EajdiEEF€GREEB®RTc®[ngTEE£NTs

One Eager

Detailed Repol.t:

1.0 Ratings

2®0 Profile

3®0 Ownership

4.0 Governance

5.0 Risk Management Framework

GOO CreditRisk

V

7o® MarketRisk \

8.0 Operational Risk

goo Industry Risk Analysis

flo.0 Capital Adequacy

flloo AssetQuality

fl2®® Management

E3.® Earnings Quality

14.S Liquidity Management

Rating Scale

Page NO.

01

01

03

03

06

06

06

07

07

09

10

12

13

14

nor NBFI\ational Credit

Mings are based on Audited Financial Statement upto Decernber 31, 2016 along with the othet reletant

Qottiutive as well as Qltolirative information up tode Me of Rating Declaration

Fotlowed Financial Institutions Rating Mefiodologttbt*, & NBFI) of NCR published in ant *ebsite-

Y&c: wvu.ncthdcom

F \\\(t{LDATA.. - \1il1ions)

Particu la rs 2016 (July 01FY 2015-16

to Dec 3I)

02.11.2017- Ortlr"k

A- (Singte A Minus) i

i\,I I DAS FIN,,TNC-INC LIM ITED

ENrnY I{artNG -2017Date ofRating Declaration Long Term Short Term

sT- 3

r-:l .{ssets 10,555.31 9,463.72

]:.:Jt,'-tl:ii 6,r6s 08 s,eo, 63

i = -;red Caoital-- :1"*[; 616 sr seo 16

- :: I Capital 1,136.41 1,024.69

:: ll Capital 56.04 53 08

,---:r.:l Surplus 575.95 487.60

, -:ss Frnance 8,932.79 7,884-27

" - P:rbrming 1.071.05 1,195.89.- \PL):-:i:5ron Required 462.67 567.70.;- -.'t \PL. - r ir\rn Maintarned 462.67 567,0.:: ::t \PL

":: L:rerest Based 143.51 214.g4

. :::, \et Revenue 225.06 271 -65

--i-R \laintained 139.57 103.98

:-R \laintained 624.46 509.98

-- {R oo) 19.34 18.26

The ratings are valid Jbr one yeat fiom the date ofdeclatration.

R{Trrc R-rllor.rLsThe above ratrngs of MIDAS Financing Limited have been assigned with due consideration of its comfy

fundamentals liki consistent financial performance, sound liqutdity position backed by adequate financial

flexibility, relatively low cost of fund and good corporate structure having renowned board members and

management team with affluent experience. NCR considers established policies and guidelines for risk

manalement, internal control system, credit approval process and conformance of regulatory requirements as a

positiie rating stimulus. The concern's Capital Adequacy Ratio (CAR) remained comfortable at 19.34o/o, followed

ty maintainirig a bulky amount ofcapital iurplus in the reporting year. ln addition, the company has maintained a

si.ong p.oui.iin lor potential impaired lending. Further, MFL reported Tier I ratio at 19 !:% o/n & Tier II ratlo at

0.91%-besides uppr.iiubl" surplus in CRR and SLR which reflect potential strength in MFL's funding & liquidity

profile.

The above fundamentals are, however, constmined to some extent by concentration of NPL in last category

(62.570/o ofNpL stood bad & loss). The ratings are further hindered by negative net liquldity gap in the short run

and decreasing trend in NIM in recent years. The ratings also take into consideration low interest rate in the

concem market and economic expansionary policies taken by the govemment'

The stable outlook reflects MFL's unwavering performance on its fundamentals and as such NCR expects that

MFL will be able to maintain its good fundamentals on an ongoing basis in the future.

AssEssltE)-T

r The shareholder's equity of the company stood at TK 1,021.69 million as on June 30, 2016 against TKg57.26 million in June 30,2015 whereas the equity was reported to TK 1,136.41 million as on December 31,

2016 for six (06) months. The Risk Weighted Asset (RWA) of MIDAS Financing Limited increased and stood

to TK 5,901.63 mililon in FY 2015- 16 against TK 4,857.90 million in FY 2014- l5 whereas the Risk Weighted

Asset (RWA) is recorded TK 6,165.08 ,nillion as on December 31,2016. The company maintained total eligible

capitai of lk t,Oll.ll million as on June 30, 2016 which was composed of Core Capital (Tier-I) of TK

t,OZ+.Og million and Supplementary Capital (Tier-II) of TK 53.08 million, representing a capital surplus of TK

4g7.60 million. Finally the CAR was posted 18.26% which was composed of 17 .36V, Core Capital (Tier-I) and

0.90% Supplementary Capital (Tier-ll).r Thegrossfinances(loan,advance&lease)ofMFLincreasedtoTK7,884.27 millioninFYl0l5-l6againstTK 5,1t3.39g million in Fy 2014- 15, registering a growth ol5l.81% and the gross finances (loan, advance &teasej of MFL was recorded TK 8,932.79 million as on December 31,2016. The Non-Performing Loan (NPL)

increased and was recorded TK 1,195.89 million in FY 2015- 16 against TK 1,128.63 million in FY 2014- 15,

registering a growth of 5.96Y, and the Non-Performing Loan (NPL) was recorded TK 1,072.05 million as on

nJcemUei: t ]ZOl 6. The impaired lending to gross finance increased to 15.17Y, tn FY 20 1 5- 16 from 21.73ok rn

FY 2014- ls.. MFL has maintained the full required provision of TK 462.67 million in 2016 (from July 01, 2015 to

December 31,2016), TK 567.70 miltion in FY 2015- 16 and TK 641.66 million in FY 2014- 15. The NPL

coverage decreased to 47.47ok in FY 2015- 16 from 56.85% in FY 2014- l5 and the NPL coverage was

recorded 43.16% as on December 31,2016.. Interest based income which increased to TK 757.19 million in FY 2015- 16 from TK 593.96 million in FY

2014- I 5 registering a growth of 27 .18oh and rhe interest based income was recorded TK 502.I 5 mtllion as on

December 31, 2016. ROE and ROA improved to 17.79o/oand2JOoh respectively in FY 2015- 16 from7.59Yo

and 1.00% respectively in FY 2014- 15.

r NetlnterestMargin(NIM)decreasedto 3.04o/oinFY20l5- 16from4.85o/oinFY2014- 15. Theassetyield

also decreased to 8.60% in FY 201 5- 16 kom 16.120/o in FY 2014- l5 resulting the interest spreads to increase

to-0.750 inFy2015-16from4.42"/oinFY2014-15andtheinterestspreadswasfoundpositiveandrecorded0.03% as on December 3l,2016. However, the cost of lund deteriorated to 9.35Yo in FY 20 I 5- 16 from 20.559'o

in FY 201 4- 1 5 and the cost of fund was recorded 4.670/o as on December 31, 201 6.

. The company maintained Cash Reserve Requirement (CRR) of TK 129.43 million against the required

reserve (2.5% oiterm deposity of TK 139.57 million having a surplus of TK 10.14 million as on December 3l'2016. The company maintained Statutory Liquidity Reserve (SLR) of TK 275.96 against required resewe (502

of total liabilitiis) of fX OZ+.+O million havrng a surplus of TK 348.50 mrllion as on December 31, 2016.

