directors' report - Dutch-Bangla Bank Limited

A 100% compliant export-oriented 

denim fabric manufacturing Industry 

at Comilla EPZ financed by DBBL. 

A partial view of 100% export-oriented 

embroidery factory at Fotullah, Narayanganj 

financed by DBBL. 

directors' report 

Bismillahir Rahmanir Rahim 

Dear Fellow Shareholders 

The Board of Directors is pleased to welcome the 

honorable shareholders in the 12th Annual General 

Meeting of the Bank. The Directors' Report along 

with audited financial statements and auditors' 

report thereon for the year ended December 31, 

2007 are presented before your kind-self. 

In the report, DBBL's operational performance of 

2007 as compared to 2006 have been evaluated 

and analyzed within the prevailing business 

environment. The information and analysis may be 

read in conjunction with the DBBL's audited 

financial statements which have been prepared in 

accordance with Bangladesh Accounting Standards 

and applicable legal and regulatory requirements. 

State of the Bangladesh economy 

GDP growth 

Bangladesh economy achieved a real GDP growth 

of 6.5% in FY 2007 slightly lower than 6.6% of FY 

2006. The growth was commendable as it was 

achieved in a challenging environment marked by 

high and volatile oil prices in international market, 

labor unrest in the garment industry and 

confrontational political situation of the country in 

the first half of FY 2007. At current market price 

GDP of Bangladesh in FY 2007 was estimated at 

Taka 4,675.00 billion. The strong growth was 

underpinned mainly by robust growth in services 

and notable expansion in manufacturing activities. 

Economic growth was also aided by increased 

inflow of workers' remittances from abroad and 

reasonable growth in exports. 

The industry sector attained robust growth of 9.5% 

in FY 2007, slightly lower than 9.7% of FY 2006. 

The growth was supported by a continued 

improved performance in manufacturing sub-sector, 

facilitated by strong and sustained growth in exportoriented 

manufacturing activities and expansion in 

domestic demand. Overall the service sector grew 

by 6.7% in FY 2007, higher than 6.4% recorded in 

FY 2006 and remaining above the growth in FY

2007. Agriculture sector achieved a moderate growth of 3.2% in FY 2007 following the post flood 

high growth of 4.9% in FY 2006, resulting mainly from a lower growth in crops and horticulture subsector. 

The long term trend showing a shift of sectoral composition of GDP away from agriculture 

towards industry continued in FY 2007 while the share of industry sector increased to 29.8% from 

29.0% , the share of agriculture sector in GDP came down to 21.1% from 21.8% ; the share of the 

service sector in GDP also slightly declined to 49.1% from 49.2%. 

Government and Bangladesh Bank policy towards economic development 

With a view to achieving higher economic growth, the Government and Bangladesh Bank continued 

to adopt policies to support economic activities to the highest sustainable level while maintaining a 

moderate CPI inflation. The fiscal policy in FY 2007 was geared to accelerate economic growth 

and create employment opportunities and promoting private sector investment. The Government 

pursued a set of strategies which were attuned to the poverty issues. These strategies included, 

among others, increasing allocation in education, health and other sectors; ensuring financial 

security of the disadvantaged by widening social safety nets; ensuring economic good governance 

and enhancing public management capacity. Bangladesh Bank continued to pursue a cautiously 

restrained monetary policy stance with the prime objective of keeping inflationary pressure under 

control while supporting the targeted real output growth during FY 2007. 

External sector 

Exports and imports achieved robust and reasonable growth in FY 2007, and remittances from 

workers abroad showed a strong and steady growth in FY 2007. Export increased by 15.8% from 

US$ 10,412.00 million in FY 2006 to US$ 12,053 .00 million in FY 2007 while imports increased by 

16.6% from US$ 13,301.00 million to US$ 15,511.00 million. At the same time remittance increased 

by 24.5% from US$ 4,802.00 million in FY 2006 to US$ 5,979.00 million in FY 2007. As a result 

country's current account balance exhibited a notable surplus of US$ 952 million in FY 2007 from 

US$ 572.00 million in FY 2006. The overall balance of payments also recorded significant surplus 

of US$ 1,493 million in FY 2007 compared to US$ 365.00 million in FY 2006.Gross foreign 

exchange reserve increased by US$ 1,593.00 million to US$ 5,077.00 million at the end of FY 2007 

that was equivalent to 3.9 months' import. 

Inflation 

The rising trend of inflation measured by CPI continued during FY 2007. The expanding pressure 

of domestic demand supported by continued high monetary and credit growth, increase in 

international prices of major consumer goods particularly food and petroleum products, adjustment 

in domestic fuel price, price manipulation through business syndication and loss of business 

confidence resulting from anti corruption and anti hoarding drive in the country contributed to 

inflation spirals. Annual average inflation measured by 12-months average movements in CPI, 

marginally increased from 7.16% in June 2006 to 7.20% in June 2007. while 12-month consumer 

price inflation on a point-to-point basis increased to 9.2 % from 7.5% over the same period.


embroidery factory at Fotullah, Narayanganj 


Savings and investments 

Domestic savings -GDP ratio rose from 20.3% in FY 

2006 to 20.5% in FY 2007 while investment -GDP 

ratio decreased from 24.7% of FY 2006 to 24.3% in 

FY 2007. Savings -investment gap of 3.8% was 

financed by net factor income from abroad. 

Pubic Finance 

Revenue receipts in FY 2007 were Taka 494.7 billion, 

10.3% higher than revenue of Taka 448.7 billion in 

FY 2006. Tax revenue was 79.3% within total 

revenue. Public expenditure amounted to Taka 668.4 

billion in FY 2007, 9.5% higher than Taka 610.6 

billion in FY 2006. Public expenditure comprised of 

Taka 420.6 billion current expenditure and Taka 

216.0 billion development expenditure which was 

reduced by 16.9% from original target of Taka 260.0 

billion due to less than the expected amount of 

resources received from external sources. The deficit 

in revised FY 2007 budget stood at Taka 173.7 billion 

or 3.7% of GDP at current prices. The domestic 

borrowing component of the deficit financing was 

Taka 100.3 billion (2.1% of GDP) in FY 2007 in which 

bank borrowing was Taka 65.3 billion (1.4% of GDP). 

