United Commercial Bank Ltd (UCBL), a private sector commercial bank has achieved remarkable progress during last fiscal year and maintained it success this fiscal overcoming its previous weaker position.

The Bank has earned Tk 6.07 billion operating profit in the year 2011, marking an attractive growth of 138.04 percent.

Considering the overall performance, especially the upward trend of most of the key indicators, the Bangladesh Bank has de-listed the from “Early Warning” category in June 2011, Bank sources said.

The Bank has Tk 139.48 billion deposit which was Tk 113.07 billion in the previous year.

In three years, the Bank has gained a remarkable 2323 percent growth in terms of its paid-up capital as it was Tk 7.27 billion as on 2011, jumping from Tk 300 million in 2008. The paid-up capital, however, was Tk 1.19 billion in 2009 and Tk 2.91 billion in 2010.

At present, the Bank has Tk 16.15 billion shareholders’ equity, gaining by 268.72 percent while the amount of loans and advances is Tk 114.87 billion with 158.43 percent growth over the year 2008.

In 2011, the Bank made export transactions of Tk 76.96 billion and import of Tk 90.92 billion, the source said.

Expatriates channeled Tk 16.80 billion through UCB in 2011. In the previous year it was Tk 5.45 billion.

Gaining 4.45 percent growth in terms of Capital Adequacy Ration (CAR) in 2011, the Bank had 10.80 percent CAR which in 2010 was only 6.31 percent.

The Bank’s Non-Performing Loan (NPL) has come down to 1.80 percent from 4.62 percent in 2008.

At present, the Bank has a total of 120 branches across the country and 2982 employees. In terms of setting up new branches the Bank achieves 42.86 percent while in new recruitment it gains 42.54 percent growth.

The employees of the Bank feel that the dynamic leadership as well as enriched experiences of the present Managing Director M Shahjahan Bhuiyan has been playing tremendous role in achieving rapid progress and putting the bank gradually on a firm footing.

M Shahjahan Bhuiyan, a well acclaimed banker, has already been able to bring the Bank out from the bad repute of problem Bank and putting his best efforts in placing the Bank in the row of an acceptable and dependable commercial bank.

He has applied some innovative ideas to accelerate the banking activities. As part of it, the Bank has raised Tk 4.36 billion through issuing rights shares during March-April 2011.

M Shahjahan Bhuiyan, who has just won the “Best Banker Award-2010,” newly initiated by the Bangladesh Institute of Bank Management (BIBM) and the Institute of Bankers Bangladesh said (IBB), told daily sun that the very exceptional performance that are visible in UCBL today was possible as a strong corporate governance concept was established in the bank management.

He said that the successful operation and growth depends upon the quality governance. Absence of good governance in many cases create obstacle in the way of institutional advancement.

He also believed that, the honest, skilled, responsible and experienced managing board can play most significant role behind the success of institutions like any bank. The expected success is possible to achieve through the collective efforts both from the management board and the operational body.

He, however, hoped to establish the UCB as one of the leading commercial banks within short span of time through the guidelines and cooperation of the management board.

The Daily Sun/Bangladesh/ 16th Feb 2012

M Shahjahan Bhuiyan, managing director of United Commercial Bank, won the country's first-ever best banker award for his outstanding contribution to steering a troubled-bank into a profitable one.

Bangladesh Bank Governor Dr Atiur Rahman handed over the award at a ceremony in Purbani Hotel co-organised by Bangladesh Institute of Bank Management (BIBM) and Institute of Bankers Bangladesh (IBB).

Bhuiyan also received a certificate and a cheque for Tk 1 lakh as the award money.

“He (Bhuiyan) has been recognised for his excellent efforts to turn a problematic bank into a very successful one,” Rahman said in his speech.

The governor said this recognition would increase competitiveness among the banks.

A six-member jury board led by eminent banker Khondker Ibrahim Khaled selected Bhuiyan for the award, Kriti Banker 2010, by assessing his performance. The jury board assessed deposit, lending and profit growth as well as the status of non-performing loans.

