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

Good evening. Welcome to BRAC Bank plc's H1 2026 earnings disclosure broadcast today across our online platform, Facebook, and other digital channels. I'm pleased to report that BRAC Bank delivered a strong first half of 2026. On a stand-alone basis, profit after tax grew 67% year-on-year to BDT INR 103 crores with return on equity of 19.71%. On a consolidated basis, profit after tax rose 57% to BDT INR 1,423 crores with ROE of 21.52%. This performance was underpinned by broad-based balance sheet growth, continued improvement in credit quality and further strengthening of our capital and liquidity position. Before inviting our business leaders to walk you through their respective segment updates, allow me to share some perspective on the macroeconomic environment and how it has shaped our performance this half of the year. Let me begin with the operating environment as it frames everything that we follow. Inflation eased to 9.16% in June from 9.42% in May, giving the Central Bank the room to cut the policy rate by 50 basis points in July. It's the first rate cut since 2020. This is a constructive signal, though I would caution against reading too much into a single data point. Remittance inflows grew 19.1% year-on-year, and foreign exchange reserves rose to USD 32.9 billion as of June 30, both supporting external stability. That said, the current account remains under pressure from elevated energy input costs, and the expansionary pursuit of the financial year 2027 budget will need to be financed prudently. Taken together, the operating environment is improving, but we are not getting ahead of it. We manage this institution to perform across a range of scenarios, not just the favorable one, and our results this half reflect that discipline as much as they reflect the prevailing tailwinds. So with this context, let me turn it over to our AMD and Head of SME Banking, Mr. Syed Abdul Momen. Syed Abdul, over to you.

Thank you, Tareq. Good evening, everyone. I will give you an update on the SME banking division. SME banking has grown very strongly in H1 '26, and I'm excited to walk you through the story behind the momentum. So in the first half, the SME story was all around deposits. Our SME deposit drive gained real momentum, and our deposit portfolio has grown by 28% year-on-year, an amazing achievement despite inflation staying elevated for much of the first half of '26. The most encouraging part of the H1 SME deposit growth is our CASA mix, which has improved to 45%, which has gone up by 4.3 percentage points. This is a result of a joint effort by our sales force and branch team to move from transaction-led to relationship-led growth. This has also helped us to hold on to our cost of deposit well at 5.03%. So that strong liability base funded our disciplined asset growth. The SME assets during H1 have grown by 14%, a measured pace in a soft macroeconomic environment. Our sharp focus on portfolio quality helped us to improve our 30-day overdues to 1.95%, which is almost a 105 bps improvement year-on-year. NPL has come down to 1.72%, which is also a 102 bps year-on-year improvement. So we managed to hold on to our asset yield at around 13%, which is strongly supported by the Central Bank's refinancing scheme, especially for CMSMEs. The SME trade business is something that experienced a slowdown during these challenging economic conditions. The trade volume was muted to USD 102 million, which is down 14% year-on-year. During the second half, we want to build on what we have done well in H1, which is to keep up the liability-led growth, grow CASA and low-cost deposits by deepening relationships with SME customers and bringing them into our digital payment ecosystem through our banking app, our QR payment system, supplier and distributor finance platform and so on and so forth. And equally push robust asset growth with the same underwriting discipline that has driven our quality gain in H1 and bring back the momentum in SME trade volume, extend former financing to underserved SMEs to digital means, and leverage the Bangladesh Bank refinancing scheme. So SME is doing what it does best: growing responsibility, staying disciplined on quality, and building momentum that will carry us to the rest of the year. Thank you, and over to you, Tareq.

Thanks, Syed. So in our SME division, growth and asset quality are moving in the right direction. We could not achieve the level of growth that we had expected in the first half of the year, partly due to the extended holidays around the election and, we remain confident that, in the second half, growth will be as per our expectation. We are also focused on recovering the shortfall and building stronger momentum over the next 6 months, encouragingly. And we have already started to see the traction from the last month, and we expect this momentum to continue throughout the remainder of this year. Thanks again. On this note, let me turn it over to our MD and Head of Wholesale Banking, Mr. [indiscernible], over to you.