Revenue as a percentage of GDP declined to 10.6% 

as compared to 10.8% in FY 2006. While public 

expenditure as a percentage of GDP declined from 

14.7% in FY 2006 to 14.3% in FY 2007. Accordingly 

overall budget deficit declined from 3.9% of GDP in 

FY 2006 to 3.7% in FY 2007 reflecting strict fiscal 

discipline and cutting wasteful expenditure through 

austerity measures. 

Future outlook for the Bangladesh economy 

In view of medium term outlook of sustainable 

economic growth and low inflation for world and 

South Asian economies and assuming continuation of 

prudent policies and progress in advancing structural 

reforms, the near and medium term economic 

prospects of Bangladesh appear favorable. In the 

updated Medium Term Macroeconomic Framework 

(MTMF) of PRSP entitled 'Unlocking the Potential: 

National Strategy for Accelerated Poverty Reduction', 

real GDP growth has been projected to increase to 

7.0% in FY 2008 and sustaining at or above 7.0% 

through FY 2010 . 

Improved macroeconomic stability and intrinsic 

resilience, buoyancy in overall agricultural sector 

growth, steady growth in the manufacturing sector, 

competitive business environment and sustained

improvement in the investment climate, and ongoing implementation of economic reform programs 

including SOE and NCB reforms are essential preconditions for above-noted growth targets. To 

support the pro-poor growth targets envisaged in the MTMF, the gross domestic investment is 

projected to increase gradually through mobilization of internal and foreign resources. Inflation is 

projected to decline with an appropriately cautious restrained monetary policy stance towards 

maintaining price stability coupled with the support of prudent fiscal and trade policies. 

The rising inflationary pressures, the sustained high global oil prices, under-pricing of energy 

products, infrastructure constraints (especially power, ports, and transportation) , probable adverse 

effects in the RMG sub-sector from 2008 onwards due to expiry of restriction imposed on China , 

restoring business confidence for strengthening private sector investment activities , and the 

political developments and outcome of the next general elections scheduled to be held within 2008 

remain major challenges for the economy in near future. Apart from these risks, economic 

prospects in near and medium term particularly in FY 2008 are likely to be affected by the repeated 

floods and cyclone Sidr. 

Money, Credit and Financial Market 

Money and credit growth 

Despite the restrained monetary policy stance adopted by Bangladesh Bank, Broad money grew by 

17.1% in FY 2007 which was lower than 19.3% growth in FY 2006 while domestic credit grew by 

14.5% lower than 21.1% growth in FY 2006. Credit to the private sector increased by 15.1% 

compared to 18.3% in FY 2006 reflecting lower demand for credit resulting from declining business 

confidence prevailing in the economy. Public sector credit grew by 12.5 % compared to 30.6% in 

FY 2006 mainly due to downsizing of ADP. 

Monetary policy stance and interest rate scenario 

Bangladesh Bank continued to pursue a cautiously restrained monetary policy stance with the 

prime objective of keeping inflationary pressure under control while supporting the targeted real 

output growth during FY 2007. In line with this policy stance, an upward bias in the policy interest 

rate and reintroduction of BB bills in October 2006 succeeded in limiting inflation around the 

targeted level up to January 2007. Besides, repo and reverse repo interest rates and treasury 

bill/bond yield rates were maintained on sustained up trend during the year in an attempt to 

slowdown credit growth. 

The declining trend of interest rates that persisted over a couple of years till FY 2005 reversed in 

FY 2006 which continued in FY 2007. Weighted average interest rate on bank credit increased to 

12.8% at the end of June 2007 from 12.1% at the end of June 2006. The weighted average interest 

rate on bank deposits recorded a modest increase to 6.9% from 6.7% in the same period. As a 

result, net spread between advances and deposits increased to 5.9% from 5.4%. 

Money market 

Efficient monetary operation, especially use of shorter term monetary instruments such as reverse 

repo and reintroduction of Bangladesh Bank Bills helped keep the money market sound and stable 

during the FY 2007. Steps towards activation of secondary trading in treasury bills/bonds were also

A medical equipment at a reputed hospital 

financed by DBBL 

A partial view of cycle manufacturing industry 


continued. As a result, the overall money market 

situation was stable and sound during FY 2007. The 

weighted average interest rates in call money market 

witnessed stability in FY 2007 as against a degree of 

fluctuation in FY 2006. The weighted average interest 

rate moved within the range of 6.9% to 7.7% during 

FY 2007. This may be due to excess liquidity in the 

market resulting from lower growth of demand for 

credit in the private sector as compared to the 

preceding year and huge inflow from export earnings 

and workers' remittance. 

The repo injects required money in the system and 

provides banks with necessary funds to maintain their 

liquidity. While pursuing a cautious monetary policy, 

Bangladesh Bank kept this window open for the 

banks to maintain the market liquidity at desired level. 

The weighted average interest rates on repo auctions 

ranged from 9.0% to 9.3% per annum in FY 2007 ( 

8.0% to 8.5% in FY 2006). While repo injects money 

in the system, the reverse repo takes it away from the 

system. As a counterpart of repo auctions, the 

reverse repo auctions continued in FY 2007. The 

reverse repo auctions were used to maintain intended 

level of liquidity in the market as well as to contain 

credit growth. The weighted average interest rates on 

reverse repo auctions ranged from 6.1% to 6.5% per 

annum in FY 2007 as against 4.5% to 6.5% per 

annum in FY 2006. 

A carefully coordinated operation of repo and reverse 

repo transactions along with auction of Bangladesh 

Bank bills played a key role in stabilizing the interest 

rates in banking sector during FY 2007. 

Foreign exchange market 

Bangladesh Bank introduced floating exchange rate 

in May 2003 for Taka. Under the arrangement the 

banks are free to set their own rates for inter-bank 

and customer level transactions. Taka is fully 

convertible for current international transactions. 

Repatriation of profits or disinvestment proceeds on 

non-resident FDI and portfolio investments are freely 

permitted. The exchange rate is being determined in 

the market on the basis of market demand and 

supply forces of the respective currencies. However 

BB occasionally intervenes in the market when it 

deems necessary to maintain stability in the foreign 

exchange market designed to ensuring the

competitiveness of Bangladeshi products in the international markets, encouraging inflow of 

remittances, maintaining internal price stability and maintaining balance in external account 

position. 

