Developing a Strategic Plan for Brac Bank Ltd. for 2020

Introduction

Objectives

Broad Objective:

To identify and analyze the Key Performance Indicators

and formulate best suited Strategic Plan for 2020

Specific Objectives: To identify the Key Performance Indicators for the bank

Determining the desired perceived Identity for the bank

Setting specific strategic goals for 2020

Methodology

Primary sources: Depth interviews with bank officials, semi-structured

questions, 60-90 minutes

Secondary sources: Annual & Half Yearly Reports of peer banks

Bangladesh Bank publications

Other financial news

Company Overview

Highlights

Launched on July 04, 2001

86 Branches

21 SME Service Centers

48 SME/Krishi Branches

333 ATMs

Over 400 SME Unit Offices

More than 1,300,000 customers accounts

Vision, Mission and Values

Vision Statement

“Building a profitable and socially responsible financial institution focused

on Markets and Business with growth potential, thereby assisting BRAC and

stakeholders build a "just, enlightened, healthy, democratic and poverty

free Bangladesh”.

Vision, Mission and Values

Mission StatementSustained growth in ‘Small & Medium Enterprise’ sector

Continuous low cost deposit growth with controlled growth in Retained

Assets

Corporate Assets to be funded through self-liability mobilization. Growth

in assets through Syndications and Investment in faster growing sectors.

Continuous endeavor to increase fee based income

Vision, Mission and Values

Mission Statement (Cont.)Keep our Debt Charges at 2% to maintain a steady profitable growth

Achieve efficient synergies between the bank’s branches, SME unit

Offices and BRAC field officers for delivery of Remittance and Bank’s other

products and services

Manage various lines of business in a fully controlled environment with

no compromise on service quality

Keep a diverse, far flung team fully motivated and driven towards

materializing the bank’s vision into reality

Vision, Mission and Values

Core Values

Value the fact that are a member of the BRAC family

Creating an honest, open and enabling environment

Have a strong customer focus and build relationships based on integrity,

superior service and mutual benefit

Strive for profit & sound growth

Vision, Mission and Values

Core Values (Cont.)

Work as team to serve the best interest of our owners

Relentless in pursuit of business innovation and improvement

Value and respect people and make decisions based on merit

Base recognition and reward on performance

To be responsible, trustworthy and law-abiding in all that we do

Industry Analysis

PESTEL Analysis

Political Factors

Strength of Factor: 1 (Strong)

Duration of Effect: Mostly Short-term

Political Uncertainties and Unrest

Tax and Profit Repatriation policies

Entry mode regulations for local banks

PESTEL Analysis

Economic Factors

Strength of Factor: 1 (Strong)

Duration of Effect: Long-term

Interest rates

Credit accessibility

PESTEL Analysis

Social Factors

Strength of Factor: 2 (Medium)

Duration of Effect: Long-term

Population demographics

Changes in lifestyles and trends

PESTEL Analysis

Technological Factors

Strength of Factor: 1 (Strong)

Duration of Effect: Both Long-term and Short-term

New Innovations in Financial Services

Technological Advances and Electronic Platforms

PESTEL Analysis

Environmental Factors

Strength of Factor: 2 (Medium)

Duration of Effect: Long-term

Environmental Protection Laws

Popular and Government Attitude towards Environmental Safety

PESTEL Analysis

Legal Factors

Strength of Factor: 1 (Strong)

Duration of Effect: Both Long-term and Short-term

Employment Regulations

Operational Regulations

Porter’s Five Forces

HIGH

LOW

HIGH

HIGH

MODERATE

TRENGTHS

SWOT Analysis

• Young, energetic and dedicated resource pool

• Wide range online distribution channel

• Unique SME model • Strong technological platform• Strong brand• Diversified Business Model• Largest customer base among

PCBs including Mobile banking • Organizational flexibility

• Asset quality • Inconsistent customer experience • Absence of focused technology

roadmap • High CIR (Cost Income Ratio)• Low Non Funded Income

S

OPPORTUNITIES

THREATS

• Trade Finance • E-commerce • bKash infrastructure • Customer mining from parent &

subsidiaries • Growth in Medium, Emerging

and Small sectors • Derivative and FX products• Social Networking• Mobile phone based banking• Agent Banking

• New Competition • Talent Attrition, Staff turnover • Unstable capital market • Country Image crisis may result

withdrawal of facilities like GSP• Industrial Unrest causing investors’

interest shift to Myanmar, Vietnam, Sri Lanka etc.

SWOT Analysis

Financials

Industry Highlights: December 2012INDUSTRY SCENARIO Operating Profit PBT FUM CIR NPL