Thank you, Tareq. Good evening, everyone. Let me walk you through Wholesale Banking's performance for H1 2026. On deposit, we focused on improving our CASA mix while strategically reducing high-cost term deposits, improving our cost of deposits by 44 basis points this year. Our CASA mix has now improved to 58%, a very positive 7% growth from last year. This reflects our conscious shift towards transactional deposits while we achieved 40% growth in digital transaction volume. On the asset and investment side, our portfolio grew to INR 27,762 crores, a healthy 24% year-on-year growth. Prudent onboarding and risk management practices continue to help us to maintain a quality portfolio. Our NPL now stands at 2.12%, one of the best in the industry. Strong OBU and FCY lending portfolio pushed down our overall yield somewhat. However, our strategic deposit mix helped us to keep the overall spread steady for wholesale banking. Credit volume was a real highlight this half. Total credit volume grew to USD 4.4 billion, a strong 30% year-on-year growth. This growth was driven by diversifying our footprint in the import segment across both public and private sectors and by onboarding new export clients. Our remittance business continued to grow strongly, 76% year-on-year. Our OBU grew 31% year-on-year, placing us among the front runners in this in both segments. In summary, H1 2023 reflects a deliberately cautious stance on deposits and credit growth amid macro headwinds, balanced by strong momentum in our chosen segments like trade, remittance and OBU, along with continuous improvement in asset quality and cost of funds. We look forward to even a stronger second half in 2026. Thank you for your questions, Tareq.

Thank you. In wholesale banking, we have performed ahead of our expectations while remaining highly selective and prudent in our lending approach. We are particularly pleased that the growth of our lending book is moving in line with our asset quality, reflecting our clear focus on the quality of our volume. If you look at our NPL position, it further reinforces that we are moving in the right direction, growing the portfolio responsibly while maintaining a strong focus on the quality of our assets. Now I would like to invite our Head of Retail Banking, Mahiul, to go through the retail business update. Mahiul, over to you.

Thank you. Good evening. In retail banking, we have continued our strong growth momentum in the first half of 2026, delivering healthy performance across deposits, lending and cards. Let me walk you through the key highlights. Our customer deposits portfolio grew by 38% year-on-year to reach INR 50,000-plus crores. So we have crossed a big milestone of INR 50,000-plus crore landmark. Our CASA mix stands at 33%, improving 1 percentage point year-to-date, while our cost of deposit has further improved by 20 basis points year-to-date to 6.30%, reflecting continued focus on funding quality and cost optimization. On the asset side, the portfolio grew by 25% year-on-year and 17% annualized year-to-date to INR 13,600-plus crores. Our asset yield has strengthened to 11.82%, improving by 122 basis points year-on-year, demonstrating a higher-yielding lending portfolio. Now, in terms of portfolio quality, our NPL has improved to 2.67%, declining by 75 basis points year-on-year. PAR also continues to remain healthy at 4.69%, improving by 58% year-on-year. Although it has increased slightly by 31 basis points year-to-date, we continue to closely monitor portfolio performance and remain confident in our collection capabilities. In our cards business, we have maintained growth across both portfolio and customer spending. Our credit card portfolio reached INR 1,700-plus crores, growing by 14% year-on-year, and credit card spend also increased by 22% year-on-year, while the debit card spend grew by an impressive 29% year-on-year, reflecting continued customer engagement across our digital payment ecosystem. Overall, the first half of 2026 has demonstrated strong, balanced growth across our retail banking segment, supported by improved yield and resilient asset momentum. We remain well positioned to build on this performance in the second half of this year. That's all from my side. Thank you.

Thank you, Mahiul. Although retail deposits have crossed INR 50,000 crores and our retail assets are growing faster than expected. We believe this is only the tip of the iceberg. There's significant headroom for us to grow further in this segment, and we are therefore reshaping and sharpening our strategies accordingly, with a clear focus on unlocking the full potential of our retail franchise. Hopefully, in the coming days, you will see a more agile and retail-focused bank as a leading retail franchise. I invite our Head of [indiscernible] to deliver his speech.