At the floating regime exchange rate remained somewhat stable against major international 

currencies. However in 1st half of 2007 foreign exchange market experienced substantial 

pressure on demand side created by continued price hike for import of oil and petroleum 

products, and other major import commodities in the world market coupled with higher growth in 

lending to the private sector which led to higher demand for import of capital machinery. 

However, due to adoption of cautious monetary policy by Bangladesh Bank together with 

substantial inflow of foreign exchange from export earnings and remittances the situation eased 

later on and at the end of FY 2007 Taka-Dollar exchange rate remained stable within a range of 

Taka 68.70 to Taka 69.30. 

Remittance 

Over the last few years various steps have been taken to boost the flow of remittance through the 

banking channel. These include expansion of activities of drawing arrangements, review of 

statements received from foreign banks /exchange houses, close monitoring and supervision of 

banks. Besides, scheduled banks have ensured quick delivery of remittances by reducing leadtime 

to the beneficiaries in Bangladesh, which brought substantial development in the delivery 

system. As a result, remittances increased by 24.5% from US $ 4,801.9 million in FY 2006 to US$ 

5,978.5 in 2007. 

Capital market 

The capital market witnessed a vintage year in 2007 raising the total market capitalization to GDP 

ratio to 15.88 % against 7.59% of 2006. Total market capitalization crossed US $ 10 billion -mark 

in 2007. DSE Market capitalization stood at Taka 74,220 crore on December 30, 2007 while it 

was Taka 31,066 crore on January 03, 2007. Heavy inflow of liquidity and entry of fresh investors 

pulled the stock market to its record height in 2007. Institutional investors this year channeled 

huge funds into the market. The benchmark General Index climbed to 3093.54 points on 

November 19, 2007. The benchmark index gained 1,434.12 points or 91 % to close at 3,017.21 

on December 30, 2007. Turnover at the DSE recorded its highest mark with total transaction of 

Taka 316.83 crore on October 21, 2007. Portfolio investment also doubled this year posting a 

total portfolio turnover of Taka 1100.00 crore. 

A number of factors contributed to rise of index, turnover and market capitalization in 2007. That 

included concerted efforts by the authorities to restore investors' confidence in the securities 

market and the two-day International Investors Conference titled 'Bangladesh-the new investment 

frontier' held on May 10 and 11, 2007 paved the way for attracting international investors to our 

market. 

Though DSE index marked notable growth in 2007 however some of the issues marked unusual 

rise that is increasing risk for general investors. Under this background the concerned authorities 

are attaching highest priority to build and enhance investors' awareness particularly about the risk 

factors involved in investment in securities. It is advised that investors should make their 

investment decision based on company fundamentals, price level and disclosed information 

avoiding rumor based speculation. It is expected that the momentum in country's stock market

A partial view of 100% export-oriented knit fabric 

Dying unit at Fotullah, Narayanganj 


will be sustained with growing awareness of 

investors, enabling policy environment pursued by 

the authority and listing of fresh securities from 

attractive sectors like telecommunications, power, 

gas, energy and other infrastructure sectors. 

Review of DBBL's business operations and 

strategy in 2007 

Principal activities 

The principal activities of DBBL is to provide all kinds 

of commercial banking products and services to the 

customers including project finance, working capital 

finance and trade finance for corporate customers as 

well as house building loan, car loan and life style 

loans for retail customers. There are various deposit 

products particularly suitable for retail and institutional 

customers. DBBL's state of the art IT platform and 

online banking system provides largest ATM network 

and POS services of the country through which 

customers are getting any branch and anytime 

banking for 24 hours a day and 365 days a year. IT 

network also provides SMS banking, alert banking 

and internet banking services. Debit cards of 

MasterCard International and DBBL's propriety cards 

are in operation. In addition, international cards (VISA 

& MasterCard) of different local & international banks 

are accepted at DBBL's ATMs for withdrawal of 

money and at POS terminal for payments of 

shopping, hotel and dining bills etc. 

Consolidation of business and profit growth 

Due to the political change in the country the 

business of the Bank was geared to consolidate and 

not to expand so much in 2007. The deposit of the 

Bank increased by 4.98% from Taka 40,111.54 

million in 2006 to Taka 42,110.15 million in 2007, 

loans & advances remained close to 2006 level at 

Taka 28,369.58 million compared to Taka 28,325.34 

million in 2006, while import business increased by 

11.23% and export business increased by 2.15%. 

However, operating profit increased by 33.15% from 

Taka 1,080.47 million to Taka 1,438.67 and net profit 

after tax increased from Taka 362.18 million to Taka 

479.81 million showing an impressive growth of 

32.48%. Lower cost of fund resulting in higher net 

interest income, increase of non- interest income and 

lower growth in operating expenses due to improved 

operational efficiency and productivity contributed 

notable growth in both operating profit and net profit

after tax despite containing business growth because of market condition and internal 

consolidation. 

Strategic plan for positioning the company for future growth through capacity building 

As part of its strategic plan, DBBL continued to invest heavily to improve and expand IT network, 

ATM services and card services along with branch network, business promotion and CSR 

activities. Though expenses on such investments in 2007 apparently reduced expected profit 

growth, however these will substantially improve our capacity to deliver customer services with a 

wide range of products that can be matched with the best in the industry by improving 

productivity, distribution channel, communication network and strengthening IT platform. DBBL's 

strategic objective is to have a clear advantage over its competitor to provide the full range of 

banking services through state-of-the-art-technology. 

Customer focus and customers' right 

DBBL's performance cannot be judged by just looking at profit figures. DBBL considers that it is 

the customers' right to get modern, online and full ranges of banking services at an affordable 

price. DBBL's service cost is lowest in the industry and in many cases services provided through 

ATM are free. 