“The nominee's image was also considered in the selection,” said Khaled, chairman of Bangladesh Krishi Bank.

UCB's operating profit increased by an amazing average of 138 percent in four years since Bhuiyan took over the bank's charge in 2008.

Deposits and loans grew by 156 percent and 158 percent respectively between 2008 and 2011.

The BB governor said the banking industry is an important part of the economy. The economy, which faced turmoil in the past year, is slowly getting stabilised, especially due to prudent role played by the bankers, he said.

Rahman cited the example of the depreciation of the taka, interest rates and operation of banks in this regard.

“Banking is not only a monetary transaction but also a business of reliance and trust,” said Bhuiyan.

“I am aware that this award is a mere milestone in the never-ending journey of providing excellent services to our customers,” he said.

Humayun Kabir, managing director of Sonali Bank, chaired the event.

Prof Mustafizur Rahman, executive director of Centre for Policy Dialogue, Amjad Khan Chowdhury, president of Metropolitan Chamber of Commerce and Industry, Dr Towfiq Ahmed Chowdhury, director general of BIBM, and MA Yusuf Khan, a former banker, were the other members in the jury board.

The Daily Star/Bangladesh/ 16th Feb 2012

Bangladesh Bank yesterday released a commemorative note of Tk 60 denomination, marking the 60th anniversary of the country's Language Movement, the BB said in a statement yesterday.

Artist Murtaza Bashir unveiled the note at a function at the bank's premises in the capital.

The central bank printed 10 lakh pieces of the commemorative note with the title of '60 Years of Language Movement 1952-2012'.

The note carries the image of the Central Shaheed Minar on one side and portraits of five language martyrs on the other side, according to the statement.

“The Language Movement was not only a movement for the mother language, but it was also a fight to bring about socioeconomic changes in the country. So, we should keep it in mind round the year,” said Bashir.

"Currency collectors, both at home and abroad, will be able to know about the Language Movement through the note," said BB Governor Atiur Rahman.

Syed Badrul Ahsan, executive editor of The Daily Star, wrote the literature part of the note in English while officials of BB's department of currency management and payment systems translated it into Bangla.

The note is now available at the central bank's Motijheel office at Tk 200 with an especially designed folder and envelope while only the note will cost Tk 60.

The note will also be available at all branches of the BB and commercial banks across the country from February 19.

The Daily Star/Bangladesh/ 16th Feb 2012

Banks have gradually increased investments in clean and renewable-energy technology, which was beyond conventional banking a few years ago.

Total investments in the alternative energy sector stood at Tk 71 crore till November 2011, according to Bangladesh Bank (BB) data. Of the investment, BB refinanced Tk 25 crore from its Tk 200 crore fund and the rest was lent by banks.

Trust Bank financed Tk 15 crore to set up 500 biogas plants in Gazipur, Manikganj, Natore, Tangail and Barisal in less than two years. The Bank aims to take the total number of plants to 1,000 by June.

AB Bank is implementing a project to install solar panels for 2,700 families in the Sylhet region. Mutual Trust Bank has funded nine solar-powered pumps for irrigation across the country. Eastern Bank, which funded the highest amount of Tk 29 crore to a single project -- Rahimafrooz Renewable Energy, is now financing poultry farms to convert waste into gas and electricity in Cox's Bazar.

On biogas plants, Shah A Sarwar, managing director of Trust Bank, said, “Though it is going through trial and error, it is still workable.”

Leaving rural areas that account for 68 percent of Bangladesh's economy, out of lending programmes, does not make business sense to banks, he said.

Trust Bank runs this business on a 'four cow model'. The Bank lends Tk 3 lakh to buy four cows and the borrowers can feed those cows and pay bank instalments by selling milk. In addition, slurry generated from the biogas plants can be used as organic fertiliser.