Thank you, Tareq, and good evening, everyone. I'm pleased to share a few highlights from our distribution network performance for H1 2026. Our focus has been on sustainable growth through relationship banking, service excellence, and strong compliance governance. The numbers reflect good progress across both business growth and customer engagement. Let me start with deposits. During H1, we achieved INR 9,300 crores of net deposit growth. Importantly, INR 5,000 crores of this growth came from CASA, taking our CASA mix to 55%. This is particularly encouraging because it means our deposit growth is increasingly coming from lower-cost and more stable sources. As a result, our cost of deposits declined by 46 basis points to 6.53%. So we are not only growing deposits, but also improving the quality and economics of our funding base. On the asset side, we disbursed INR 1,400 crores, representing 41% growth year-on-year. This demonstrates that we are successfully converting our strong deposit mobilization into productive assets while maintaining our focus on quality. We are also seeing strong momentum in our card business with 9,700 credit cards issued during H1, up 59% year-on-year. Customer engagement remains another key priority for us. During H1, we delivered 6.97 million services, equivalent to around 60,000 customer interactions every day. At the same time, we added 153,000 new relationships supported by digital and quality onboarding. So if I summarize the distribution network story in 3 points, first, we are delivering strong deposit growth with a significant portion coming through CASA. Second, we are improving the economics of our funding base with a meaningful reduction in the cost of deposits. And third, we are deepening relationships through asset growth, customer acquisition and service excellence. Going forward, our focus will remain on quality growth, increasing CASA penetration, deepening customer relationships, and delivering consistent service excellence while maintaining strong compliance and governance. That's all from me. Thank you very much.

Thank you. Our distribution network has made significant progress with more than 9,000 deposit migrations in H1. However, given the breadth of our nationwide presence, we see considerable opportunity to transform our distribution capabilities further. We are working towards making our network more digitally enabled, customer-centric and responsible so that we can serve our customers more seamlessly across the country. We are confident that you will see the impact of these initiatives very soon. With this note, I'm pleased to invite our MD and Chief Risk Officer, Mr. Ahmed Joy, to brief you on risk management and sustainable finance updates.

Thank you. Good evening, everyone. Yes, the first part that we have here is the stressed portfolio trend, and you can notice that 1 or the weak loan ratio, whatever it is called, is under control. In H1, we ended the stressed portfolio trend ratio at 2.79%, which includes an NPL ratio of 2.03% and the resulting loan of 0.76. So we combined and show this as a stressed loan portfolio. And you can notice that this is stable. This has been going on for a while. On the right side, you can see the NPL coverage ratio, that's 145%, which was end of H1 2026. Basically, this increased from 133% at the year-end. And for the corresponding period, our cost of credit was 89 bps, the same as what we had last year of 91 bps. At the bottom, you can notice that our net NPL ratio was 0.19%. This net NPL ratio is basically the bad debt less interest suspense and specific provisions. So that is 0.19% we have at the end of H1 2026. The NPL slippage ratio was minus 0.15%, which indicates that in absolute volume, our NPL amount declined. I have a question on that in the follow-on questions on that. There is more of the write-off amount that we did in H1, which I will answer in the separate questions. With that, our economic cost of risk, which is the written amount divided by the entire portfolio, was 0.5% in the first half of this year. So, at the bottom, we are still holding an NPL coverage ratio of 145%, a stressed loan portfolio ratio below 3%, and an NPL slippage ratio of virtually 0. Next slide, on sustainable finance, we still have 10% in our green portfolio that is within the term loan; our green portfolio is 10%, and the sustainable portfolio is 82% given the regulatory definitions. We have unlocked a 60 million credit line from the European Investment Bank recently. The utilizations will be mostly for the green financing and the sustainable financing. On the right side, you can see that since last year, we issued the first social bond in this country. I mean, 91% of the allocations we have already completed out of the process of that social bond of INR 1,000 crores. So that has been done. We are working on the green bond framework according to the ICMA principles, and we are approaching the regulator for the approvals of the green bond. On transparency and recognition, we continue to publish our sustainability report with global standards and GHG emissions. In addition, we are also publishing the IFRS S1 and S2 reports, which we did last year as well. So we are continuing our focus on ESG and sustainable finance. We are also engaging with the development financial institutions globally who will set our strategic target on net-zero emissions and also what the bank should undertake with regard to sustainable finance compared to the global best practices. So that's it from my side. Thank you, Tareq. Over to you.

