. And from September onwards, you'll be happy to know that we are seeing a very positive momentum in SME asset growth as well. On portfolio quality, despite all these challenges, our 30-day overdue ratio remained very stable. And even more promising, the non-performing loans, we have successfully reduced it by 63 basis points and our NPL has came down to 2.22%, which is probably the best in the industry. In terms of trade volume also, we have experienced a 16% year-on-year growth, which reflects our ongoing commitment to supporting the trade and supply chain financing of our customers. One of the major highlight of this quarter is that we have successfully completed the digitization of our SME loans. And all our entire SME loan process is now fully digitized. 90% of all the loans that we do are done digitally now and which has significantly improved the efficiency of our colleagues as well as improved the customer experience by speeding up the loan approval process. Looking ahead, the momentum in lending is returning and we are confident that the efficiencies we have achieved through digitization, this will drive an accelerated growth in the remainder of the year. In conclusion, while we have faced macroeconomic challenges, our SME division has remained resilient by our strong customer base, innovative solution and continuous focus on operational efficiency. We are optimistic about our future and remain committed to supporting the growth of Bangladesh SME. Thank you very much. Over to you, Selim Bhai.

Thank you, Tomal. Thank you for a brilliant effort from the SME team. Great to see the strong growth in deposits, reasonable growth in customer assets and particularly the incredible improvement in the portfolio quality. That is absolutely brilliant. I think that's quite astonishing to see a 2.2% NPL in the SME business. And even the 30-day par has improved to 3.48%. Importantly, you may have noticed that Tomal ended with a confirmation that the digital infrastructure for all the SME lending is now very much in place. And going forward, we will only continue to refine this process more and more and get more productivity and improved customer experience. Thanks again, Tomal. Let's move to Retail, and Mahiul Islam, Deputy Managing Director and Head of Retail, will give us a short update on the Retail business.

Thank you, Selim Bhai. Good evening to all. In retail banking, we continued our strong momentum in customer acquisition and deposit growth during quarter -- third quarter of this year in line with our strategy. I'll highlight some major areas. Our total customer number grew by 24% year-on-year to 1.47 million with a net inclusion of 283,000 customers. In terms of customer deposits, we had a very strong portfolio growth, 33% year-on-year, which now as of quarter end third quarter stands at BDT 29,500 crores. And I'd like to take this opportunity to thank especially our distribution team for their remarkable achievement in growing our retail customer deposit base, particularly this year. We continued our focus on digitalization. 75% of our eligible accounts were opened digitally and our mobile app Astha users crossed the 700,000 mark in September with a monthly transaction volume of over BDT 12,500 crores. In terms of digital loans, we also disbursed total more than 22,000 loans this year and with a portfolio which stands now of BDT 130 crores. So we are moving quite ahead in terms of digitalization and that's one of our core strategy. As a result of rising inflation, we continue to remain selective on lending in specific customer segments such as employee banking. And so our customer assets portfolio was fairly muted to 7% year-on-year growth with credit cards growth at 9%. We focused on risk-based pricing and our asset yield improved to 9.18%. Despite our continued strong efforts in portfolio management and collection, customers struggled due to macroeconomic stress that resulted in par increase by 68 basis points to 5.66% and NPL remained stable at around 2.92%. However, compared to the industry, our retail assets portfolio remained in much better position. Finally, as a result of our sustainable relationships with exchange houses and various offshore banking initiatives, our wage earners dividends had an outstanding growth of 79% year-on-year, touching $1.09 billion mark. That's all from my side. Thank you.

Thank you so much, Mahi. And we'll move to Shaheen Iqbal, Deputy Managing Director and Head of Treasury and Financial Institutions for a quick update on Treasury and FI business.