As on 31st December 2012 BDT_M Growth BDT_M Growth BDT_M % %

Islami Bank Bangladesh 15,608 10.9% 12,096 16.9% 758,324 36.2% 3.8%

National Bank 3,725 -61.2% 3,275 -65.1% 283,500 69.1% 4.3%

Prime Bank 8,551 15.1% 5,335 -21.1% 342,943 36.6% 3.8%

UCBL 5,762 -3.5% 3,739 -27.7% 306,602 43.4% 3.7%

Southeast Bank 5,434 -6.5% 3,584 -16.9% 280,217 29.5% 4.5%

Pubali Bank 11,511 21.7% 4,317 -20.2% 272,487 46.7% 5.1%

Eastern Bank 8,844 13.5% 5,581 9.3% 188,501 36.9% 3.2%

Dutch Bangla Bank 5,205 0.9% 4,816 5.9% 217,034 81.1% 3.0%

BRAC Bank 5,145 3.5% 1,988 -33.9% 238,271 52.8% 7.4%

AB Bank 8,435 8.9% 3,190 7.9% 246,092 70.4% 3.3%

Dhaka Bank 5,343 -14.2% 1,440 -60.6% 197,567 39.7% 6.3%

Bank Asia 5,052 25.0% 2,723 -20.7% 202,391 48.6% 5.7%

NCC Bank 4,027 -4.5% 2,743 -24.4% 176,866 61.0% 5.5%

The City Bank 4,537 6.3% 1,763 -49.2% 177,432 46.6% 14.9%

Mercantile Bank 6,209 0.6% 3,351 -4.3% 225,705 45.2% 4.4%

Industry Highlights: December 2012

INDUSTRY SCENARIO Ranking

As on 31st December 2012 Op. Profit PBT FUM CIR NPL

Islami Bank Bangladesh 1 1 1 14 11

National Bank 15 10 4 3 9

Prime Bank 4 3 2 13 10

UCBL 7 6 3 10 12

Southeast Bank 8 8 5 15 7

Pubali Bank 2 5 6 7 6

Eastern Bank 3 2 13 12 14

Dutch Bangla Bank 10 4 10 1 15

BRAC Bank 11 14 8 5 2

AB Bank 5 11 7 2 13

Dhaka Bank 9 16 12 11 3

Bank Asia 12 13 11 6 4

NCC Bank 14 12 15 4 5

The City Bank 13 15 14 8 1

Mercantile Bank 6 9 9 9 8

Findings

Desired Perceived Identity

Q & A: Depth Interview What are the main goals for 2020? The main goals for 2020 are to be within top five banks in terms of Operating Profit and

be the 2nd largest bank in terms of Fund under Management. What are the main challenges ahead? The major challenges are political unrest, NPL reduction and cost income ratio

reduction What is the desired growth in the SME sectors? BBL aims to achieve a greater market share at the end of 2020.

Would the loan mix change to focus on Corporate and Retail more? Retail and Corporate must grow but the focus would still be SME.

What is the desired deposit mix? The deposit mix should change with greater focus on CASA.

Q & A: Depth Interview What is the aspired ranking in the industry in terms of Profit? The aspired ranking in the industry in terms of Profit is to remain within top 5. What is the aspired ranking in the industry in terms of FUM? The aspired ranking in the industry in terms of FUM is 2nd.

What should be the communication strategy? Effective but efficient (less costly) communication strategy should be used.

Are there probable going international plans? BBL will focus on internal consolidation first then extend footprints internationally

What are the technological prospects? Innovation & Technological Advances are continuous processes. BBL aims to turn its IT

into a profit centre through the launching of biTS, BRAC IT Services Ltd.

Q & A: Depth Interview

How can you improve the efficiency of the workforce? BBL has a separate Learning & Development Division for training thus efficiency

improvement of their employees. How can you reduce the costs? Staff cost can be reduced through efficiency and specialization/ job rotation where

relevant. Are there any plans of leveraging subsidiaries? bKash channel could be used to reduce dependency on corresponding bank. What ROE would you like to offer the shareholders? Shareholder wealth maximization thus higher ROE offering is essential and one of the

major goals for 2020.

Analysis & Recommendations

Strategic Objectives : 2020

SME Market Share Present Status: 6% market Share Recommendations:

Focus on the medium segment A 2% increase per year would make the share

20% at the end of 2020

Year 2013 2014 2015 2016 2017 2018 2019 2020

SME Market Share 6% 8% 10% 12% 14% 16% 18% 20%

Strategic Objectives : 2020

Operating Profit Present Status: 11th position in 2012 Recommendations:

Increase the ranking by 2 from 2014 to 2017 and reach 5th position

Aim for the 2nd position in 2020 Focus on Non-Funded Income such as LC

Strategic Objectives : 2020

Fund Under Management Present Status: 8th position in 2012 Recommendations:

Reach 2nd position by 2020 Loans and Advances and Deposits should

grow at 30% per year Deposit mix should increase its share of CASA

so that low cost funds are more and net interest margin is higher

Strategic Objectives : 2020 Operating Cost

Present Status: 5th position in 2012 in terms of cost income ratio

Recommendations: A fundamental redesign of the way the bank operates

to reduce cost sustainably Approach: A small team should be formed from various departments of the

bank to conduct a series of bottom-up and top- down analyses to develop aggressive goals

Team: Bank’s leadership team must visibly lead the effort and must illustrate both their vision for short-term changes and their long-term view in town hall meetings, electronic newsletters, social- networking sites, and Q&A sessions for small groups

Engagement: The entire organization must be mobilized throughout the process by a systematic change program that ensures the right amount of information is communicated to the right people at the right time.

Strategic Objectives : 2020

Non Performing Loans Present Status: 2nd position in 2012 Recommendations:

The credit division needs to be more careful and obtain relevant trainings if required from experts / organizations.

The collection team also needs to be more aggressive and motivated to reduce the NPL

Strategic Objectives : 2020

Return on Equity Present Status: 5.47% in 2012 Recommendations:

It should be around 10% in 2013 and increase in the following way in the coming years:

Year 2013 2014 2015 2016 2017 2018 2019 2020

ROE 10% 12% 14% 16% 18% 20% 22% 25%

Conclusion

Strategic Management is very important to ensure that employees and other stakeholders are working toward common goals

The bank should focus on few specific areas rather than too many targets for achieving their desired position in 2020: SME market share, Profit, FUM, Costs, NPL & ROE

BBL must think ahead of time and act ahead of competitors to retain leadership in innovative banking

Mr Najmul Hoque JewelHead of Business Planning and AnalysisFinance Division, Brac Bank Limited

Mr. Benozeer AhmedSenior Manager, Business Planning and AnalysisFinance Division, Brac Bank Limited

Mr. Salman AhmedSenior Manager, Business Planning and AnalysisFinance Division, Brac Bank Limited

Acknowledgement

Thank you

Q & A