Thank you. So let me highlight 2 numbers again. One is that our stress portfolio has fallen with NPL coverage at 145% and slippage negative in H1 '26; we recovered more than we lost. These are the 2 numbers that I would like to highlight again. At the same time, 82% of our portfolio is now sustainable finance, and we unlocked EUR 60 million from the EIB, the longest tenor line ever extended to a private commercial bank in Bangladesh. That is not a coincidence. Long-term development capital is priced on asset quality and disclosure. Our credit discipline is what makes it available to us, and the capital is what lets us lend long. We enter the second half with a cleaner book and a funding profile that this market can replicate. So with this note, I would like to invite our Chief Financial Officer, Mr. Masud Rana, to represent our financial performance in greater detail.

Thank you. Good evening, and all welcome to all the viewers. We are really proud to share this excellent set of results for the first half of this year with our stakeholders. This strong set of results is supported or is a function of many things. Let me call out those. I think to start with, we have a well-diversified and very large business. Our approach, if you call it, is prudent and disciplined balance sheet management, driving efficiency, improved asset quality, and also, most importantly, the collaboration that we've driven during the first half across the businesses. This all led to a fantastic set of results. So if you look at our scorecard, our balance sheet continues to grow at a rate of around 25%. However, if you look at the last 4 quarters, the second half of the last year captures about 55% of this growth. This half actually gives us about 45%. As our MD and also my business colleagues has alluded that the environment is very subdued, and that's a reflection in also translating to our numbers as well. Like the similar period, perhaps in 2025, you would have noticed a larger growth in our balance sheet. Having said so, this asset growth is predominantly driven by our deposits, as all our colleagues have mentioned. I think if we look at our revenue, it has grown by about 31% year-on-year. And the corresponding earning asset growth was 23%. So 23% growth on earning assets, but revenue has grown by about 31%. So the delta has come from the efficiency that we have driven in a planned manner. We have been focusing on gathering more low-cost CASA. We have focused on other businesses that have helped this growth of the revenue. If you look at the net interest income, while this net interest income is as per our regulatory format. However, if I take the overall earning asset, our interest income constitutes about 82% of our income. The 18% is the non-funded or fees income. So we have seen that over a period of time, with the growing balance sheet, growing business side, our fees income has also grown. However, just to note, particularly in trade finance, we have seen our trade throughput was about INR 4.4 billion, which has significantly grown. But at the same time, we can see intense competition within the market. And therefore, the margin has gone a bit thin. However, that has been compensated by the volume that we have grown in the last half of the year. If you look at our yield, it is improving year-on-year by about 37 bps. And this is because of the kind of diversified business we have. 65% of our business is in granular businesses like SME and retail and also wholesale. Given the construct of the business, it's quite a quick-churning business. And therefore, this yield growth has been registered at 37 basis points. At the same time, as we are focusing on low-cost transactional flow of the CASA deposit, overall cost of deposit has also improved by 16 basis points and has resulted in about a 54 basis point improvement in our spread. Our profit after tax has grown by about 67%. This is a combination of our business growth, resulting in revenue growth, very focused attention to our costs, and driving efficiency. Our cost-to-income ratio has improved to 42%, which was last year same period was 48%. But at the same time, we have continued to invest in our people, technology, and infrastructure. Having said so, in the first half, we have invested a hefty amount to review our staff salaries and compensation. I'm very proud and satisfied that we have done that. And now we can say our compensation practice is most competitive in the market. If we look at overall, our financial metrics, like return on asset has improved by about 41 basis points, and also ROE is 19.7%, close to 20%. If we go to the consolidated piece, the picture is more or less similar: the balance sheet grew about 24% revenue also grew close to the solo performance. Profit after tax at a 100% consolidation level is INR 1,423 crores. ROA and ROEs have similarly grown. I think if we go to the next slide, that will give you the picture of our subsidiaries' contribution. We have got 4 subsidiaries: 2 capital market subsidiaries, an exchange house, and Vikash. So in the capital market subsidiaries, investment is still suffering due to the market conditions and all. However, it's picking up a bit. I would say we are optimistic that the second half would be better than the first half. In the stock brokerage, the stock brokerage is gaining momentum, and the market is reviving, and we hope to see a strong second half in the brokerage. Sagen is picking up, and we believe that in the next half, we will get to see profit generation from this business. Bkash, the good contribution that Bkash has been making is continuing. First half, they have reported INR 409 crores. This is as per the 100% consolidation. But if we exclude the minority interest, our consolidated profit would be around INR 1,161 crores. However, I think Mohenbai has joined us. So we will like to hear from him about the Vikash performance for the first half. Over to you, Mohenbai.