Thank you again, Selim Bhai. I think we have enhanced return on our portfolio by managing duration in government securities. This has given us a lot of benefit in terms of generating higher return. And also, we have been able to place bank's balance sheet in a better position for upcoming economic cycle or the interest rate cycle. And also on the FX side, like strong sourcing like both from remittance and other sources, GFIs, we have been able to support our trade efficiently and financing in foreign currency efficiently. And that's why we have been able to grow this portfolio significantly compared to the market. While market has degrown in overall trade, our portfolio has grown significantly, like 23%, as Tareq Bhai mentioned. On the risk side, like we are very well managed. Considering the current market scenario, we have built liquidity buffer. We have derisked our portfolio on move to government securities and reduced our overall exposure to the market. Considering the stress market scenario, I think we are very well placed in terms of maintaining our quality portfolio and generating appropriate return as well. I think that's from my side. Thank you very much again.

Thanks very much, Shaheen. Let's move to an update from our Head of Distribution. This is branch network, Sheikh Mohammad Ashfaque. He's also our Deputy Managing Director in BRAC Bank. Ashfaque, please give us an update on your distribution network.

Thank you, Selim Bhai. Good evening, everyone. Today, I am excited to share with you the remarkable strides we have made in expanding our distribution network, which have driven significant growth for BRAC Bank. These 9 months, we have achieved an impressive growth of BDT 9,800 crores, which is a 74% year-on-year increase. What's even more remarkable is that 80% of this growth is concentrated across our pan-bank, showing the strength of our reach and customer trust. In terms of new relationships, we onboarded 160,000 new customers, marking a 33% increase year-on-year. This achievement signifies our commitment to expanding our network and enhancing customer engagement. Looking at our balanced deposit growth, we have strategically diversified our portfolio with a balanced focus on Retail, SME and Corporate segments. Retail now makes up 50% of our deposits, while SME and Corporate account for 35% and 15% respectively. This balance is a proof to our robust strategy in catering to diverse customer needs. Now let's shift our focus on to what's driving this growth. It starts with customer engagement, where we hosted around 200 events to better connect with our customers and understand their needs. Additionally, our commitment to women leadership development is evident through initiatives like the Woman Warrior program and our all women branches empowering women in leadership roles and banking services. We have also been expanding our network by opening 16 new sub-branches and repositioning 14 existing ones to maximize our market presence. Furthermore, we have placed a strong emphasis on voice of customers through innovative tools like QR codes, FMS and Transition Triggers, which help us listen, adapt and improve. And last but not the least, our dedication to maintaining compliance is reflected in achieving a 96% satisfactory level. This achievement highlights not just numbers, but the hard work, innovation and customer-centric approach that drive us forward. Thank you for your support as we continue to grow and serve our communities better. Thank you.

Thank you, Ashfaque. It's pertinent to recognize that in Bangladesh our business growth through the distribution network is a combination of physical and digital, high-tech and high-touch. So we have digital capabilities for many, many customer segments and individual customers and corporate and institutional clients, but we are also able to provide a high-touch solution through our agent banking network, our restricted license sub-branches and our full licensed branches. We are expanding this physical network as much as we can here in 2024 and intend to continue to do so for 2025 and onward as well. It will be quite some time before Bangladesh can afford a fully digital bank. At the moment, that is somewhere in the future. Therefore, the need of the hour is to provide both digital and physical access to our different client segments. Thank you again, Ashfaque. Let's give an update on our portfolio from our Risk Head. Ahmed Rashid Joy, who is also a Deputy Managing Director in the team. Joy, over to you.

