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Mercantile Bank’s move to facilitate industrial growth

imagesManaging cost of fund, encouraging low cost deposits and lowering higher rate of bank loans are the top priorities of Mercantile Bank Ltd to facilitate industrial growth of the country, the Bank’s Managing Director (MD) & Chief Executive Officer (CEO) M. Ehsanul Haque said.

In an exclusive interview with the FE,  Mr Haque disclosed the business priorities of the leading third generation private commercial bank and shared the Bank’s contribution in expediting growth of the Readymade Garments (RMG), textile, agriculture and Small and Medium Enterprises (SMEs).

“We started our journey 15 years back. Fortunately, the bank did not face any major setback so far and witnessed a steady rise,” he said.

He said the main concern is cost of fund, not size of deposits of the banks.

“If cost of fund is 6-8 per cent on Tk 10 million deposits, than we are happy but if it is 12 per cent for Tk 100 million, we do face problems,” he said.

“We have supported a wide range of industries. It has contributed to expedite growth of readymade garments and textile sector.”

Many RMG and textile industries started with two line businesses 15 years ago with the financial support of the bank. They have moved up and are going on. Their growth is now so robust that they are now borrowing from global market.

The bank is disbursing agricultural loan through partnering with the micro-finance and non-government organisations (NGOs) that have wide-range of network in grass-root level.

The Bank’s disbursement of loan in SMEs is quite significant after RMG and other trading businesses.

Currently, the bank has some 93 branches across the country.

Mr Haque remained optimistic to hit the number of branches to 100 by the end of this year (2014).

“We are focusing on lesser developed area in north Bengal zone of the country. Demand for agricultural loan is higher in the area,”

Mercantile Bank has been disbursing loan in auto and semi-auto rice mills in northern areas of the country.

The bank is exercising smart policy that helped it to gain profit in 2013 despite unfavourable situation.

Last year, operating profit of the Bank was Tk 4.40 billion. Up to March this year, operating profit was Tk 1.15 billion.

Profit growth was around 29 per cent in 2013 compared to that of 2012.

Although the business growth was hampered with political turmoil last year, the Bank has overcome the challenge amid sluggish business growth faced by others.

“The year 2013 was very good for us because fund management was cool and calculative. With the proper management, cost of fund came down and leakages were capped,” he said.

“The Bank has provided lucrative dividend to the share-holders and offered four bonuses to its employees,” he added.

The bank has also been able to bring down non-performing loan rate and recovered a significant amount of loans.

On investment scenario, Mr Haque said this year and beyond, there will be some demand for loan. He,however noted that there are several challenges on boosting investment. Communication and utility service and adequate supply of power, gas should be ensured.

The base of Mercantile Bank is quite larger and it is continuously expanding, the senior banker said.

“There are many challenges with the presence of so many banks,” he said.

“We have adopted a strategy under which a newly-opened branch gets 18 months time after opening to come into profit,” he added.

On SME loan, Mr Haque said “I strongly believe there would be no development without SME. SME can facilitate growth for large industries.”

The bank is disbursing SME loan through partnering with other financing institutions as their distribution channel is much cheaper and larger. Agricultural loan target for 2014 was achieved in the first quarter of the year.

Responding to a query on excess liquidity, he said it will not persist if investment boosts up. He said credit demand is quite low now.

Mr Haque said the Bank is discouraging high cost deposits but encouraging small savers.

“We have some 5,00,000 small depositors  ranging from garments to middle class businessmen,” he said.

They opened monthly deposit accounts with Tk 500 to Tk 50,000 across the country, he added.

Small savers prefer monthly schemes. Marginal savers are strength of the bank because of their sustainable deposits. They contribute some 30 per cent of total deposits.

“We are in a declining regime of interest rates. Term deposit rate is 10 per cent whereas lending rate is 14-16 per cent for corporate,” Mr Haque said.

The spread is about 5-6 per cent. When rate of interest will come down, spread will be narrowed.

Mr Haque said there is a gap on supply and demand. High rate of bank interest for bank depositors is now demand of the market. He, however, expressed hope over bringing down the spread very soon. The bank will be able to disburse loan at 12 per cent rate of interest.

Currently, interest rate on loan in foreign currency is 6.7 per cent.

“We want single digit rate of interest on loan. High rate obviously hurts business,” he said.

The bank will issue second TR bond, subordinated bond, amounting to Tk 3.0 billion that will re-strengthen capital base for lending.

Deposits base of Mercantile Bank is quite larger, close to Tk 130 billion and advance is about Tk 110 billion.

Report: Doulot Akter Mala
Source: Financial Express

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