Thank you, Mahaiul. Thank you. Good evening. I will just quickly take you through how the first 6 months of the year looked like. So to start off with our biggest asset, our customers. We finished the first half with 84 million customers. So we added about 5 million more in the first 6 months of the year. We were averaging about 27,000, 26,000 customers a day. In terms of merchants, we have 950,000 merchants across the country where bKash is accepted. In terms of volume throughput, it's 363 billion. That really means that we're doing about 45.2 billion every day that's going through the platform. Coming down to active customers, 50 million active customers, which was a growth of 11% over last year. It was 45 million last year. Agent number, 369,000 agents across the country. Remittance volume was 146 billion. So roughly 6% of the country's remittance flows through bKash. And on an average, 1.3 million beneficiaries receive remittance every month. So those are our key indicators. Coming down to the P&L. We've had a growth of 15%, fairly modest if you compare it last year. So a net revenue of INR 3,692 crores in the first 6 months of the year. Moving to cost of services. So as opposed to revenue, which grew 15%, cost of revenue grew by 13%, which translated to a gross margin profit of a 20% increase to INR 1,393 crores. If you were to then deduct operating administrative expenses, INR 738 crores for the first 6 months, primarily being driven by depreciation, annual maintenance charges and salaries and wages. Commercial expenses were flat, which then comes down to INR 437 crores, which is a 37% increase over the same period last year. Net finance income is the interest that we yield from our own working capital, which was INR 159 crores, which is a 36% increase. And then moving to profit before tax is INR 566 crores. If you deduct tax. So we finished the first 6 months of the year with INR 412 crores, which is a 34% increase over same time last year. So, in a nutshell, was bKash's financial performance.

Profits are growing more than twice as fast as revenue. [Technical Difficulty] So let me start again. Before we open to your questions, let me share a few closing thoughts. The results we have just walked you through are not accidents. They reflect the discipline of our team, the trust of our customers and depositors and strategy grounded in what we believe is the matters for a bank like ours, which are sustainable growth, disciplined risk management and genuine impact in the communities we serve. So we are mindful that the environment remains fit, Inflation is easing, but external pressure persist. So those opportunities abound, but so do headwinds. Our role is not to take every opportunity or to shy away from the major challenges. It is to navigate this landscape with clarity, integrity and the long view. So what I'm confident about this bank is that BRAC Bank has the capital, the team, the strategic clarity to perform across scenarios. Our credit quality has improved. Our balance sheet is resilient. Our cost discipline is real and our people, our colleagues across all divisions remain deeply committed to delivering for you. So as we move into the second half, we'll continue to focus on what we control, credit quality, cost efficiency and deepening relationship with our customers. So we'll be opportunistic in growth, but never reckless; we also keep our capital and liquidity management discipline because that is what institution stewardship demands. Thank you for your confidence in BRAC Bank. Now we look forward to your questions.

We have received a couple of questions. So let me start with the bKash first. So I will ask Moha to join. Mohai, over to you. The first question is, is there any update on listing bKash to SEC or GSE?

No, there's not as yet. There's absolutely no update from us from bKash in terms of listing. Okay.

So the next question is that if bKash receives a digital bank license, what would be the key investment requirements? And when do you expect the business to reach meaningful scale?

Well, the outcome has not been announced; we are hopeful. In terms of the minimum capital requirement, the regulations clearly stated that the minimum capital level was INR 300 crores. And how long will it take to break even? Well, it's absolutely new venture. We'll have to see as and when it comes in terms of how long does it take to break. I think we've got some time to go there. The license needs to become for us and then we start, we invest and then the breakeven.

The next question is just opposite of that, that if bKash does not receive the license, then how do you see that competition from other digital banks? And what would be bKash's strategy to maintain its market position?

As I said, we are hopeful. Hopefully, we'll receive it. But in the event that we don't, we obviously have our biggest assets, which is our customers. There are many ways of capitalizing on the assets we have their data, their behavioral patterns. There are many ways of monetizing this data. Okay.

So, the next question is, what is bKash's current MSA market share and H1 volume growth? And with the large float balance, which area is BeKashident for investing that money as rates fall?