Capital management plan and capital adequacy ratio 

During 2007, Shareholders' equity (Tier-1 capital) increased to Taka 2,089.52 million being 7.23% 

of risk weighted assets (RWA) and supplementary capital (Tier 2 capital) increased to Taka 

1,309.97 million being 4.53% of RWA. During the year under review, Tier-2 capital was reinforced 

by arranging another subordinated loan of EURO 5.00 million from FMO. Tier-2 capital was also 

strengthened by revaluation of immovable assets of the Bank as of December 31, 2007 that 

increased by Taka 244.90 million as a result of revaluation. These will strengthen the capital base 

of the company and provide long-term growth and stability to the Bank. It may be noted that as 

per Bangladesh Bank regulation subordinated loan is eligible as Tier-2 capital up to 30% of Tier-1 

capital and 50% of assets revaluation reserve (Taka 122.45 million) is eligible as Tier-2 capital. In 

line with long term capital management plan of the Bank to maintain strong capital adequacy 

ratio, total capital adequacy ratio significantly improved in 2007 reaching 11.76% at the end of the 

year that was well above statutory requirement of 10.00%. Keeping in view implementation of 

Basel II requirement, Bangladesh Bank increased the capital adequacy ratio from 9.00% to 

10.00% effective from December 31, 2007. 

Expansion of branches 

The Bank opened 10 new branches in 2007 to reach 49 branches at the end of the year. Another 

20 branches will be opened in 2008 to expand the branch and distribution network. These will 

bring up-to-date banking services to our existing and potential customers and at the same time 

increase our resource position and business potentials that will maximize profitability and 

shareholders' value. DBBL's strategy is to reach the doorsteps of customers to provide full range 

of banking services based on state- of -the- art- technology and IT platform at free or affordable 

cost. 

IT System with On-line banking 

DBBL has been successfully continuing providing sophisticated On-line banking services to its 

customers. Dutch-Bangla Bank Limited is the first and only Bank in Bangladesh which invested


Spinning mill at Bhaluka, Mymensingh 


huge amount of money for developing the largest ICT 

infrastructure in the banking sector of the country. As 

a technology driven bank, we have implemented 

world reputed online banking software-Flex cube at 

all its 49 branches with following delivery channels: 

♦ Any Branch Banking 

♦ Online ATM/POS service 

♦ Internet banking service under the domain 

www.dbbl.com.bd 

♦ SMS and Alert banking service 

The Bank has upgraded its IT system successfully for 

further strengthening and securing of the automation 

of Bank services. The Bank also implemented Online 

Synchronous Disaster Recovery Site to provide 

reliable banking convenience for the DBBL customers 

which is first time in Bangladesh 

DBBL's ATM network has become the largest ATM 

network in the country increasing the number of 

ATMs at 207 and 700 POS. DBBL has also offered 

other banks to join and enjoy its ATM/POS network. 

Customers of the following member Banks are 

enjoying the DBBL ATM/POS network: 

- Standard Chartered Bank 

- Commercial Bank of Ceylon Limited 

- Mutual Trust Bank Limited 

- Bank Asia Limited 

- National Credit & Commerce Bank Limited 

- United Commercial Bank Limited 

- Southeast Bank Limited 

- Prime Bank Limited 

- The City Bank Limited 

Future initiatives in IT network 

The Bank is planning to install co-branded ATM at the 

premises of member banks. 

The Bank has also planned to make its ATM/POS 

network EMV compliant for issuing as well as 

acquiring to improve security (with associated fraud 

reduction) and makes the card interoperable 

worldwide.

Setting up a National E-payment Gateway to provide an efficient, cost effective and secure ecommerce 

platform to facilitate real time internet based transactions processing, and payment 

settlement is also underway. 

Debit and credit cards 

Maestro & Cirrus debit cards of MasterCard International, DBBL's propriety cards like Classic 

Card, and Silver & Gold Cards are in operation. In addition, international cards (VISA & 

MasterCard) of different local & international banks are accepted at our ATMs for withdrawal of 

money and at POS terminal for payment of shopping, hotel and dining bills etc. 

EMV compliant Credit card comprising both VISA and MasterCard is in process of launching. 

Retail banking and lending under SME scheme 

Considering future market direction and to capitalize on our robust IT platform and strongest ATM 

network DBBL restructured its Retail Banking Division in 2007. The Division was shifted to new 

premises with introduction of central processing and monitoring of retail loans. A number of retail 

loan products aimed at specific target group were launched in 2007 to augment fee income and 

improve yield and spread on total loan portfolio. The loan products included housing loan, auto 

loan, professional loan and other consumer loans to purchase consumer durables and to meet 

other needs of customers related to healthcare, education, travel, marriage, festival etc. A 

number of retail deposit scheme were also launched in 2007 including Power Account i.e. interest 

bearing current account for salaried customers. 

In future retail banking operation will be further intensified to increase DBBL's market share in this 

segment with introduction of more products and services. SME lending scheme will also be 

launched in 2008 as a priority sector. Expansion of retail banking operation and SME lending will 

be strongly supported by adequate manpower, robust IT and ATM network, various promotional 

activities as well as faster and better customer services. 

Human resources development 

In common with most organizations, DBBL's performance depends on the quality and 

commitment of its people. Accordingly, the Bank's stated strategy is to attract, retain and motivate 

the most talented people in the industry. The Bank's activities are based on trust and relationship. 

The Bank's policy is to look after people who want to make a long term career with the Bank 

because trust and relationship are built over time. Remuneration package may be an important 

factor to motivate for joining a company, but it is not the only one. In case of DBBL, it is 

excellence of DBBL with good values, fairness, potential for success, scope to develop a broad 

interesting career etc. which attract people to join and work with DBBL. 

DBBL always encourages excellence in performance by rewards and recognition. In addition, a 

number of well thought out policies were formulated for welfare of employees in the form of DBBL 

Superannuation Fund, DBBL Gratuity Fund, House Building Loan Scheme and Car Loan Scheme 

etc. In order to ensure better healthcare of employees there is a medical consultant at Head 

Office and selective branches to provide medical advices to employees of the Bank. In addition a 

thorough medical check up facility is provided to each employee on a yearly basis. On the other 

hand, DBBL attaches utmost importance to the development of its employees through

A partial view of telephone company 

financed by DBBL 

A partial view of a steel tube manufacturing 

company financed by DBBL. 

continuous training. We imparted training to 219 

officers in 13 different courses during 2007. The 

training programs were organized by our own training 

institute. We also nominated 133 officers to undergo 

different training programs/courses organized by 

different organizations like BIBM, Bangladesh Bank 

Training Academy (BBTA) and other similar 

organizations. In addition, 15 executives were sent 

abroad for attending overseas training and workshop. 

The number of DBBL staff increased by 105 in 2007. 