PR(}Fn,t:

! MIDAS Financing Limited (hereinafter called as 'MFL' or 'The Company') is operatrng as a Non-Bank

Financial Institution under the Financial Institution Acts, 1993 to provide integrated financial solutions. MFL,

having license from Bangladesh Bank on October ll, 1999 and incorporated as a Public Limited Company

under"the Companies Aat, 1994 on May 16, 1995. The company commenced commercial operation from

January 01, uotjo. rrre company issued public oflbrings in August 12,2002 by enfistrng with Dhaka Stock

Exchange on October 26, 20b2. iater on iuly 27 ,2004 the company enlisted wlth Chittagong Stock Exchange'

tr,tEL relisterea as a Merchant Bank in January 22, 2017 with the Securities and Exchange commtssion

f,iL Gross Advances 12.00

:. l,.rr 10.34

i -r\ roo) 1.12

\ \1 iro) 1.58:...et Yreld (%) 4.70

--.'s: oiFund (%) 4.67

S::ead (70) 0.03

\\ \i \ \1S:

\ .;i()ti \lllR\'' ' ,--:- l ::,l i^-li

- ./ r.ri,Li if{11

\r lrt L \l{ll\l0Ol}' '. :-r- l:i) l atr-s

, :i;bo;otr':

15.17

17.792.103.048.609.3s-0.7 5

140.89

ANL{ FR

\cR has used due care in prepaiation ofthis document. our information has been obtained from sources we consider to be reliable but its aceuracy or completeness is not

g.:aranteed. NCR shail or"* no liability whatsoever to any loss or damage caused by or resulting from any error in such information. None of the information in this

j,xument may be copied or otherwlse reproduced, stored or disseminated i-n whole or in part in anylom or by any means whatsoever Lry any person without NCR's written

.::t: OLir iepor:s a:id ratings constituie opinions. t'tot recommenda.tiotrs to buy or to se11

Tel: +88-02-47120156-8 website: www.ncrbd.com

l

|-

NBFInr; E P O RT National Credit Ratings Limited

1.0 TLATINGS

.ii.':,:gs are based on Audited

ENrrrY RA.TING - 2017

.': ::,:ritl Statenent up to December Date of Rating Declaration Long Term: - :!)16 along u:ith the other

:.:.u:t QLtantitative as well as

ii:,-;litati.ve information up to ile) : : : oi' Roting Dec laration.

l: .io t ed Financial Institutiorls

Short Term

ST- 3A- (Single A Minus)

.':::,:g .\fethodolog,t (Bank & NBFI) The rotitlgs orc wlitl1i,r one l,enir .frou the tlate oJ deckrrution.' ' r .l puoltslted in our tcbsite.

Ll e b s ite : www. ncrbd.com

2.0 PRoFILE 2.1 MIDAS Financing Limited (hereinafter called as 'MFL' or 'The Company') is

. provides extensive financial operating as a Non-Bank Financial Institution under the Financial Institution Acts, 1993 to

solutions as a Non-Bank provide integrated financial solutions. MFL, having license from Bangladesh Bank on

FinancialInstitution October 11, 1999 and incorporated as a Public Limited Company under the Companies

. Operateswith5branches, 1 Act, 1994 on May 16, 1995. The company commenced commercial operation from

booth office and l0 SME January 01, 2000. The company issued public offerings in August 12,2002 by enlisting

branches with Dhaka Stock Exchange on October 26, 2002. Later on J:uly 27,2004 the company

. Enlisted with Dhaka Stock enlisted with Chittagong Stock Exchange. MFL registered as a Merchant Bank in January

Exchange and Chittagong Stock 22,2011 with the Securities and Exchange Commission.

Exchange

. HasaMerchantBankingUnit 2.2 The Registered office is located at MIDAS Center (10th & il'h floor), House# 05,

Road# 16 (new) 27 (old), Dhanmondi, Dhaka-1209. The head office and the share

depafiment is situated at its own premises located Dhanmondi. The Head Office maintains

and monitors the accounts of all branches. The details of all the branches are provided

below:

SI. Branch Location

I . Hcad officc H3,-It":.'l!:l :ii"l i,J "n floor)' House# 05' Road# r 6 orcw) 27 (old)'

2. (.lrirrrgon3 u*n.f, ] )r.ii SV Touer I l.t lloorr. nl. Zirkrr Ho..ain R,,rr1. f Jst \a5irabad. Kl)Jl\hi

L hrttrlU('ng.

3. Bogra Brancl.r offi.. in,ilsl,opping Ccnte r 1 ird Floor). Borogola, Bogra Rarrgpur Road, Bogra Sadar,

-1. \rr.rarrgrnj Branch Olllcc Sl a . g.g nn".l rlrtLl Floort. I \o. Rajlcdlc. \Jrir\Jneani.5. Khulna Branch Officc Fatcma Torvcr (2ncl Floor). 2-A. KDA Avcnuc. Khulna.t, l-crri Booth Olllec Hl/i L.rrrl Tuscr r ird Floori. nln. Tnrilk Rnatl. t ,rrttilla Brrs St:nd. Fcni.

7. Comilla SME Branch Salam Buildcrs Mausiorr (2nd Floor). N'logo)tu)i. Courilla.

8. Sitaklnda SME Branch Nibir Bipani Bittin (l s1 Floor), Shitakunda. Chittagong.9. Gazipur SN{E Branch K.S Torvcr (2r'rd Floor). Chandana Cirourastira. Gazipur.10. Islarnpur SME Branch Nurul Haque To*cr (lnd Floor). 2l Patoam)-v Road. Dhaka-1 100.

I L Chandpur St\{E Branclr !.Plli-^.i Hl]': i]:::i-.:5 No (Ncu -780) Haji Mohsin Road' Natun Bazar'

"-" t ltardp.rrSrd"r.t ltrrtdlrrrr 1,i00

l). Brahrrarrbarn Sl\4E BrJrrclr lc{ t oLtrr Ro.rt1..:rJ Fi,'u1. g.,,,l. Potti. Brrrltrttanharir.l i. Hathajari SME Branch S.A Shopping f ompicr (Znd Floor). Ilathajari. Chittagong.

r4. Kcraniganj SME Brancrr bil,:l';l:::'rrl'i:x[[il:"Jiii] iloor), Housc #0l Kodomtori Gor Chottor'

15. Nur.irrydi S\lF Rrrrrch BJnkprtti. \ledlrabdi U-rr. tr,t.,,lt "ba;. \ar:irrgdi

I 6. Jcssore SN{E Branch Sardar Plazza ( I st Floor). I 35-M.K Road. Jcssorc.

MIDAS FINANCING LIMITED Page I of 15

02.11.2017

Outlook

ewNO\T,MBER 2017 www.ncrbd.com

Stable

ncr I{BFI

REPORT National Credit Ratings Limited

2.3 MFL, a non-bank financial institution, engaged in providing a broad range offinancial services ranging from inveshnent activities for capital machinery, equipment andvehicle for industrial and commercial purpose, financing activities for household durablesfor individual customers, temporary financing and term deposit services. The companyalso provides Merchant Banking services through the Merchant Bank Unit. The details ofthe product lines are given below:

Loan/ Product Corporate Service Investment product Deposir/Liabitiries **'T;l,H[*r* *Management Services

r Lcase Finance

. Tcnr, Loan (SME)

r Term Loan (MIDi)

e Housing Loans

. Auto Loans

r Consumcr Credit

. Project FinanccAppraisaJ

. Project LoanSyndication

' Working CapitalArangcrnent

o Syndication Agencvservices

r RefinancingarTangcments

. Comrnon Eqr.rityInvcstmcnN

. Prcfcned EquityInvcstmcnts

o Bonds

r Term DcpositSchemcs

r Double MoneyDcposit Schemcs

r Tnplc MoncyDcposit Schones

r Monthly.,lQuarterlyIntcrest Schemcs

o Monthly DcpositSchcmcs (DPS)

o Loan Against Licn ofSecurities (LLS)

. PonfolioManagerncnt

. Guarantcc Scn.ices

2.4 The BoD in the 277h Board Meeting dated May 07,2017 recommended no dividendwhich was entitled to the shareholders as on May 29, 2017 (Record Date) and wasdeclared in the 21't Annual General Meeting held on June 20, 2017. The shares of MFLare listed with both the bourses of the country and are being traded in the ,,2,, category.Total shares outstanding of MFL are 120,268,676 andmarket capitalizationof MFL is TK4,690.478 million. The basic EpS from July 01, 2016to December 31,2016was TK 0.93and the market price per share as'on 29.12.2016 was TK 2g.00. The closing price pershare as on 22.10.2017 was TK 39.00. The closing share price of MFL for the last oneyear is depicted in the following chart, and according to the chart, the closing share priceof MFL showed an increasing trend since first of November,2016 and has been decliningsince mid of April, 2017. However, the share price again gained momentum durin!September,20l7.