Thank you, Selim Bhai. Good evening, everyone. Our first slide is on the asset quality. And you can see in red line, our non-performing loan decreased by 60 basis points from 3.4% as of December 2023 to 2.8% in Q3 2024. In our recent memories, we have seen for the first time that our NPL ratio has gone sub-3 level. But even in absolute volume, our NPL amount decreased by BDT 148 crores in this year, if you follow the blue colored bar, which shows the absolute amount compared with the year-end of last year. Again, on 30 days overdue, our PAR ratio, which is the strictest measures, also decreased from 4.3% to 3.8% if you compared to the year-end of 2023. Despite the recent changes in NPL definition by Bangladesh Bank, which came into effect in Q3 2024, which we are talking about, our NPL ratio decreased both in percentage and absolute amount. Now what we want to emphasize here is that since 2017, our portfolio increased by more than around BDT 37,000 crores, whereas our NPL amount increased by only BDT 883 crores. Again, during this time, our portfolio increased by almost 3x, but our 30 days PAR ratio has come down below 4% level. So you can see that across the year, we could maintain our asset quality, thanks to our business model and the structured approaches in managing credit risk. Next slide. Now this is the vintage analysis, which will also prove the claim that we just made in the previous slide on the consistence of asset quality. Let me explain one. Each bar here shows amount of loan disbursed in each year, and the red portion is the amount of present NPL originated in that year. And then we presented them in percentage form. Let's take the bottom one, the year 2018. In that year, we disbursed loan for BDT 21,723 crores, of which BDT 125 crores is now classified, which is just 0.58% of the total loan disbursed in 2018. So in the last 7 years, we disbursed total around BDT 2.29 trillion of loans, from which only BDT 6.5 billion or BDT 650 crores is now NPL and that is 0.3% of the total loan disbursed during this 7 year. One more information. Again, this BDT 6.5 billion or BDT 650 crores NPL is the 40% of our total NPL, which originated in the last 7 years. It indicates that 60% of our NPL originated before 2018, and that's what we call it as the legacy portfolio. So this was all about vintage, which clarifies the NPL trend in a better way because we can trace the year of initiation of each bad loans. Now ladies and gentlemen, in line with the global best practices, we are building all the possible risk models by our in-house risk modeling teams. We have already rolled out RAROC for corporate exposures and are extensively working on the PD and LGD model under the IFRS 9. With all these risk models in operations, we will be more confident in managing our risk and credit loss statistically. Next. This is about NPL coverage and the credit cost. As of September 2024, our credit coverage stands at 131%. And during the year, we provided BDT 278 crores as loan loss provision, which resulted cost of credit to 65 bps. And this line -- chart is mostly consistent if we compare with that of the peers in our market. And that's all from me, Selim Bhai. Thank you.

Thanks, Joy. Thank you very much. Ladies and gentlemen, I think you will agree, that is an outstanding achievement in terms of the quality of the portfolio and is the result of both excellent risk appetite management, but also client acquisition and collection and recovery efforts as well. Overall, a fantastic team effort and easily the best portfolio quality in Bangladesh. Let's move to our Chief Operating Officer, Sabbir Hossain. He will give us a quick update on our sustainable finance initiatives. This is an important part of what we do in BRAC Bank.

Selim Bhai, thank you very much. BRAC Bank was recognized as one of the Top 10 Sustainable Banks by Bangladesh Bank and this was the fourth year we were recognized in a row. We've recently published our second sustainability report and that was very well accepted by our customers and the stakeholders. The report is available on our website. We would invite our stakeholders to please take a look at it. We now have completed 50 sustainable finance help desks in our network. And from these sustainable help desks, we actually educate our customers as to what are the products of sustainability we promote and how can we help them. We increased mobilization of concessional funds to promote green projects as well. On the portfolio side, 79% of our portfolio is now under sustainable finance. And at the same time, green finance stands at 24%. That actually depicts our commitment on the sustainability front. Thank you, Selim Bhai.

Thank you, Sabbir. Sustainability is a key KPI for BRAC Bank and for the different management teams. Let's move now to the actual financials and our Chief Financial Officer, Mr. Masud Rana, will now give you an update on how we've done in terms of the actual numbers.