At the end of 2007, number of staff stood at 789 

compared to 684 at the end of 2006. The corporate 

culture at DBBL as grew over last 12 years is such 

that the members of the staff have ample 

opportunities to take initiative and responsibilities. 

The challenge is to maintain a business like, 

committed corporate culture that matches DBBL's 

mission. Achieving results and taking responsibility 

are important components of the culture we pursue, 

one in which management and staff work together 

and are mutually accountable. 

In addition, to strive hard for winning the challenges 

in a fiercely competitive market, the management has 

been constantly pursuing the following areas: 

♦ To attract and retain best professional in the 

industry. 

♦ Job evaluation, job enrichment, performance 

target, performance evaluation, and performance 

based compensation and incentives. 

♦ Evaluating the training need of individual 

employees including training need for introducing 

new products, services and technology. 

♦ Arranging high quality training at home and 

abroad so that DBBL executives can have 

competitive advantage in the market. 

♦ Encouraging its employees to develop and 

broaden existing knowledge and skills and to 

acquire new skills and expertise. 

♦ Reviewing and updating organizational structure 

on a regular basis to have a structure which can 

give strong support to the strategic objectives of 

the Bank.

Correspondent banking relationship 

At present, DBBL has correspondent banking relationship with 112 countries through more than 

82 foreign banks. As a result, we can route Letters of Credit (L/C) to all important business 

centers of the world. We are maintaining adequate number of nostro accounts in major currencies 

with the key players in the world market to facilitate export and import transaction needs of our 

valued clients. 

DBBL's excellent service with competitive charges provides a good correspondent banking 

solution for the valued clients of DBBL. We are also enjoying L/C confirmation limits for more than 

US$30.00 million from different leading banks and financial institutions of the world. 

DBBL has established Taka Drawing Arrangements with various exchange houses located in 

USA, UAE, Kuwait, Italy, Canada etc. Moreover, arrangements of DBBL with Western Union, 

USA and Express Money of UAE Exchange Center, UAE enable people to get direct inward 

remittances from every corners of the globe. Remittance inflow of DBBL rose significantly by 

40.25% to US $ 31.97 million during the year 2007 from US $ 19.10 million in 2006. 

Contribution to National Exchequer 

DBBL made significant contribution to the government in boosting its revenue collection. As per 

prevailing law of the country, DBBL being a corporate citizen pays income tax on its own income. 

In addition, the Bank deducts at sources income tax, VAT and excise duty from clients, 

depositors and suppliers and deposits the same to the government. 

Total contribution by the Bank to national exchequer during the year 2007 is given below: 

Particulars In million Taka 

Payment of income tax on DBBL's own income 370.15 

Income tax, VAT and excise duty deducted at sources from 

clients, depositors and suppliers and paid to the government 

457.91 

Total payment to national exchequer 828.06 

Income, expenses and financial results 2007 

Net profit after tax in 2007 increased to Taka 479.81 million, 32.48% higher than 2006. Though 

interest income increased by 20.02% and non-interest income increased by 24.75%, net interest 

income increased by 24.86% due to lower cost of fund that resulted from improved deposit mix 

and lower cost of fund. Higher net interest income complemented by higher non-interest income 

coupled with lower growth in operating expenses due to improved operational efficiency and 

higher productivity increased growth in operating profit to 33.15% (15.00% in 2006). Profit after 

tax increased by impressive 32.48% despite making higher specific provision to the extent of 

Taka 362.61 million to clean up the balance sheet and to improve the asset quality. Return on 

equity was 24.02% in 2007 compared to 24.07% in 2006. 

Higher investments in branch expansion and IT network and human resources though contained 

profit growth in 2007 however, these will increase resource capacity, increase branch and 

distribution network, improve efficiency in operations, augment resource flow to expand customer 

base and to provide much better and faster customer services. As a result, in the long term it will 

bring substantial and sustainable benefits for the Bank.

A partial view of ceramic industry 

at Gazipur financed by DBBL 

A partial view of 100% export-oriented dying unit 

of knit composed mill at Kanchpur 

Sonargaon, Narayangonj financed by DBBL. 

Business analysis 

Deposits 

The deposit grew by Taka 1,998.61 million (4.98 %) 

in 2007 from Taka 40,111.54 million to Taka 

42,110.15 million. Deposit mix improved substantially. 

Expanded ATM network and tailor made customer 

services helped procure cost free or low cost deposits 

which increased to 44.71% in 2007 from 27.80% of 

total deposit compared to 2006. Because of improved 

deposit mix, weighted average cost of fund declined 

to 8.44% in 2007 from 8.80 % in 2006. 

Advances 

Loans and advances stood at Taka 28,369.58 at the 

end of 2007, just over Taka 28,325.34 million in 2006. 

The bank continued to consolidate and diversify its 

portfolio in 2007 to have a diversified client base and 

portfolio distributed across the sectors to reduce 

client specific and industry specific concentration and 

to reduce overall portfolio risk. Considering future 

market direction and to capitalize on our robust IT 

platform and strongest ATM network a number of 

retail loan products aimed at specific target group 

were launched in 2007 to augment fee income and 

improve yield and spread on total loan portfolio. 

Weighted average rate of return increased to 13.85% 

in 2007 from 13.80% in 2006. 

Classified loan as a percentage of portfolio increased 

from 2.68% in 2006 to 3.26 % in 2007. However, full 

provision was made against classified loans. 

Moreover 1.61 % general provision has been 

maintained to cover any unforeseen losses. Serious 

efforts are being continued to bring down the amount 

and percentage of classified loan by exploring all 

options including legal actions, out of court settlement 

etc. depending on merit of the cases. 

To clean up the balance sheet, loans considered to 

be bad were written off for a further amount of Taka 

123.69 million in 2007 that was in addition to Taka 

201.78 million written off in 2006 . As a result , a 

cumulative amount of Taka 325.48 million was written 

off up to December 31, 2007.

Borrowing from International financial institutions to provide Credit Facilities to selected 

sectors and to strengthen capital adequacy ratio of the Bank 

In order to support some of the preferred sectors of the economy, DBBL has extended soft term 

credit facilities financed by some International Financial Institutions as follows: 

♦ Under a foreign currency loan for US$ 8.75 million from Netherlands Development Finance 

Company (FMO) DBBL is advancing credit lines to export oriented RMG units at an interest 

of 11.85 percent p.a. for procurement of capital machinery. 