MIDAS FINANCING LIMITED P"g. , "f

1-5

F

NO\TMBER 2017 wrvw.ncrbd.com

II

I

I ncr National Credit Ratings LimitedR E P O RT

Closing Price GraPh of MIDAStr'IN

lIII

25iI

I

li2oi 'l

15i - --

Nor 16 Ds 16 .Iu l7 i,{"rl? -Aprt7 NI* t7 lutT JdU Aug17 sEpu os17

Shareholding Pattern

IIItttT

TTtIlII

3.0

!

OWNERSHIP

Sponsors hold 32.81% ofshares, comPanies and

institutions hold 36.44% ofshares and 30.75% of the shares

are held by the general Public

GownNlNcn

Experienced BoD

2.5MFLisamemberofBangladeshLeasing&FinanceCompaniesAssociation(BLFCA), Bangladesh Association of Public Listed Companies (BAPLC), Bangladesh

Money Market Dealers Association (BAMDA), Dhaka Stock Exchange (DSE),

chittagong Stock Exchange (cSE), The American chamber of commerce in Bangladesh

(AmCham),MetropolitanChamberofCommerce&lndustry(MCCI)andDhakaChamber of Commerce & lndustry (DCCI)'

3.1 Sn.tRr ClPrtAI-:

3.1.1 AuTHoRIZED SHARE CAPtrlL

MIDAS Financing Limited was incotporated with an authorized share capital of TK

2,000.00 million having 200 million ordinary shares of TK 10 each'

3.1.2 IssuED, SunscnrsBn AND PAID Up Capltal:

The shareholding structure of MFL is found diversihed. The sharehoiding mix is

comprised of 40.25o/o Sponsors/Directors, 29 .02% lnstitutions and 30 '73o/o General Public

as on September 30, 2017. As on December 31,2016, the company's ordinary shares

stood at 120.268,616 shares of TK 10 each having total capital of TK 1,202'681 million'

The shareholding pattemas on September 30, 2017 is presented in the adjacent graph:

4.0

i

il Sporrsor's Dlrrtaol!

ghrdfirdorrs

.; G.ncrdHrbtr(

4.1 The Board of MFL is comprised of 12 (trvelve) mernbers among them 03 (three) are

Shareholding Directors, 04 (four) are Nominee Directors from the Shareholding

Company,03(three)arelndependentDirectors,0l(one)isNomineeDirectorfrom

MIDAS FINANCING LIMITEDPage 3 of 15

www.ncrbd.comNO\EMBER 2017

NBFI

NBFTnflr National Credit Ratings LimitedR E P O RT

. Two committees in BoD

. Nine Sub-committees

Institutions and 01 (one) is Ex-Officio

BoD mernbers is given below:

Name of BoD Members

Ms. Rokia A. Rahman(Norninee Dircctor of MIDAS)

Mr. Md' Ikramullah(Nominee Director of MIDAS)

Mr. Mirza Ali Behrouze IsPahani(Nominec Director of MIDAS)

Mr. Bazlur Rahman Khan(Nomince Dircctor of MIDAS)

Ms. Md. Shamsul Alam

Mr. NId. Shahedul Alam

Mr. S.M. Azad Hossain

Mr. Mohammad Khairul AnamChorvdhury

(Nominee ofLanka Bangla Finance

Limitcd)

Mr. M. Hafizuddin Khan

Mr. Ali Imam Majumder

Mr. Siddiqur Rahman ChoudhurY

IIr. Shafique- Ul- Azam

Director as Managing Director' The brief profile of

sl.No,

0l

Designation

Chairmau

Director

Dircctor

Dircctor

Director

Director

Dircctor

Director

IndepcndentDirector

IndePendcntDirector

IndcpendentDircctor

ManagingI)i rectors

CommitteeMember

Member of AuditComrnittec and

ExecutiveCommittee

Mcrnber of AuditCornmittce and

Chainnan ofExccutivcCommittec

MenTbcr of AuditCommittce

N/A

Member ofExecutiveCommittec

KeY ExPerience

Pionecr in Woman Entrcpreneur,Directorship in Multinational

Cornpanies & Trustce Board

Membcr of TIB

Pionecr in Micro Credit IndustrY,

Prornittcnt busincsstnan in )easing

Prominent businessrnan in FMCG

Prominent businessman in lcasing &power and energY sector

Prominent businessman in agro

sector

03

04

06

07

10

I

I

I

ItIttT

T

T

TI

Prominent busincsstnan in agro &N/A leasing scctor

N/A Ou'ner of sPinning mill

I 9 vcan exPerience in stockN/A brokelgc industry

Mcrnber ofg*".utiu" Rctircd as 6'1'Controllcr and Auditor

Committec and Gcncral of Bangladcsh an{ !x- iiruin"un oi Chairman of Agrani Bank Limitcd

Audit ComnrittecFx- ( hainnan ol thc Board ol

Mcmbcrol Dircctors ol'Sonrli Bank LirnircdExecutir e rnd Bitnan Bangladcsh AirlincsCottttntttec I inrited

Retired Financc SccrcrarY of the

. Co\ L'trlncnt ol Bangladcsh' Er've tnber ol Attdtt ch.ri.nan of tltc board of dircctors ol'

comtnittee Agrani Bank. Sonali Bank (uK) Ltd

and Sadharan Blma CorPoration

NrA 20 Ycars banking cxPcrict'lcc

4.2 The Board of Directors (BoD) of MFL has highly experienced and competent

professionals to establish and monitor intenlal ru1es and regulations as well as to impose a

goodgovemancepracticeb.vcomplying\\.iththelarvs.rulesandguidelinessetforthbythe respective regulatory bodies. Tl-re Board has t$o colnmittees namely' Executive

CommitteeandAuditCommittee.TheresponsibilityoftheAuditCommitteeistoperfom the audit function and look after the colporate govemance' financial

management, risk management, alld reguiatory compliance'

4.2.I EXECUTIVE COMMITTEE (EC)

TheECofMFLcomprisesof5(Five)members.TheECshallbeCompetenttoexreciseall or any of the powers, authorities & discretion vested in or exercised by the Directors'

The Ec manages the business of the company, implement strategic business plans and

policies approved by the BoD, identify, formulate & prioritize strategic issues on an on-

going basis and charl strategic directions for Management & staff for action' approve new

11

Page 4 of 15rllrUAS FINANq4Iq LIUMPNOVEMBER 201?