Thank you, Selim Bhai. Good evening, and Assalamu Alaikum to all. If we start with our journey, I mean, as you can heard from our business leaders and also our distributions and risk and all, we have had a fantastic 9 months. We are quite pleased to deliver what we have promised to our stakeholders. Our strategic drive, I think we have actually delivered a good set of numbers, good set of results. I mean, now if you look at the -- on an overall bank perspective, the deposit has been the #1 deliveries that we could mention. So overall bank registered about 36% growth and all the Skyscraper, as you can see, is moving very rapidly and it is all across. All the segments, business segments has contributed. And thanks to SME, in particular, what has not happened before, we can see a very good momentum in our SME book. Retail has been fantastic. But at the same time, Corporate is also equaling that effort. If you look at the loans -- next slide, please. This is the overall mix of our deposit, the contribution from different segments. As you can see, we hold on to this mix of more or less similar. And Retail contributes around 50%, 30%, 35% from the Corporate and the rest is coming from SME. While if you look at the journey of our growth, in '22, which was BDT 35,000 crores book has now become almost doubled, BDT 61,000 crores. So if we look at the assets now, next slide, please. The CASA mix, yes, it was a tactical move from our side to build our deposit. And obviously, as the macro condition on overall liquidity position, we strategically grown our term deposit book, which is now about 57%. However, the CASA book overall in terms of volume has also grown. And we could see a traction in the SME transactional deposit and also in the Corporate side, of course, is growing, and we are hopeful that we can build on to our capacity and increase our CASA. But if I -- if you could recall, particularly the macro outlook, we believe the next 12 to 18 months would be -- will still be a difficult period and perhaps the interest rate -- high interest rate regime will continue. And therefore, we may not see a very different approach from our side. We will still would like to grow in terms of our deposit side, while we'll be selective and cautious in terms of lending. Of course, we will definitely grow wherever we get the opportunity. So next slide, please. Loans and advance. Yes, compared to last 2 years, if you look at -- the growth has been a bit muted in terms of last 2 years' growth where we registered about 25% to 28%, but understandably slow, roughly of these 3 quarters, first quarter was a bit dull following up the general election, then the market was a bit slow, but quarter 2 was very good. But quarter 3 in the month of July and August, we all know there was a massive disruption. So overall, the growth is bit muted compared to last 2 years. But I think the Corporate has actually compensated of these 2 other business segments and delivered a fantastic growth, which actually help us to capture the market share that Selim Bhai showed you a bit earlier. If you go into the next slide, this is the overall mix of our asset book roughly, and this is as per the regulatory definition, while the management view is different, I can -- I'll show you a bit later. But by the regulatory definition, our share of Corporate has grown now 43%, 41% SME and 16% Retail. However, in terms of management, we do look at -- like if you look at the next slide, Corporate, we manage it. If we take that into account, it is 37%, 48% is SME and Retail remains at 16%. So moving ahead, with this all, now let us review the financial scorecard. This is, of course, the stand-alone piece, the bank. The customer deposit has a staggering 34% year-on-year growth, while loan, as you can see, this has been for the last 9 months on an annualized basis, 14%. But as I said, in terms of our strategy, we wanted to grow our balance sheet and the balance sheet growth has been 26% in the total asset box in the orange color, as you can see. Our now balance sheet size is close to BDT 87,000 crores. If we look at our couple of financial metrics, like the yield of assets, it's almost a very short tenure, kind of almost a 12 months period book. So when -- at the same time last year, our yield was around 8%, which has now progressed to 9.4%, about 140 basis point improvement. And as we can understand, since July onwards, the cap is not there, the rate cap. So our growth in our yield will be much faster than the industry, being a short tenured book. On the other hand, the cost of deposit, in the last 12 months, it has grown by about 147 bps, 148 bps. So as a result, the spread is a bit more or less similar, while we discussed this CASA has gone down, but it was a tactical thing. In terms of the credit management, overall NPL reduced to 2.8%. And as we go along with our underwriting and all, this should go further down in all segments. NPL coverage as we have in 9 months in terms of the requirement, we have actually still making some buffer, preparing ourselves from the transition that the regulator is eyeing to. So overall, if the -- we move to a very stricter definition of NPL, we are sufficiently covered and would not impact our profitability as such. Now if we look at...

Thank you, Masud. I'd just like to interrupt you for a couple of minutes. And Deb, if we can remain on this slide, I'd like to focus the attention of our viewers on a few metrics here. Spread is around about 4%. That's where we want to be as a bank. We do not want to increase spreads to such levels that we could be accused of being predatory in nature. NPL has improved significantly. Cost-income ratio in 2024 has now come below 50%, at 48%. I think that is an outstanding achievement and reflects our investments in people, processes and technology over the last 3 or 4 years. If you look at our capital, again, very good at just under 15%. Our ROE is 16%. Return on assets is also good at 1.38%. I wanted our viewers to just focus on those areas. Lending has been relatively subdued, but it's still a 14% growth year-on-year and is significantly higher compared to market. Thanks, Masud. You can go on with the next slide.