♦ To develop small scale entrepreneur, a long-term local currency loan equivalent to EURO 

5.00 million was also arranged form Netherlands Development Finance Company (FMO) to 

finance small scale enterprises engaged in manufacturing, agriculture, transport, tourism 

and productive trade & commerce and service industries. The loan amount was increased 

to EURO 7.50 million to include residential housing finance only for fixed income group. 

♦ A subordinated loan equivalent to Euro 5.00 million was earlier arranged from FMO for 

financing housing sector of the country and to strengthen Tier-2 capital of the Bank. In 

2007, another subordinated loan equivalent to Euro 5.00 million was taken from FMO for 

the same purpose. Subordinated loan is also eligible as Tier -2 capital of the Bank subject 

to regulatory limit. 

Investments 

The Bank's investment stood at Taka 5,909.32 million at the end of 2007 that was close to Taka 

5,876.52 million in 2006. The investments mainly included Government securities for Taka 5, 

887.32 million (99.63% of total investment) maintained mainly to cover SLR requirement. In 

addition, investments were planned in a way to provide sufficient liquidity and flexibility in treasury 

operations and to boost aggregate yield which increased from 10.00% to 11.30% in 2007. 

In addition, a substantial amount of surplus fund resulting from consolidation of loan portfolio was 

placed in term deposit (Taka 4,524.24 million at the end of 2007 compared to Taka 3,010.68 

million of 2006) and overnight market (Taka 2,050.00 million at the end of 2007 compared to 

Taka 560.00 million of 2006) to supplement net interest income and higher profit growth. 

Treasury team of the Bank was very much watchful to manage market risk & uncertainty and 

ensure maximum return form investments in security, term deposits and call money market. 

During the year under review, the Bank was able to maintain cash reserve requirements (CRR) 

and statutory liquidity requirements (SLR) successfully. 

Import - Export business and remittance 

During the year under review, import business of DBBL recorded growth of 11.23% while export 

trade grew by 2.15%. 

During the year under review, DBBL has also taken various steps to stimulate foreign exchange 

earnings. Drawing arrangements were also made with different foreign exchange houses and 

banks during the year under review for increased remittance inflow in the country. Remittance 

inflow of DBBL rose significantly during the year 2007.


weaving mill at Bhaluka, Mymensingh 


A partial view of a embroidery unit of 

100% export-oriented spinning mill 

at Bhobanipur, Gazipur financed by DBBL. 

Outlook for 2008 

In the business plan and budget for 2008, deposits 

and loans are projected to increase by 30.60% to 

Taka 55,000.00 million and 50.00% to Taka 

44,000.00 million respectively. Import and export 

businesses are expected to rise by 80.00% to Taka 

64,000.00 million and 73.00% to Taka 56,000.00 

million respectively. With higher interest margin 

resulting from substantially improved deposit mix and 

much lower cost of fund, and growing funded and 

non-funded business, healthy growth in after tax profit 

is expected in 2008. 

The above growth will be supported by expansion of 

branches, ATM network, up gradation of IT and 

online banking system to provide better and faster 

customer services, improving operational efficiency 

and productivity and introduction of new products and 

services particularly in retail segment. A number of 

new retail products will be introduced in 2008. 

Risk factors and risk management 

Credit Risk 

Credit risk is most significant and inherent risk in 

banking business. Every loan exposure or transaction 

with counterparty involves the bank to some degree 

of credit risks. Credit Risk Management is at the heart 

of the overall risk management system of the Bank. It 

is designed and continuously updated to identify, 

measure, manage and mitigate credit risk to maintain 

and improve quality of loan portfolio and reduce 

actual loan losses and to ensure that approved 

processes are followed and appropriate due diligence 

are made in approving new credit facilities and 

renewals, that operation and performance of loans 

are regularly monitored and that there is an early 

warning system to address the loans whose 

performance show any deteriorating trend enabling 

the Bank to grow its credit portfolio in a sustainable 

way to ensure higher quality and lower risk with the 

ultimate objective to protect the interest of depositors 

and shareholders. 

The Board approves the major policy guidelines, 

growth strategy, exposure limits for particular sector, 

product, individual company and group, keeping in 

view regulatory compliance, risk management 

strategy and industry best practice. Credit approval

authorities are carefully delegated to the Executive Committee of the Board and appropriate 

level of management. Balance between adequate control and flexibility in credit operations to 

ensure full transparency and accountability at all levels are maintained meticulously. 

There is an independent risk management department to assess credit risks and suggest 

mitigations before approval of every credit proposal. A separate credit administration 

department confirms that perfected security documents are in place before disbursement. 

DBBL is continuing a unique process of rechecking of security documentation by a second 

legal adviser other than the lawyer who vetted it originally. Then an independent and fully 

dedicated credit monitoring and recovery department monitors the performance and recovery of 

loans, identify early signs of delinquencies in portfolio and take corrective measures to mitigate 

risks, improve loan quality and to ensure recovery of loans on time. This department also 

monitors risk status of loan portfolio, and address the problem loans for early and most 

appropriate settlements. In addition, Internal Control & Compliance Division independently 

verifies and ensures, at least once in a year, compliance with approved lending guidelines, 

Bangladesh Bank guidelines, operational procedures, adequacy of internal control and 

documentation. Internal Control & Compliance Division directly reports to the Audit Committee 

of the Board. 

Moreover, overall quality, performance, recovery status, risks status, adequacy of provision of 

loan portfolio is regularly reported to the Board of Directors for information and guidance. 

Asset Liability / Balance Sheet Risk Management (treasury) 

Asset Liability/Balance Sheet risk management comprises liquidity risk, interest rate risks and 

foreign exchange risk. Liquidity risk is the risk that we may not meet our financial obligation as 

they become due. Liquidity risks also include our inability to liquidate any asset at reasonable 

price in a timely manner. Interest rate risk is possible loss from changes in market interest rate 

in either direction resulting from reduced spread and income as well as increased cost. Foreign 

exchange risk is potential loss arising from changes in foreign currency exchange rate in either 

direction. Assets and liabilities denominated in foreign currencies have foreign exchange risks. 