“We want to connect with the rural economy for sustainability and financial inclusion,” said Sarwar.

Mutual Trust Bank, which funded the first ever solar pump for irrigation in the southern district of Barguna in July 2010 for Tk 34 lakh, has now set up nine such pumps.

“All those pumps are running quite well,” said Anis A Khan, managing director of Mutual Trust Bank.

Khan said the Bank also disbursed Tk 20 crore to set up solar panels in 900 off-grid union parishads (councils). The Bank also launched loan products for green energy recently, he said.

Eastern Bank has given $3 million in loans to Rahimafrooz Renewable Energy to produce 18 megawatts of electricity. The Bank has also financed the setup of effluent treatment plants at many textiles and garment factories. Despite that, Ali Reza Iftekhar, managing director of the Bank, believes they are not doing enough to save the planet.

“We have to own the planet we live in,” said Iftekhar.

BB Governor Dr Atiur Rahman, however, is not happy with the pace the banks are financing green projects.

“Banks can appoint agents, if necessary, to reach out to more clients with renewable energy products,” said Rahman.

He said BB has given out only Tk 25 crore to banks so far, out of its Tk 200 crore scheme. The governor is surprised to see why the banks are not so interested in taking the fund at an interest rate of only 5 percent.

The Daily Star/Bangladesh/ 16th Feb 2012

Bangladesh Bank has been pursuing a contractionary monetary policy since December 2010. Initially, it was intended to avert a bubble in the country's capital market and to limit inflation at a reasonable level. The disclosure of the policy statement triggered a slump in the stock market and, since then, an increasing liquidity crunch ensued in the banking sector.

The exchange rate between Taka and the US dollar experienced a nominal devaluation by about 20 per cent in the last 12 months. Foreign exchange reserves plummeted. In January 2012, the reserve were found to be insufficient to support three-month import bills. Point-to-point CPI inflation continued to rise and hit a maximum 12 per cent in September 2011.

A rising inflation combined with an excessive government borrowing from the banking system has further aggravated liquidity position of the banking sector. Leading entrepreneurs of the country feared that the excessive public borrowing would crowd out private sector investment and slow down the economic growth.

Bangladesh Bank on January 26, 2012 thus unveiled its monetary policy statement (MPS) for the second half of 2011-12. The policy statement identified price stability and adjustment in the current account balance as major objectives. An intense debate is undergoing if the recent monetary and exchange rate policies would bring about the needed macroeconomic adjustment.

Before we focus on the effectiveness of recent monetary and exchange rate policies, it is better to reflect on how Bangladesh economy evolved into this present uncertainty. As we all know, our economy has grown three times bigger than the level it was in 1991.

The per capita GDP has more than doubled. Even the growth rate of per capita GDP accelerated from less than 2.2 per cent to more than 4.9 per cent during this time. Both saving and investment in relation to GDP also saw a persistent growth. Trade gap and as such saving-investment gap though widened, it did not cause any serious imbalance in our external account.

An increasing flow of inward remittances helped to meet this gap. This was a remarkable development. Goldman Sachs thus labelled Bangladesh as one of the New 11 (N-11) emerging economies that would drive the future growth of the world economy. But a big question is what went wrong that the economy got into a crisis scenario.

The rising economic growth was not all good. It is argued that it was more driven by rising aggregate demand than the expansion of productive capacity. This happened in the context of increasing exports and remittance earnings and a persistently rising broad money supply in the domestic economy. In fact, M2 to GDP ratio, which is a measure of broad money supply, increased from 31.5 per cent in 2000 to about 56.6 per cent in 2011. This monetary expansion was even more pronounced in recent times rising from 45.6 per cent of GDP in 2008 to 56.6 per cent in 2011.

An external factor indeed played a complimentary role to this monetary growth. It is that the central bank maintained a de facto pegged exchange rate with the US dollar and that, since August 2008, the dollar devalued by 25-40 per cent against some major currencies including the Japanese yen and euro. Note that the regime classification of exchange rate by Bangladesh Bank is managed floating not pegged to the dollar and it is known as de jure classification in the literature.