lvrvlv.rcrbd.com

II I,I National Credit Ratings Limitedf

-ilI

I

policies,manuais,approveallkindsofpennissibleloan,reviewquarterlyrepodonpending lega1 cases, repofi on written-off cases' report on Asset Liability Management'

repofiondisbursementmadeagainstlimitsanction,creditadministrationofloanaccountsanddebtrecoveryproceedings/loanrestucturingandexecuteaSfeementswiththirdparties or other tinancial instituitions or subsidlries & associated companies in the

ordinarycourseofbusiness.ThecompositionoftheExecutiveCommitteeisgivenbelow:

sl.No.01

02

03

0405

Name of Executive Committee \{emtters

Mr. Md. lkramullah" Dircctor

Ms. Rokia Afzal Rahman' Chairman

Mr. M. Hafizuddin Khan, Indepcndent Dircctor

Mr. Ali Imam Majumdcr, Indcpcndent Dircctor

Mr. Md, Shamsul Alam, Dircctor

Name of Sub-Committee

Management Committec

Purchasc Committee

Intcgrirl Commince

Promotion and Selection Commrttee

Credit Committce

ICT DevcloPment Committee

Asset Liabiiity Management Committce

Monitoring and Rccorcry Comtnittec

Proht OPtimization Forum

Designation

ChairmanMcmbcrMcmbcrMcmbcrMember

4.2.2 Auorr Colvmtrrnn (AC)

TheACofMFLcomprisesof05(Five)members.TheACreviewstheappropriatenessandeffectivenessoflnterrralControl,lnternalaudit,Compliance,Relationshipwiththeextemalauditor,ReporlingtotheBoard.TheACalsooverseesthefinancialreporlingprocess of quarterly, rrrii i"rrv and annual financial statements, accounting policies and

procedures, and reviews the statement of significant related party transactions submitted

by the management' The composition of the Audit Committee is given below:

SI' No' Name of Executive Committee Members Designation

0l Mr' M Hafizuddin Khan' Indcpcndcnt Dircctor Chairman

t)Z *' *oO'u O"'Rahman' Chainnan Mernber

03 Mr' Md lkramullah' Director Member

04 X;":*:-- -"man Chmdhury' Indcpcndent

::**'05 io''

'i"" o"

"cl.trouzc Ispahani' Director Membcr

4.2.3 SUg CON,TN4TTTEES

othertheExecutiveCommitteeandAuditCommitteeoperatingunderthedirectsupewisionoftheBoardofDirectorsofMIDASFinancingLimited,thereareninesubcommitteestolookintothedailymatters.Thecommitteesalongwiththenumberofthemembers action under the respeciive committees are presented in the table below:

Sl. No.01

02

03

04

0506

01

08

09

No. of Members07 mcmbcrs04 mcmbers06 mcmbcrs05 tncmbcrs05 membcrs

06 members

07 mcmbers

05 members14 members

rnqpgSf ",ll4llc-I]!s!L!4TEP- crbd'com

NownrsEn 2017

I

-_t

I

I ncr National Credit Ratings LimitedR E P O RT

5.0 RISKMANAGEMENT

FRAMEWORK

Has Risk Management

Department to imPlement risk

management framework across

the company

5.1. The management has satisfactorily

MIDAS Financing Limited. The risk

operational risk and the core business

decision for approval of lease finance or

have been developed to ensure proper

implemented the risk management framework ofparameters such as credit risk, market risk,

risk are identif,red and evaluated while taking

term finance. Various manuals and guidelines

credit risk management system. Legal and

I

II

compliance department ensures that proper documentation against each transaction is

6.0

l'

Specific manuals and guidelines maintained'

for risk management

CnrorrRrsr

Well constituted Credit

Committee for credit

assessment

Clearly defined delegation of

authority for credit aPProval

Follows polices and guidelines

provided by the regulatorY bodY

MARIG,TRISK

Maintained proper Provision for

the diminution in market value

of equity investment

6.1 MFL introduced credit Risk Management Policy developed by the senior

management and subsequently approved by the Board. Credit Risk Management (cRM)

policy of MFL include identification, measurement, grading, and control/ mitigation of

risks. All Credit proposals those received from the branches are processed by the Credit

committee (cC). credit applications reviewed by the cC team are forwarded to the

credit Risk Management Depafiment (CRMD) for their assessment. The credit is

subsequently approved by relevant authority as per delegation. The maxirnum exposure

Lease products are set by the BoD. A11 proposals over the limits delegated to the cc/EC

are placed the Board for approval. The delegation of business powel of each committee is

presented below:

proposars category T.ffi**T,l or#3f"f,,,,, '"New Clients Othcr than BDT 0.75 million BDT 4 00 rnillion

Sanction H[:i:i: BDr 7.50 milrion

Existing cricnrs ,?jl,"J#;; BDr r.00 rniuion BDr 4.00 million

Waiver Fces & Charges BDT 5'000

The primary responsibility of recovery of loans and lease rentals lie with the Relationship

Manager,s (RM) of Business operational units. The Monitoring department at head

office reviews the NPL accounts along with the statr.is of recovery and assesses the

adequacy ofprovisions on a quarterly basis'

7.1 Total lnvestment of MFL increased to TK 239.397 million in FY 2015- 16 against

TK2Ol .g5l million in FY 2014- 15. registering a grorvth of 15.l2ok and the investment of

MFL was recorded TK 22j .173 million as on 31" December,2016. The company had no

investment in Government Securities as on December 31,2016. The investment in

marketable securities stood to TK 204.60 million from July 01,2015 to December 31'

2016 against 185.38 million in FY 2014- 15. The company made an investment in non-

marketable securities worth of TK 22.57 mllliott in CDBL, Financial Excellence Limited,

Lankabangla Securities Limited and Bangladesh ventures Limited which remained

constant in 2016 (from July 01, 2015 to Decembet 31,2016) and FY 2014- 15' The

market price of the total marketable investment stood at TK 189'91 million having an

unrealized loss of TK 14.69 million. The company maintained fulIprovision of TK 14'69

million against the loss in value of shares. The cost and market price of the investment

along with the provision made for quoted marketable securities and non-marketable

securities is given below as on December 31 , 2016 '

MIDAS FINANCING LTUTTNU Page 6 of 15

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IIItttt|lT

ITTT;

7.0

I

NO\.EMBER 2017

NBFI

NBFI

nsr National Credit Ratings LimitedR E P O RT

Type of Investment

Marketablc Sccurities(Quotcd & Unquotcd)

Non{rarkctable Sccuritics

Cost Price

FY2016 2ol4- 15

204.60 I 85.38

22.57 22.51

2ot6 ,orXlr, 2016

ExPosure in. Market (TK in miuion)Maintained

Market Pric€ Gain/(Loss) provision

Fy 2016 FY

2014- 15 201't- 15

Eicess/ (Shortfall)on Provision

2016 FY20t,{- r5

8.0

I

a

Oprnarrolqer, Rrsr

Uses advanced IT for MIS

Maintains daY to daY data back

up

9.0 INDUSTRYRISKANALYSIS

g.1 MFL maintains own developed customize software which contains product wise

module along with accounting system based on visual Basic 6 and Microsoft sQL server

2012since200T.MFLalsousesVPNtechnologyformaintainingcommunicationbetween head office and branches. The system generates reports as per organizations'

need. The company has installed new software for Merchant Banking Unit in the year of

200T.Forensuringdatasafety,MFLmaintainsdaytodaydatabackuptominimizetherisk of data loss.

S.2MFLhasseparatelnternalControlandComplianceManual.TheBoardofDirectorsreviews policies and procedures periodically. The internal control system helps

identifiing the orgaIlizational weaknesses and takes appropriate measures to overcome the

difficulties. Independent inspections take place annually 10 elsure compliance with

LendingGuidelines,operatingprocedures,FlpoliciesandBangladeshBankdirectives.MFL has formed tuturrug"*"rrlcommittee (MANCOM) that monitor the effectiveness of

the internal control ,yrrJ-. The MANCOM is directly supervised by the BoD.

g.l Non Bank Financial Institutions (NBFIs) have emerged as an important segment of

financial system in Bangladesh. NBFIs offer diversified financial services mostly long-

term in nature to cater the ever changing demands of customers. NBFIs play crucial roles

in providing additional financial services that cannot be always met by the banks' In

addition, NBFIs are engaged in the capital market as well as in real estate sector of

Bangladesh. es a watcildog, Bangladesh Bank supervises NBFIs through a risk-based

supervisory system so that NBFIs can deliver financial services efficiently' NBFIs showed

strong performance in terms of grornth in assets and deposits during FY16'

Structure of \BFIs2012 2013 20ls 2015 2016*

.:l jl .:l ll ill.rllj10 l0 l0 l0 lltB l3 lE 19 19

] - 15 12

169 176 lEl 198 220

Source.- Deparlntent al Fitlulf iol l)t\lilttltutls dntl L[utkLls BB'

g,2BangladeshBankissueslicenceandsupervisesNBFlsundertheFinancialInstitution Act, 1993. At present, the minimum paid up capital for NBFIs is Taka 1'0

billion as per the Financial lnstitution Regulation, 1994. NBFIs'business line is nanow ir

comparisonwithBanksinBangladesh.NBFlshavebeenallowedtooffertermdepositservicefortenureofatleastthreemonthseffectivefrom2December20l3.