The Treasury Division manages the liquidity, interest rate and foreign exchange risks with 

oversight from Asset-Liability Management Committee (ALCO) which is chaired by the 

Managing Director including top management and senior executives of the Bank. The 

Committee meets at least once in a month. The Board approves all risk management policies, 

sets limits and reviews compliance on a regular basis. The overall objective is to provide cost 

effective funding to finance the asset growth and trade related transactions, optimize the 

funding cost, increase spread with lowest possible liquidity, maturity, foreign exchange and 

interest rate risks. 

Foreign Exchange Risk 

In order to further strengthen the foreign exchange risk management, DBBL has strengthened 

and restructured its dealing room with the help of advanced technological equipments and 

experienced personnel. The Bank operates its foreign exchange and money market activities 

under a centralized and single functional area. Bank's Exchange Rate Committee meets on a 

daily basis to review the prevailing market condition, exchange rate, exposure and 

transactions to mitigate foreign exchange risk.


Garments manufacturing factory at Kachpur 

Sonargaon, Narayangonj financed by DBBL. 

Internal Control & Compliance Risk 

The Board of Directors approved updated policy 

guidelines on Internal Control & Compliance Risk 

(ICC) thereby restructuring the organizational chart of 

the Bank in accordance with the instructions of 

Bangladesh Bank for managing core risks. In order to 

implement the guidelines on ICC, DBBL has adopted 

necessary measures including preparation of manual 

on ICC and revision of existing manuals. 

Internal Control & Compliance Division of the Bank 

under active guidance and governance of the Audit 

Committee of the Board has been pursuing strictly 

the objectives formulated & mechanism designed in 

order to assess and mitigate risks. The Division with 

its Audit & Inspection Unit invariably conducts routine 

inspections of the branches/divisions at least once in 

a year recognizing the risk factors involved 

independently and report to the Audit Committee of 

the Board of Directors directly which provides 

necessary guidelines so as to ensure compliance of 

rules & regulations of the Bank as well as the 

regulatory bodies including Bangladesh Bank. 

The Monitoring & Compliance unit of ICC, on the 

other hand, is routinely engaged in collecting data 

and information regarding performance of the 

branches/ divisions and furnishes these to the Audit 

Committee of the Board to facilitate its smooth policy 

framing & reporting to the Board of Directors of the 

bank. 

All these activities of the Internal Control & 

Compliance are devoted to ensure efficiency & 

effectiveness of performance, ensure reliability & 

completeness of financial & management information 

and to ensure applicability of laws & regulations in 

day-to-day operation of the Bank. 

Money Laundering Risk 

As prevention of Money Laundering had become a 

burning issue in the beginning of this century, Money 

Laundering Act, 2002 was enacted in our country to 

give tight rein on money laundering process. 

Bangladesh Bank too undertook a project in the year 

2003 to review the global best practices in the risk 

areas in view of

globalization of business and identified 5 (five) core risks for implementation by the banks which 

included, among others, Money Laundering Risk. 

Our Bank in line with the said Act and documented guideline of Bangladesh Bank on Money 

Laundering risk, has already formulated a guidelines on policies & procedures on prevention of 

Money Laundering. The prime objective of the guidelines is to combat Money Laundering which 

became rampant in recent years. 

As per the guidelines, Account Opening Form of our Bank has been redesigned with provision for 

obtaining particulars of Personal Identity of customer and Transaction Profile. The Bank has also 

undertaken enhanced due diligence in case of opening of accounts of Politically Exposed 

Persons( PEP) as per directive of Bangladesh Bank which is in line with recommendation of 

Financial Action Task Force of U.N. Anti Money Laundering units have been set up in all the 

branches under a central unit at Head Office. Basic training has been imparted to all the officers 

of the bank on compliance with rules & regulations of Money Laundering Act so as to prevent 

opening of suspicious accounts and identity suspicious transactions. 

Compliance with Bangladesh Bank and SEC regulations 

As a commercial bank, DBBL is regulated and supervised by Bangladesh Bank under Bank 

Company Act 1991 and rules and regulations made there under. Bangladesh Bank also 

undertakes audit of DBBL at regular intervals. DBBL attaches highest priority to strict compliance 

with all regulatory requirements of Bangladesh Bank in terms of core risk management, capital 

adequacy ratio, foreign exchange regulations, liquidity management, KYC and anti-money 

laundering compliance etc. 

DBBL has also adequately complied with Corporate governance guideline of Bangladesh Bank 

(BRPD Circular No 16 dated July 24, 2003 ) in terms of overall business activities of the Bank 

including credit and risk management, internal control, human resource management and 

development, income and expenses, and segregation of financial , operational and 

administrative authorities and responsibilities between Board and management. 

As a listed company, DBBL is regulated by Securities and Exchange Commission (SEC). As 

detailed in statement of corporate governance, we have adequately complied with corporate 

governance guidelines issued by the Securities and Exchange Commission. 

Preparation for BASEL II Accord -Strengthen Risk Management System and Capital base 

of the Bank 

Bangladesh Bank has decided in principle to adopt the BASEL II Accord and it intends to 

implement the new accord in early 2009. Currently BASEL I accord is in force in our Banking 

sector which requires minimum 8% capital against risk-weighted assets taking into account only 

credit risk. The minimum capital requirement was increased by BB to 9% in 2002 and 10% in 

2007 effective on December 31, 2007. 

BASEL I minimum capital requirement and risk measurement and management system is now 

considered inadequate. Accordingly BASEL Committee on Banking Supervision published a more 

comprehensive new package on capital adequacy requirement known as BASEL II for 

strengthening the capital adequacy, improving supervisory system to assess the adequacy of 

capital based on a thorough review of risks, reinforce risk management system and market 

discipline with the ultimate objective of having strong capital base that are commensurate with 

risk profile of the Bank comprising credit risk, market risk and operational risk that can ensure 

long term stability and solvency of banking company and banking sector as a whole.


weaving mill at Bhaluka, Mymensingh 


With a view to ensuring non-disruptive migration to 

Basel II Bangladesh Bank has adopted a consultative 

approach. A high level National Steering Committee 

comprising of senior officials from banking industry, 

Bangladesh Bank and Chartered Accountant Firms 

has been constituted. Furthermore a Coordination 

Committee and a Basel II implementation Cell have 

been established. The Implementation Committee is 

now working on preparation of a roadmap for 

implementation with the assistance of Coordination 

Committee with main emphasis on the existing 

capacity of the banks and their financial position to 

meet additional capital requirement. 