The fact that the taka-dollar exchange rate remained stable at around Tk 69/US dollar from 2007 to 2011 implies that the monetary policy in Bangladesh was somewhat tied with that of the United States. Since the Fed followed a hugely expansionary monetary policy to stimulate the US economy after the collapse of Lehman Brothers in 2008, Bangladesh monetary policy became automatically further expansionary as the central bank continued to peg its currency to the US dollar. It was also then a policy response to an uncertainty that our apparel exports would possibly suffer from a loss of demand in the US and Euro-area markets.

Excess liquidity in the financial sector was an obvious outcome and the private sector credit became cheaper. Both the deposit and lending rates decreased significantly. Investment by firms and consumption by households jumped up during the period. Economic growth accelerated largely because of rising aggregate demand and the soaring private sector credit fuelled it. Banks and financial institutions being flooded with money further found ways to prop up certain asset markets.

Given that the country is endowed with limited land and its share market is too small, both the markets observed bubbles in recent times. Bubble in the share market has in fact busted as the central bank began monetary tightening in the December of 2010. The timing of this policy intervention was too late to arrest emerging macroeconomic imbalances.

It is recognised in macroeconomics that prices do not respond to monetary expansion in the short-run. But as the real economy evolves to its long-run potential, excess money will only translate into rising price level. In fact, the consumer price index began to move up in the July of 2010. Point-to-point CPI inflation jumped up from 7.0 per cent in July 2010 to a double-digit 12 per cent in January 2012.

A persistently rising domestic price level has caused real effective exchange rate to appreciate and the trade deficit to widen. Trade deficit to GDP ratio increased from 6.6 per cent 8.8 per cent between 2010 and 2011 fiscal years. The taka value of aggregate imports increased by 46 per cent.

Imports of certain primary commodities, including rice, wheat, crude oil and other petroleum products, increased by about 85 per cent between the years. Current account balance deteriorated though remittance flow remained buoyant.

The central began tried to support initially its pegged exchange rate possibly to limit rise in local price of imported commodities. But the policy proved unsustainable as the foreign exchange reserves declined below US$10 billion in December 2011 and proved insufficient to cover even three-month import bills.

Bangladesh Bank thus let the taka-dollar exchange rate to depreciate by more than 20 per cent between July 2010 and January 2012. In fact, a large part of the devaluation happened in the last six-month period starting from July 2011.

Two further problems on the fiscal front compounded the problem. One is that the government failed to obtain its planned long-term external financing from the multilateral agencies to embark on some mega development projects, including Padma Bridge. The other is that the rising volume of imports of fuel and petroleum products forced the government to heavily borrow from the domestic banking system. An increased public borrowing resulted into a severe liquidity crunch in the banking system.

It is notable the liquidity crisis in the banking sector began when the central bank increased the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR) for the private commercial banks in the middle of December 2010. The liquidity problem since then only aggravated as the capital market crisis further worsened.

The big question is now if the recent MPS would bring about needed macroeconomic adjustments and, if yes, how long it will take to happen. The answer crucially depends on how fiscal policies will be coordinated with the monetary and exchange rate policies. One immediate policy goal should be a significant cut in the planned government spending. And it must accompany substantial reforms in fiscal management.

A nominal depreciation of taka/dollar exchange rate by more than 20 per cent would surely increase price competitiveness of our exports. As local prices of imported goods would rise substantially, the devaluation would significantly reduce growth rate of aggregate imports. An increasing flow of remittances will follow too.

The adjustment phase will likely be longer than the MPS perhaps expected it to be. Unless the fiscal management improves and government spending becomes restrained, the monetary policy objectives will remain unmet. For a government facing a general election in two years, it is politically costly though.

Financial Express/Bangladesh/ 15th Feb 2012