UID 4qIIN4lgIryG LIUIIEp--NO\T,MBER 2017

189.91 208.56 (14.69) 23.18 14'69 5 00 - 5 00

Prg. ? "f 15

I

2011

i1I

S

t0,i3

161

I

ItIIT

T

T

TI

No. ofNBFIs

@_--EJoint-venturePrivate

1&v-!s!e!s!---Total branches*As on 30 June 2016.

@ rvlvlv.ncrbd.com

-NBFIncr

::,: RTNational Credit Ratings Limited

lnvestment Pattern of NBFI 2016

I lndustry

I R6rl E tare

lTrad. & Commcrcc

lMcrchrnt Bsnkrng

EAgrlcultur(.

93 Presently, out of 33 NBFIs, three are Goven:ment-owned, 11 are joint venture and

the rest 19 are locally private-owned. Meanwhile, the branch network increased to 220 as

on 30 June 2016. The Structure of NBFIs is shown in the following table.

Assets, Iiabilities and deposits of NBFIs

. Yerr. , 2ql!Total asscts 288.4

Toral liabiliric' 2.1r,7

Liabilitics-As:ctsratio 81 7

Total dcposit 112.6

Deposit as '',, oltotal liabilitics 4'.8*.1s on 30 June )0 I 6.

Source: Department of Financial Institutions and Markets, BB.

g.4 Capital adequacy focuses on the total position of NBFIs' capital and protects the

depositors from the potential shocks of losses that an NBFI might incur. It helps absorb

major financial risks related to credit, market, interest rate, etc. NBFIs in Bangladesh have

been instructed under the Basel Accord to maintain Capital Adequacy Ratio (CAR) of not

less than 10.0 percent with at least 5.0 percent in core capital. At the end of June 2016, ortt

of 33 NBFIs, (one NBFI is yet to come under this operation) 2 were evaluated as "l or

Strong", 15 were "2 or Satisfactory", 14 were "3 or Fair" and I was "4 or Marginal" in the

capital adequacy component of the CAMELS rating.

Total Loan/Lease and Classified Loan/Lease(TK in Billions)

2012 2013 2014 2015 2016i'

l5:.1 :-.r.h 371.8 448.5 4q8.h

li.7 16.8 19.1 40.0 '15.1

s.l 6.1 5.3 8.92 9.0

Source: Departfrent of Finqncial lnstitutions and Markets, BB.

9.5 Earnings and profitability of an NBFI reflects its efFrciency in managing resources

and its long term sustainability. Among various measures of eamings and profitability, the

best and widely used indicator is the retum on assets (ROA) which is supplemented by

retum on equity (ROE). ROA and ROE of all the NBFIs in June 2016 were 0.8 and 5.6

percent respectively. At the end of June 2016, out of 33 NBFIs, 3 were evaluated as "1 or

Strong", 16 were "2 Or SatiSfactory", 11 were "3 or Fair" and 2 were "4 or Marginal" in

the earnings and profitability component of the CAMELS rating (the remaining one NBFI

is yet to come into rating).

2012 2013 2014

l.]j.q 4lo.l 510.05

:71..1 I5U.4 12J )1rJ).2 RO.i x l.5t45.4 l qx.i 218.5

5i,0 50.r, 5r..2

(TK in Billions)

2015 2016

611,0 672.8

509.0 572.083.3 85.0

31 8.1 351 ..1

62.5 61.4

-Ls4r4!9-_9lqrjil_"i@r/Lease .. _

Classified Loan{Lease as o/o

_el]e!cl-*_-*As on 30 June 2016.

2010 2011

1 7E. I 109.7

10.5 10.3

5.9 4.9

MIDAS FINANCING LIMITED Page 8 of 15

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National Credit Ratings Limited

IItT

tT

T

II

protitabilit-v of NBFIs20lt 2012 20t3 20t5 20t5

ROE tt.1 l0 :t 7.5 q.q"' '"-2.;- --ROA ).1 LS t.5 t.8 .;'1,,,tt lt Jr1., :t,l^ t-q411t.ttt:,.J1

Source.' Daportnent of FiildllLittl ltjstttutions untl Markds. BB

2016

5.6

0.8

III

10.0 Caprrar, ADEeuAcy

. Complies with the prudentialguidelines of the regulatorybody, Bangladesh Bank

. Maintained 19.34% CAI.

9'6 NBFIs have already passed more than two and a half decades of operation. Theyface competitive disadvantage in collecting funds compared to the banks due to severalreasons' The main reasons are: - NBFIs cannot collect short term (less than three month)deposits from individual due to the central bank's restriction, and again deposits in NBFIsare perceived to be less safe to the public. As a result NBFrs have to offer higher rates ondeposits, which are sometirnes as expensive as bank borrowing. Again, excessivedependence on bank loan and deposit ha, un adverse impact on the overall industry. Dueto the liquidity crisis, when interest rate goes up, the average rate of interest on bankcredit lines and deposit rate also increases, which causes significant rise in the cost offund for NBFIs' The high cost of fund for NBFIs compels them to operate on a rerativelylow profit margin.

9'7 Despite several constraints, the industry has performed notably well and their role inthe economy should be duly recognized. Non-Bank Financial lnstitutions (NBFIs) inBangladesh have achieved impressive growth in recent years reflecting the process offinancial innovation and holding the promise of deepening financial intermediation inlong term financing needs. It is important to view that NBFIs work as a catalyst foreconomic growth and provide necessary suppoft for the development. A long termapproach by all concerned for the development of NBFIs is necessary. Given appropriatesupport' NBFIs will be able to play a more significant role in the economic developmentof the country.

10.1 MFL has formed Asset Liability committee (ALCo) after stafiing to implementBASEL Il requirements which are strlrctured around three pillars namely minimum capitalrequirement, supervisory review process and market Jiscipline to compry with theBangladesh Bank's pmdential guidelines on Capital edequacy and Market Discipline inaccordance with Basel lI' BASEL committee has responsibly implemented the BaselAccord with three specific approaches - standardized approach whereby the risk weightedassets are calculated based on the ertemal credit assessment of the risky assets,standardized rule based approach is lbllorved to measure the market risk and basicindicator approach is used to quantify the operational risk. The BASEL Com,rittee isresponsible to draw dor'vn a clear roadmap in various stages to implement the Basel Ilcompliance, to design and arange training to build a skilled manpower, to communicateany issues related to BASEL Il implementation with the management and provide asolulion lo any issues arisirrg our of it.

l0'2 The shareholder's equity of the company stood at TK 1,024.69mi11io[ as on June30,2016 against TK857.26 milion in June 30,2015 whereas rhe equity was reported toTK 1,136.41 million as on December 3r,2016 for six (06) months. The equity baseincreased by 19.53% in Fy 20r5- r6. The equity base is composed of paid_up capital of

lflOaSfr:laffiNoITMBER 2ol7

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Page 9 of 15www.ncrbd.com

nffirREPORT

NBFI

L

-INBFI

ncr National Credit Ratings LimitedR E P O RT

TK l,2o2.6gmi1lion, Statutory reserve of TK 158.73 million and retained earnings of TK