BASEL II is more risk sensitive and comprehensive 

and its implementation will require improved risk 

management system in Bank. To comply with BASEL 

II requirements, your Bank has already introduced 

guidelines for managing core risks as issued by 

Bangladesh Bank. Capacity building measures are 

also underway so that the bank is fully prepared to 

adopt the accord in 2009. In line with Bangladesh 

Bank requirement, your bank has already formed a 

Basel II Implementation Unit to ensure smooth and 

timely implementation of Basel II accord. introduced 

guidelines for managing core risks as issued by 

Bangladesh Bank. Capacity building measures are 

also underway so that the bank is fully prepared to 

adopt the accord in 2009. In line with Bangladesh 

Bank requirement, your bank has already formed a 

Basel II Implementation Unit to ensure smooth and 

timely implementation of Basel II accord. 

Credit Rating of the Bank 

In line with Bangladesh Bank's BRPD Circular No. 06 

dated July 05, 2006 and in order to improve the risk 

management and corporate governance system of 

the Bank and to safeguard the interest of investors, 

depositors, creditors, shareholders and the Bank 

management as a whole, credit rating of the Bank for 

the year 2006 was done by Credit Rating Information 

and Services Limited (CRISL), a credit rating agency 

established under joint venture with credit rating 

agencies of Malaysia and Pakistan. The date of rating 

by CRISL was 21 June 2007. 

CRISL assigned 'A' (pronounced as single A) rating in 

the Long Term and ST-2 Rating in the Short Term to 

Dutch-Bangla Bank Limited (DBBL). 

The above rating has been done on the basis of 

Bank's good fundamentals such as satisfactory 

business growth, satisfactory balance sheet 

management and market share, experienced top 

management; diversified product lines including IT 

based modern products and good asset quality.

However, the above ratings were moderated to some extent by high funding cost, noticeable leverage 

ratio etc. 

Financial Institutions rated in this category are adjudged to offer adequate safety for timely repayment of 

financial obligations. This level of rating indicates a banking entity with an adequate credit profile. Risk 

factors are more variable and greater in periods of economic stress than those rated in the higher 

categories. Short Term Rating ST-2 indicates high certainty of timely payment. Liquidity factors are strong 

and supported by good fundamental protection factors. Risk factors are very small. 

Credit rating will be done regularly on a yearly basis and credit rating of 2007 will be completed before 

June 30, 2008. 

Awards 

DBBL was awarded with ICAB National Award for best published Accounts and Reports for the year 

2006 in the Financial Sector -Banking category. DBBL's Annual Report was also adjudged as Recipient 

of a Merit Certificate for the year 2006 in the category of Banking Sector by South Asian Federation of 

Accountants. 

Appropriation of profit 

The financial results and recommended appropriation of profit for the year 2007 are given below: 

Particulars In million Taka 

Net profit after tax 479.81 

Retained earnings brought forwarded 733.39 

Profit available for appropriation 1,213.20 

Appropriation recommended by the Board of Directors 

Transfer to Statutory Reserve 

Proposed dividind (bonus share @3.94719 shares for existing 1 share of 

Taka 100 each) 

204.45 

797.87 

Retained earnings carried forwarded 210.88 

The Bank earned a net profit after tax of Taka 479.81 million in 2007 that was 32.48% higher than 2006. 

The Board of Directors has recommended bonus shares @ 3.94719 shares for 1 share of Taka 100 each 

for 2007 (Cash Dividend of Taka 25 per share for 2006) after retaining Taka 204.45 million as statutory 

reserve. 

Dividend policy and utilization of retained profit 

The Bank has been pursuing a dividend policy that must ensure satisfactory return for shareholders as 

well as sustainable growth with strong capital adequacy ratio to protect greater interest of depositors and 

shareholders. 

The proposed bonus shares will strengthen the capital base and capital adequacy ratio to support 

sustainable business growth of the Bank while providing strong safety and security to depositors as well 

as shareholders. 

Election of the Directors 

In terms of Article 113 of the Articles of Association of the Company, at every Ordinary General Meeting, 

one- third of the Directors for the time being or if their number is not three or multiple of three, then the


knit fabric industry at Fotullah, Narayangonj 


number nearest to one-third shall retire from the office. 

Accordingly, as per Article 114, Mr. Md. Shahidur 

Rahman will retire from Sponsor Shareholders Group 

and Mr. Shahabuddin Ahmed will retire from General 

Shareholders' Group but they are eligible for re-election 

and accordingly, they offered themselves for re-election 

from the respective Shareholders' Group. 

Meetings of the Directors 

Seven (07) Meetings of the Board of Directors and 51 

(fifty one) meetings of the Executive Committee of the 

Board were held during the year under review. The 

Audit Committee of the Board also held five (05) 

meetings in the year 2007. 

Appointment of Auditors 

Our existing Auditors M/s. Hoda Vasi Chowdhury & Co, 

, Chartered Accountants (Independent Correspondent 

Firm to Deloitte Touche Tohmatsu) has completed audit 

of 2007 as first year of their audit and as per 

Bangladesh Bank's BRPD Circular Letter No.12 dated 

July 11, 2001, they are eligible for re- appointment. 

They have expressed their willingness to continue as 

auditors for 2008. The auditors will be appointed and 

their remuneration will be fixed for the year 2008 by the 

honorable shareholders in this annual general meeting. 

Gratitude 

The members of the Board of Directors of DBBL would 

like to express their gratitude to all shareholders, valued 

clients, patrons, all employees and well wishers for their 

continued support and cooperation, without which the 

Bank would not be able to achieve its present amazing 

position. We are also indebted to the Government of 

Bangladesh, Bangladesh Bank, Securities and 

Exchange Commission, Office of the Registrar of Joint 

Stock Companies and Firms, the Stock Exchanges for 

their continued support and co-operation. 

We look forward for your continuous support and best 

wishes for meeting the challenges that await us in days 

to come. 

With best regards 

on behalf of the Board of the Directors 

Abul Hasnat Md. Rashidul Islam 

Chairman

directors' report - Dutch-Bangla Bank Limited

Create successful ePaper yourself

Delete template?

Save as template?