Yes. If we go to the consolidated numbers, roughly more or less similar story that we was talking about for the stand-alone pieces, because in terms of balance sheet, 81% of the group is represented by the stand-alone pieces. So you'd see more or less similar trajectory in all those areas. What I like to highlight is that as a group our balance sheet is now reaching close to BDT 1 trillion, 99.6. So overall, we are inching towards that BDT 1 trillion balance sheet as a group. Our -- I would like to highlight the revenue growth, cost-to-income ratio are more or less similar trajectory if you look at across the group. Our PAT, thanks to bKash, positive contribution has been registered at more than BDT 1,000 crores in 9 months, which is -- I mean, good growth we can see. In terms of ROE, it's 16.4%, slightly improved. Overall, our group as a whole, our net asset value is BDT 42. I'd just like to share the overall contribution of our subsidiaries, if we can go to that. Yes. If we look at, this is the first 9 months compared to the last year's 9 months. So overall, if you look at -- we have had losses in our merchant bank, strong brokerage is almost there in these 2 subsidiaries, in particular, the losses that are recorded or reported here are basically coming from the market volatility that we have witnessed. In the merchant bank, the majority of the losses, in fact, 99% is coming from the mark-to-market losses of that proprietary investment book that we have. And the brokerage is predominantly the losses is again from the market holding of the securities and the market gone bad. However, in the broking business, since the volume was also down, however, if we compare both the institute has done, consider -- I mean, when compared to their peers. Coming back to Sajaan, it is an exchange house, which is our subsidiary, which is going into the business again after suspension. So it's getting its foot on the ground and improvement is there, as we can see, over a period of time. But first 9 months, it has reported a loss. But bKash has made this negatives to a positive. In the first 9 months, it has reported BDT 218 crores. So overall, our consolidated profit and loss is BDT 1,011 crores. I think we can hear from Moin Bhai, if he has joined, on the bKash 9 months results and we can get back -- happy to answer any questions if you have.

Thank you, Masud Bhai, and good evening, viewers. So in line with what Masud Bhai just mentioned, we've had a fantastic year at bKash too. The first 9 months of the year, I'm going to show you these 6 health parameters. They're all moving north. I'll begin with the customers. We clocked 77.9 million customers at the end of September, which is up by 3.8 million, and we continue to acquire about 28,000 customers a day. On to the right, of the 77.9 million, 40.2 million were active customers, which is more than 50%, 52% of the registered customers were active. In terms of market share, we ended September with 65.2% market share, which was also up by 0.5 percentage point from December 2023. Merchants, we -- at the end of September, we are more than 1 million merchants, bKash payment was available in more than 1 million merchants, which was up by about 220,000 merchants for the first 9 months of the year. In terms of average monthly volumes, BDT 839 billion is what we did, which translates to about BDT 27 billion a day, which is up by 16% from end of 2023. Agent points, we are 405,000 agent points, which is up by 41,000. So we added 41,000 new agents across the country for the first 9 months of the year. Move next slide. So this is the financial summary. Top-line, bottom-line recorded good growth. The bottom-line recorded extraordinary growth. Top-line, we continue to grow at the rate of 20%. So we have been growing at the rate of 20% for the past couple of years. So for this third quarter, our growth were basically driven by 2 elements; one was volume increased by 20% and the other one was interest income increase. So both of them coupled together led to a net revenue growth of 20%. You'll notice cost of services at the backdrop of net revenue increasing by 20%. Cost of services reduced -- increased only by 10%. So that is because we rationalized some of the -- from the commission that we pay in the supply chain, and that led to greater gross profit. So as a result of the rationalization, our gross profit increased by 41%. So our gross profit ratio right now is 35%. And if you compare it to last year, it was 30%. So that's why our gross profit increase is 41%. Next, operating and administrative expenses increased by 19%. The primary drivers were people cost, our number of head count increased and so did the increment and performance bonus, et cetera. The other increase in administrative and operating expenses was depreciation. So we continue to invest in technology, both software and hardware. That was the 2 reasons why -- and one of -- another element was foreign exchange. So we do buy or rather purchase technologies, which has the exposure of the foreign exchange. Commercial expenses increased by 16%. Primary drivers are communication expenses with customers and cost of acquiring customers. So that led to an operating profit increase of 1,728%. Next line is net finance income. That increased by 10%, primarily because of more interest rates. Our effective interest rates went up. That leads to a profit before contribution of BDT 359 million. Then you take off WPPF, we left with a profit before tax of BDT 341 crores, I'm sorry, yes. And after income tax, as Masud Bhai put, we finished quarter 3 with BDT 218 crores, which is up by 148% more the same period last year. So all in all, volumes are increasing by 19%, gross revenue is increasing by 19%, bottom-line is increasing by 140. So excellent year for the first 9 months of the year. Thank you.