(336.73)mil1ioninFY2015-16.Theshareholder,sequltytototalassetsstoodar|0.83ohinFY2015.16againstl3.|6%inFY2014-15and10.77%asonDecembet3I,2016.

l0.3TheRiskWeightedAsset(RwA)ofMlDASFinancingLimitedincreasedandstoodtoTK5,901.63millioninFY2015-16againstTK4,857.90millioninFY2014-|5whereasthefuskWeightedAsset(RWA)isrecordedTK6,165.08millionasonDecember3|,20t6forsix(06)months.TheTotalCapitalRequiredtobemaintainedis10%ofRiskWeightedAsset(RwA)whichstoodatTK590.16millionwhereasthecompanymaintainedtotaleligiblecapitalofTKl'077'TTmillionasonJune30'2016which was composed of core capital (Tier-I) of TK 1,024'69 million and supplementary

Capital(Tier.II)ofTK53.08million,representingacapita|surplusofTK43T'60million.Finally the CAR was posted |8.26%which'was "o,npo."d

of |7.36% Core Capital (Tier.

I) and0.90% Supplementary Capital (Tier-II)'

;l

I

IT

T

ItItT

tTIl*I

TL;

ffipit"t ,'c.rc caPital

ii;; iriirir"r I Supplemcntary caPital

Total Eli giblc C'apital (Tirc- 1 +Tirc-2)

Risk weighrcd 4.."15 1ftWA)

Required CaPital -(107u of RWA)

Capilal Excess / (Deficit)

CAR

2016 (From JulY 01,

2016 to December1. 20

1 ,l 36.41

56.041,192.45

6,165.08616-51

575.9,1

19.34

in million)

FY2014- 15

8s1 .26

39.20896.46

,1,857.90

485.79110.67

18.45

FY2015- 16

1,024.69

53.08

1.071 .77

5,901.63590. I 6

487.6018.26

11.0 AssEr Qullrrv. 51.81% growth in gross finance

of MFL

. l5.17Yo Non Performing Loan

of MIDAS Financing Limited

inFY 2015- 16

. General Provision and SPecific

Provision are maintained fullY

bY the comPanY.

11.1 The gross finances (loan, advance & lease) of MFL increased to TK 7 '884'27

millioninFY2015-16againstTK5,193.398millioninFY2o|4-]l5,registeringagrowthof5l.81%andthe"g.o,,finu,-,"es(loan,advance&lease)ofMFLwasrecordedTK8,g32.7gmi1lion as o'iDe"ember 31' 2016' The loan' advances and lease mix is

comprisedofLeaseFinance(|2.|g%inFY20l5-16andl7.g1%inFY2014-15),TermFinance (69.53%in Fy 2015- 16 and 62.91%in Fy 2014- 15), Housing Finance (14',88%

inFY2015-16and14.5o%inFY2014.15),StaffLoan(0.33%inFY2015-16and0.34%inFY2014.15).ConsumerCredit(0.04%inFY2015-l6ando,06%inFY2014-15)andlnterestReceivable(303n''i'inFY2015-16and4'16%inFY2014-15)'

ll.2Largeloansandadr.ancesorsirrgleborrorverexposure(outstandingamountexceedingl5%thepaidupcapitalofthecompany)increasedandstoodatTK2,393.46million against I r f"r"u.niu..trrn,, frorn July bt, zots to December 31,2016 which was

TK 914.g1 million against 05 (five) account rn FY 2014- 15. 01 (one) number of accounts

accounted for TK 86.16 million were recordecl classified among the large loan and

advanceaccountsin2016andtherecoveredamountfromthataccountwasTK5.2Tmillionuptooctober12,20lT.ThetoptwentyexposLrresstoodatTK2,55T.3lmillioninfromJuly01,20l5toDecember3l,2016uguin'tTK:I,425.69millioninFY2014-15whichaccottntsfor32.44%afi,27.45o/oofg,o,.financein2016and2015respectively.

T"E 10 "f

15

fqm+SfqallCINGLIMITEq --NO\EMBER 2017

www.ncrbd.com

-I\BFI

nffir National Credit Ratings LimitedR E P O RT

lI

I

I.l.3Thefinancetodepositratiodecreasedto140'89%inFY2015.16froml52,63ohinFy 2014- 15. Moreover, the finance to deposits and bonowings ratio decreased to

lll.33%in Fy 2015- 16 from 116.60% i, iy ZOt+- 15' Total loan recovered against

regularloanandclassifiedloanstoodatTK1200.50millionandTKl50.g3millionrespectivelyinFY2015-16againstTK5193'39millionandTK1128.63millionrespectivelY in FY 2014- 15'

I.1.4TheNon-PerformingLoan(NPL)increasedandwasrecordedTKl,l95.89millionin Fy 2015- 16 against if t,tZS.O: million in FY 2014- 15, registering a growth of

5,g6%andtheNon.PerformingLoan(NPL)wasrecordedTK1,072.05millionasonDecember 31,2016. The NPL under sub-standard classification increased to TK 339'63

millioninFY2015-16fromTK163.73millioninFY2014-15.ontheotherhand,NPLunder doubtful classification decreased to TK l0'7.ggg million in FY 2015- 16 from TK

l31.l2l million in Fy 2014- 15. on the contrary, NPL under bad/loss classification

decreased signifrcantly toTK748.27 million in FY 2015- 16 from TK827'18 miliion in

FY20|4-15.Theimpairedpoflfoliocompnsedof28.39,/,and]r4,51o/osub-standard,9.03oh and 12.15%doubtfu1 uni OZ.Sl"l, and13.34okbad & loss during FY 2015- 16 and FY

2o|4-|srespectively.Theimpairedlendingtogrossfinanceincreasedtol5.lT%inFY2Ol5- 16 tuom2l]73o/o in FY 2014- 15'

Particulars 2016'(FromJulv ' ot

(TK in millions)

,::;l';"lt', ,ol,I,u ,,il ,,2016)",G,:;;;*iil;*, l::"r:: ?,\tr'r:'r[

, t:,'r210:1',

Standard 200'46 3 13'17 2oo'71SPecial Mention Account (SMA)

2r3j70 339.63 163'73

169.'76 101 .99 l3'l '12

oa8.iq 148-27 82'7.'18

1,072.05 1,195.89 1,128'63

12.00 15.17 21.'73

11.5Thetop20(f\^,enty)classifedloanamottntincreasedandstoodatTK488.38millionin2016againstTK376.82nri1lionin20l5.Amorrgthetop20(twenty)classifiedloanaccounts, 03 (three) accounts of TK l46.ll million were categoriezed as sub standard in

2016against05(tive)accountsin2015ofTK58.65million,05(five)accolttsofTKl05.4SmiliionwereCategoriezedasdoubtfullitt2016agianst03(three)accountofTK30.74millionin2015and12(twelve)accountsofTK236.T2millionfellunderBad&LoSScategoryin20l6againstl2(twelve)accountsofTK28l,4|in2015.During2016,3g (thirty eight) Ioan *.i. ..-r.h"duled having outstanding balnace of rK 477 .18 million

in20l6.TotalTK3oT.} millionwasreoveredagainsttop20(twenty)classifiedloansas

on october |2,2017 . TK l|g.29 million was also recovered under the Bad Loan category

as on October 12,2017 '

IIIT

ttT

IItT

FF

l

Unclassiiied LoanSub-dtanOard (SS)

Doubttul (DF)

Bad Loss (BL)Non-Performing Loan (NPL) or

Classified LoanNPL 1 Gross Finances (9'lo)

up.rq$aryqryql]rylrEp-

I

NOVEMBER 2017

.INBFI

nffirR E P O RT

National Credit Ratings Limited

Particulars *r'.u,lT;' Fy

#:*1. zors-ro

31,2016)

Required Provis;ion 162.67 567.70

Standard (lncluding SME loan/lcases) 16.28 37.31

Special Mention Account (SMA) 9.76 15.16

Sub-standard (SS) 15.02 32.42

Doubttul (DF) 24.78 30.73

Bad/Loss (BL) 366.83 451 17

Provision Maintained 162.67 567.70

Exces s Provis i o n Mai ntainedLoan Loss Provision to Non-Perfbrming Loan (%) 43.16 47.11

(TK in millions)

FY2011- 15

641.6629.669.51t7.8933.88

5 5U.66

64 r.66

56.85

I2.O MANAGEMEI.IT

. Experienced management team

. The management team is also

responsible to monitor the

different activities of the

organization through nine

different committees

11.6 MFL has maintained the fulIrequired provision of TK462.67 million in 2016 (from

July 01, 2015 to Decernber 31,2016),TK 567.70 million in FY 2015- 16 and TK641.66

million in FY 2014- 15. The NPL coverage decreased Io 47.47o/o in FY 2015- 16 from

56.85% in FY 2014- l5 and the NPL coverage was recorded 43.16% as on December 31,

2016.

l2.l The management team has been organized with a good blend of qualified and

experienced professionals. The management team is headed by the Managing Director,

Mr. Shafique- Ul- Azam who has long experience in banking and financial institutions.

There are nine committees namely (i) Management Committee (ii) Purchase Committee,

(iii) Asset Liability Management Committee (ALCO) (iv) Integrity Committee (v)

promotion & Selection Committee (vi) Credit Committee (vii) ICT Development

Committee (viii) Monitoring & Recovery Committee and (ix) Profit Optimization Forum.

The detailed qualification and experience of the management executives is given below:

sl. N?-9-

All ovcr thcCompany

Monitoring &RecSvcV

BusincssDevclopment

Financc.Accorlnts &

Treasury

Managing

GcncralManager &CompanySccretary

MBA (IBA)

Experience

3 1 ycars cxpcricnccwith MFL.l-l

3

Mr. Shafiquc- UJ- Azarn

Mr. Md. Atrar Rahrnan

Ansary

Mr. Md. Monirul Islam

Mr. Md. Abdul Wadud.FCA

Director University of Dhaka.

I General I MSC (LJniversiry of i 32 years experiencc

Manager , Dhaka) with MFL.

He workcd in

Gcncrar MrBA (Banaras ,tfllli|1.1i;Manager Flindu Univcrsit-,*) . uraiunfugungluFinance Ltd.

8 years cxPerienccin Delta Brac

r Housing Ltd.,FCA (ICAB) , Chanercd

I Accountant and a

fcllow meubcr ofI ICAB

Mr. Sharnccm AhrncdHR & EstatcManagcmcnt

Hcad olAdrnin

. Scvcral YcarsMBA (Eastcm cxpcriencc in Pancx

Univcrsity) r GrouP.llYearscxPcriencc in MFL

llN{rLsi

Morsbeda Hasin I Housine & CDD

t-,

Assi:lattt v.corn rUnircrsiry of

ffiil:if Dhaka)19 years cxpcriencc

in MIL

MIDAS FINANCING LIMITED Page 12 of 15

NO\TMBER 2017 www.ncrbd.com

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NBFIncrI E P O RT

National Credit Ratings Limited

IntcmalMr. Ahrncd Ibnc Mazid"' " ' ' :,', "' "--'" Corttpliancc and

K nall control

AssistantGeneralManager

AssistantGcncralMana-qer

Manager

ScniorManagcr

Assistant , MBA (StamfordManager r Unrvcrsity)

. MBAAssistant

(Ma jor in Finance)Univcrsity of Dhaka

M.com (Univcrsity of | 24 years cxpcrienceChittagong) in MFL.

MBA10 years work

expcricncc in ILFSL

M BA r Unir crsir v of I 6 Ycars work

Dhaka) - expcrlcncesltn

r 14 Years workMBA flruC) i expericnce with

l8Mr. Anwar Hossain

Chowdhury

I rr I

Mr. Md. Enarnul Haque j*nT l

I

Mr. Md. Saidur Ranman

I

- M, fr'l";;;.* j

Abdullah l

,, | *' *"""tu'onu

| ,r. ,n,uuna", Mahmud+| ,r.Abu Saeed

14 1

I M.. Sanjida Islam

Mr. Zunaid Bin Islam

Information.Communicalion& Tcchnology

I Auto Loan

I Share

i Management &I Merchant

I Bankingi] Branch Office

I Munug.,,,"nt

10

I Documentatron

I Management

I uni!

I r-egul *L_T::"'*'*I credit Rist

i Munug...rt

i_I .treasurv

I

l"_----I p.por;,

I MarketingM.Com

I Scveral ycars

. Bankin-q sector

3 years cxpcriencei as a head of

Research in asset. managcrncnt

, . ":n]p*vr 3 years expcricnce

. years cxpcrience ,

... ,yilhMr.r-

I I I gvearswork

I Senior I M..9I ( Jagannath I "^n"I"n."

in Bra.

I Y.anlser i unrve:"v) * I lBan\ !!rtirgd_*

I s"nio, I r,lssrun;u".,ivor i "i:,#il:$i[I ManaBcr I Dhaka) I MrLrr-rf_-_"P--...-*."$ -'.-

I Rrrir,unt I lltulruniu..ri,yor | "l#ffi.:Ti.I Manager I (hiftagong) I MFL

ExecutivcOfficer

i_ 1q

12.2 MFL has well defined HR policy. The company offers salary as well as other

benefits such as festival bonus, perfbrmance bonus, incentive bonus, leave encashment,

contributory provident fund, gratuity fund etc to its employees. Moreover MFL arange

training program on a regular basis to its employees.

12.3 The total number of employees of the company stood at 207 as on December 31,

2016. MFL offers regular basis training programs that are affanged by Bangladesh

Institute of Bank Management (BIBM), Bangladesh Bank Training Academy (BBTA).

Besides, in house training courses are also being arranged to keep the employees abreast

of the latest development in financial sector.

13.1 MIDAS Financing Limited's earnings is mainly driven by the Interest based

income which increased to TK 757.19 million in FY 2015- 16 from TK 593.96 million in

FY 2014- 15 registering a growth of 27 .48% and the interest based income was recorded

TK 502.15 million as on December 31,2016. The interest expenses of the company also

increased by 18.53% and stood to TK 542.34 million in FY 2015- 16 from TK457.54

million FY 2014- 15 causing net interest based income to rise to TK 214.84 million in FY

2015- 16 against TK 136.42 million in FY 2014- 15 and the net interest based income was

found TK 143.51million as on December 31,2016. On the other hand investnent income

increased toTK62.43 million in FY 2015- 16 from TK 52.68 million inFY 2014- 15 and

the investment income was recorded TK 81.55 million as on December 31, 2016. The

13.0 EARNTNGS Quar,rrv. Increase in net income, ROA

and ROE

MIDAS FINANCING LIMITED Page 13 of 15

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NBFInsrR E P O RT National Credit Ratings Limited

14.0 LIQUIDITYMANAGEMENT

. ALCO monitors the liquiditymanagement

. Surplus CRR & SLR has been

maintained

. Increase in deposits and other

account and equity base

. Increase in borrowing and otherliabilities

company eamed capital gain on invesfinent which increased to TK 52.43 million in FY2015- 16 from37.96 million in FY 2014- 15 and the capital gain on investment was

recorded TK 4.36 million as on December 31, 2016. Moreover, Net Revenue after

considering other operating income increased to TK277.65 million in FY 2015- 16 fromTK 189.48 million in FY 2014- 15 and the net revenue after considering other operating

income was found TK225.06 million as on Decemb er 31, 2076. The Pre-Provision Profitstood at TK 177.23 million in FY 2015- 16 and TK 82.59 million :r:,FY 2014- 15 and the

Pre-Provision Profit was recorded TK 136.50 million as on December 31,2016. The

company had to maintain lower provision against non-performing loan in FY 2015- 16 incomparison to FY 2014- 15, therefore, the Profit Before Tax increased and stood at TK197.97 million in FY 2015- 16 from TK 33.50 million in FY 2014- 15.