Thank you, Moin. Masud, I believe we don't have anything else other than from any of the businesses and we can now move into the actual Q&A session itself. Deb, will you please read out the questions?

Thank you for all of you for giving the update. I'm staying with bKash. Moin Bhai is here. So Moin bhai, thank you for your update. We have a couple of questions which are related. So the question is that bKash made a significant profit within the 9 months of this year, which is BDT 218 crores, which is about 150% growth. So what is the reason?

So as I mentioned, one was we rationalized the commissions that we pay to our distributors, to our agents. We see increasing transactions on our app and also higher interest rates. So the 3 big reasons as to why we made -- our profit growth rate was 150%.

Next question is that currently, we have seen that there are some activities from the Bangladesh Bank going on the [indiscernible] active operations. So do you have any -- do you see any impact in this consequence in bKash business?

So the first 9 months of September, we -- our growth rates have been organic. So nothing extraordinary coming in for the first 9 months of the year.

So the next question and the last question is that now you made a significant profit, your partners improved significantly. So can shareholders expect enhanced dividend at the year-end?

So yes, we are making -- we've turned into a positive territory and we continue to do so. Dividend really is a shareholder issue. So that's -- I would obviously leave it to our shareholders to decide that.

That's all about bKash. Sir, can we continue with the BRAC Bank's related questions?

Please, please.

Okay. The first question is that according to the World Bank commodity outlook, commodity price may be stable in 2025 and inflation in Bangladesh may reduce. So why BRAC Bank is giving 9% interest on 2 or 3 years fixed deposit? Isn't this high deposit cost may decrease future profitability?

So we'll ask Shaheen Iqbal to answer that question. Shaheen, are you with us?

Yes.

And I'd just like to add in one comment there. Most of our 3-year lending, which is really SME business, is at roughly 13% to 14%. So it still gives -- if we can lock-in funds for 3 years at 9%, which is -- gives us a 4% margin, that's good business for us. But over to you, Shaheen.

Yes. You briefly touched upon the core idea, like we have a requirement to really increase the duration of our liabilities. So that's why if we can get some longer term fund at a relatively cheaper rate, then we'll welcome those. Also, say, 2 years' treasury bond yield is something like 12.3%. You can easily earn close to 3% spread. 5 years' treasury bond is 12.45%. So you can easily earn more than 3%. Why don't you book, like if you get 9%, 9.5% 2 to 3 years' time. So I think it's a win situation for us and also short-term rate is even higher. So we do not expect to see many depositors to really book there. But if they book, we will welcome those.

The next question is that given the current interest rate regime, what will BRAC Bank's approach be with regards to its medium-term strategy? And will it focus more on its existing customer base or what we could bring in the new customer base?

So #1, our overall bank strategy is to grow market share. #2, that is expected through customer relationships. In other words, we want to grow our customer numbers. They are roughly 2 million now. We'd certainly like to grow that much, much faster. Currently, both SME and Retail where the customer numbers are really relevant, are growing at approximately 50,000 customers per month. So that's about 600,000 customers every year. So our focus is on increasing that acquisition rate because new customers mean that we can cross-sell many different products to them. That strategy is not going to change with any change in interest rates. And as far as new-to-bank and existing customer base is concerned, in terms of the lending business, lending more to our existing customer base through something like a top-up is a key priority for us, but that does not mean that we are not constantly on a look-out for new-to-bank lending business as well, both in SME and Retail.