13.2 The performance of intermediation efficiency, Net Interest Margin (NIM) decreased

to 3.04o/o in FY 2015- 16 from 4.85% in FY 2014- 15. The asset yield also decreased to

8.60% in FY 2015- 16 from 16.12% in FY 2014- 15 resulting the interest spreads to

increase to -0.75o/o in FY 2015- 16 from -4.42% in FY 2014- 15 and the interest spreads

was found positive and recorded 0.03% as on December 31,2016. However, the cost offund deteriorated.to 9.35o/o in FY 2015- 16 from 20.55% :ui,FY 2014- 15 and the cost offund was recorded 4.67% as on December 31,2016. ROE and ROA improved,to 17.79Yo

and, 2.10%o respectively in FY 2015- 16 from 7 .59% afi I.00% respectively in FY 2014-

15. The EPS of the MIDAS Financing Limited stood at TK 1.39 in FY 2015- 16 against

TK0.27 in FY 2014- 15 and the EPS was recorded TK 0.93 as on December 31,2016.

14.1 MFL has an Asset Liability Committee (ALCO) for managing liquidity risk andinterest rate risk, comprising of the senior management personnel. The main firnction ofALCO is to continuously observe the furancial market behavior and attempt to minimizethe liquidity risk & interest rate risk. The functions include risk management policyformulation, setting liquidity standards and examine how liquidity requirements are likelyto evolve under different assumptions, exchange rate risk and equity risks. The tolerancelevels are determined keeping all necessary factors in view and fimher refined with the

application of knowledge & experience gained in Liquidity Management.

1,4.2 MFL has maintained negative gap in less than one year & positive gap in above one

year maturity bucket as on December 31,2076, that was presented in the following table:

Particulars

Risk SensitiveAsscts

Risk ScnsitiveLiabilities

Net Liquiditl'cap

Up to I month l-3 months 3-12 monthsmaturity maturity maturity

9rJ5.82 845.34 1.833.32

1.333.61 1,685.74 s.057 .22

1-5 years More than 5maturity years maturity

.1 S17 Rq 1 157 q4

919.81 122.53

(347.7el i (840.3e) | (3,223.89) | 3,618.08 1,930.41

14.3 The company maintained Cash Reserve Requirement (CRR) of TK 129.43 millionagainst the required reserve (2.5o/o of term deposit) of TK 139.57 million having a surplus

of TK 10.14 million as on December 31, 2076. The company maintained StatutoryLiquidity Reserve (SLR) of TK 27 5.96 against required reserve (5% of total liabilities) ofTK624.46 million having a surplus of TK 348.50 million as on December 31,2016.

MIDAS Fru,q.NclNc Ltuttno Pase 14 of 15

\

NoVEMBER 2017 www.ncrbd.com

Jl ,( F{BFI

R E P O RT National Credit Ratings Limited

14.4 The main source of MFL's funding was deposit (18.00%) followed by total equityattributable to shareholder of the company (58.90%) and borrowing(21.69%) in FY 2015-16. The borrowing increased to TK 1,549.88 million in FY 2015- 16 from TK 1,051.40million inFY 2014- 15. The weighted average cost of fund is given below;

Source of pund Weighled Average C:t^r_ !%) _ ^I-ung. of WAC (% )

Borowins 9.)4on l0.44oo 9.0000-10.00oo I0.000o-l l.00oo

Caf! Money : 4:50:oA , 4.22ok 3 750,0-4.5000 3.50%-4.50%Ovcrdraft 7.20oo l0.400o 5.50oo-l0.0Ooo 8.00oo-12.00oo

LongTenn Dcposit Q.l0oo q.8009 8.00oo-l0.b5oo q.00on-l l.600o

, Qfggfep oepglit i N/A N/A , N/A ' N/A

14.5 The deposit has increased to TK 5,596.02 million in FY 2015- 16 from TK3,402.54million inFY 2014- 15, registering a growth of 64.41% and the deposit was recorded TK6,814.29 million as on December 31, 2016. The deposit mix of MIDAS FinancingLimited was historically dominated by the term deposit. The top twenty (20) depositsstood at TK 1,589.34 million which accounts for 23.12% of total deposit as on 31stDecember, 2016. All the top twenty (20) depositors are institutional depositors. TheFinance to deposit ratio has decreased to 140.89%o in FY 2015- 16 from 152.63% inFY2014- 15 and the finance to deposit ratio was recorded 129.94% as on December 31,20t6.

ANALYSTSI KrsnoR MITRAI +88-02-47120156-8

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Page 15 of 15www.ncrbd.com

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National Credit Ratings-Rating Scales and DefinitionLong Term Credit Ratings

( B ank/Financial Institutions/ NBFls/Corporate/Debt Instruments)

Ratingscale i.A.~___".rd._,,`„~^",._.,.-..ill

INVESTMENT GRADE

AAA

Deflnition

~`f~~ckJ`J`u-Tfi;hei]:;:`au-aT;I;:.*oTi;:=g~h.i-;L~;;rs-:;:h;-fi=i=;'i;`;;r~;i;.i;g:;ii:;n`c``ial~;';iiutg;:ion;`.A^

i Such institutions carry minimum risk_+-I-`'-`''p`'-e` ------- `'`''.'r'-..T____-___.__-_ '_ _. __ ... _ __

+. AA. AA- #c¥ £Sn¥t:#[::€accj2;fi#]:[#;srvk:Cin8 Of financial obllgations oifering high safety.

'#c°hn[isct:iat:;gsfi:jj;;;m]:]%Scer:i:t£¥fs£:financialobligationsofferingadequatesafety.

IF.~`Jr-a--~-~-~|-r~)~-_vy~}.i..__....._-~-..-.-~..---`-..~`__~.ha-~,._`._.~___,_..__~~._`ir__.__

i Adequate capacity for timely servicing of financial obligations offering moderatei safet57. The rating category denotes amoderate credit risk. However changes in

circuinstances or economic conditions are more likely to affect the capacity for timelyservicing of financial obligations.

A+, A' A-

BBB+, B'BB, BBC-

88+, 88, 88-

8+' 8' a.

Inadequate safety for timely servicing of financial obligations. Such institutionscany high credit risk The entity remains more vulnerable to adverse economicchanges over time.

Low safety for timely servicing of financial obligations.

Very high risk for timely servicing of financial obligations.

I Entities with this rating are of the lowest category. They are either in default or likely toi be in default soon.

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( Bank/Financial Institutions/ NBFls/CorporateDebt instruments)

Deflnition

Strongest capacity for timely payment of financial commitments and carry lowest creditrisk.

Strong capacity for timely payment of financial commitments and carry very low creditrisk

Satisfactory capacity for timely payment of financial commitments and carry low creditrisk.

Moderate capacity for timely payment of fiirancial commitments and carry Moderate credit (risk

i:¥r===ilJE:i:Tin_eTyTij::_t_Tfi==o_i_mT=e_n==nT;ji,_;;_:r::.I___,indicates actual or inherent payment default.

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