The next question is that it is evident that branches acquire most of the deposit from the market and treasury function brings in lion's share of the profit. So do you think [Technical Difficulty] is this model sustainable?

See, we're not too worried about the individual divisions. It's the total package, the enterprise that matters. And for the bank, although from an accounting perspective and in terms of cost allocation, most of the costs are in the larger businesses, customer businesses, network, branches and -- but the funds are managed by a small treasury team. So the profits invariably get parked in that area. We are not worried about that. For us, it's how these different business units can coordinate and collaborate amongst each other to grow our customer numbers and to getting more deposits and make more loans. So that is important to us. And I think one of the reasons why BRAC Bank is becoming more and more successful, you will notice our cost-income ratio has now dropped below 50%, this is because the different businesses, both the front-end sales and the back-end operations and technology are all working together very well. That collaboration is generating a lot of this revenue.

The next question is that excess liquidity in the banking system remains a concern for some of the liquidity starving banks. Now how is BRAC Bank handling this situation? And will it affect the overall banking sector affecting BRAC?

There's no hiding from the fact that the overall banking sector is under a lot of stress, particularly certain banks. As far as BRAC Bank is concerned, we are easily one of the better banks, better trusted by customers and all stakeholders and we are certainly benefiting from a flight to quality or a flight to safety as well. And that applies to clientele in all 3 customer segments, Corporate and Institutional, SME and Retail.

We received a few questions about our asset quality. So first question is that what has been the impact of political unrest on bank's loan portfolio, especially the SME client asset quality?

We'll ask Ahmed Rashid Joy to respond to that; and also Tomal, our Head of SME. Tomal, if you and Joy could together take that question?

Yes. Actually, as I told in my speech also, like the political unrest have impacted some of the businesses, but those are pretty small in numbers. And rather than the political unrest, the flood caused impact on most of the customer, as I said, in Feni, Comilla, Noakhali in that belt. And we are actually providing some support. We are actually talking to the Central Bank to provide these affected customers some sort of restructuring facilities, which we are actively in talks with them. And for the customers who have suffered, Bangladesh Bank will shortly give us some leeway so that we can extend their loan tenor and make their EMI smaller. So that way, we will be able to address those problems. But in terms of numbers, those are very small compared to the size of our portfolio.

I fully agree with Tomal. It was more of due to the flood rather than the political unrest, but this was on the SME. But on the Corporate side, we made presentations to our Board of Directors headed by our Corporate Banking Head about the labor unrest and if any of our RMG units have been impacted. So given our position of our factories, of our customers, there were nothing as such and sort of like our big RMG corporate customers were out of this vandalism by the workers.

I will ask Joy Bhai to hold on. We have come to the last question of this session. The question is that given the start of the loan classification tightening rules by the Bangladesh Bank, what can we expect of NPL and provisioning expense of the banking sector and for the BRAC Bank?

I won't comment on the banking sector. So the tightening policy started in the last quarter, September 2024, and the rest will take place on the next March. So what we have calculated is that because of the rule change, BDT 54 crores of our NPL amount will increase. But as I have presented you that in this year, on a cumulative basis, our NPL reduced by BDT 148 crores. And I would not comment on the market because we don't have that data in full. We haven't received the national NPL data as of September. Selim Bhai, if you could add anything on the market, if you want.

The sense we have is that as international best practice in terms of loan provisioning is implemented in Bangladesh, and it will over a period of time be done, then the industry will be under more stress in that sense. And the recognition of the whole in different banks will be -- I think that will be available to the regulators within the next 3 or 4 months. I personally think that you will start seeing better governance and more transparency in the Bangladesh banking sector over the next 6 months or so, because as these rules and regulations are implemented, there will be an initial shock. But after that, everybody will get down to working through it and building reserves to make-up for the shortfall in loan provisioning.

Thank you, sir. That's all from my side. So we will go back to you.

Ladies and gentlemen, we have ended right on the hour. Thank you for being with us. And we look forward to meeting you again for the year-end disclosure program. Good night and good bye.