Bridging the gap between urban and rural economy The pleasant settings of the countryside dotted with twisted green-walks are a beauty to charm our mind. Tranquil homesteads under the shadows of the green, sweet murmurs of the river streams or cheerful cowboys calling cattle home are good enough to get you motionless and spell-bound. Yet, these poetic pleasures will end up in escapist fantasies unless there is any significance to what is said. In glorious 40 years of independence, our country has ascertained promising economic growth in the urban frontiers while the rural have been consigned to apathy. The affluence of city dwellers could hardly touch the aspirations of teeming millions in the far-off country- side creating wide chasm between rich and poor. It is time to spell out a vision - to bridge the gap between rural and urban economy – to go for wider economic integration with small-medium-micro-cottage industries, women entrepreneurs and agriculture alongside the tested relationship with corporate and retail businesses. This is an opportunity as well. Prospects of banking with the unbanked may open up fantastic avenues for new business entrepreneurship and growing income portfolio. We will insistently, yet systematically think up innovative ways to extend our services to rural areas and help the rural people climb out of the poverty trap. This change of perception will hopefully open up a new horizon –our campaign towards bridging up gap has just begun. DHAKA BANK LIMITED ANNUAL REPORT 2011 | 01 Letter of Transmittal To All Shareholders Securities and Exchange Commission Registrar of Joint Stock Companies & Firms Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited Dear Sir (s): Disclosure of Annual Report for the Year Ended December 31, 2011 We are pleased to enclose a copy of the Annual Report of Dhaka Bank Limited together with the Audited Financial Statements for the year ended December 31, 2011 for kind information and record. The Audited Financial Statements comprise Consolidated and separate Balance Sheet as on December 31, 2011 and Income Statement, Cash Flow Statement for the year ended December 31, 2011. Also provided are Financial Statements of Bank’s Subsidiary `DBL Securities Limited’, Islamic Banking Branches as well as Offshore Banking Unit of the Bank for the same reporting period. Best regards, Yours truly, Arham Masudul Huq Company Secretary DHAKA BANK LIMITED 02 | ANNUAL REPORT 2011 Contents 05 Milestone 06 2011 Achievements 08 Vision - Mission - Values 16 Results Summary 17 Bank’s Profile - Cherishing Heritage 19 Corporate Profile 20 Board of Directors & Committees of the Board 27 Chairman’s Message to Shareholders 35 Managing Director’s Review 45 Strategic Management & Management Committees 51 Corporate Governance Report 61 Sustainability 65 Corporate Philanthropy & Social Obligation 77 Five-year Performance Line 81 Economic Impact Report 83 Shareholders’ Information 84 Management Overview 106 Report of the Directors 142 Auditors’ Report 2011 145 Consolidated Financial Statements 150 DBL Balance Sheet 233 Auditors’ Report of DBL Securities Limited 246 DBL Flashback 2011 248 DBL Executives 250 DBL Network 254 Notice of the 17th AGM 255 Proxy Form DHAKA BANK LIMITED ANNUAL REPORT 2011 | 03 Forward-Looking Statement This report contains some forward-looking approach or statements within the meaning of existing rules and regulations of the Central Bank, Securities and Exchange Commission and other regulatory bodies with respect to certain of the Bank plans and its current goals and expectations. These projections relates to Bank’s future financial condition and performance and the markets in which it operates. Forward-looking statements can be identified by the fact that they do not relate only to historical or current facts or events. These statements sometimes relate words such as ‘aim’, ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’, or other words of similar implication. Examples of forward-looking statements include among others, statements regarding the Bank’s future financial position, income growth, business strategy, projected costs, estimates of capital expenditures, and plans and objectives for future operations. Because such statements are inherently subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties comprise, but are not limited to, risks and uncertainties relating to profitability targets, prevailing interest rates, the performance of the domestic and global economies, the performance and volatility of the capital markets, the expected level of credit defaults, the Bank’s ability to expand certain of its activities, development and implementation of its strategies including the ability to achieve estimated cost reductions, competition, capacity to address information technology issues and the availability of funding sources, changing government policy issues, and so on. Any forward-looking statements speaks only as at the date they are made. The Bank does not undertake to release publicly any revision to these forward-looking statements to reflect events, circumstances or unanticipated events occurring after the date hereof. The foregoing list of factors that might affect Bank’s financial performance is not exhaustive. Investors and others should carefully consider the preceding factors, other uncertainties, and potential events while referring to forward looking statements to make decisions with respect to the Bank and its securities. DHAKA BANK LIMITED 04 | ANNUAL REPORT 2011 MILESTONE The more we go, the more we grow Date of Incorporation April 6, 1995 Commencement of Banking Business July 5, 1995 First Dividend Declared March 16, 1996 Initial Public Offering: Publication of Prospectus November 25, 1999 Subscription Opened December 5, 1999 Subscription Closed December 19, 1999 Listing with Dhaka Stock Exchange (DSE) April 10, 2000 Listing with Chittagong Stock Exchange (CSE) June 6, 2000 First Right Issue March 11, 2001 Launching of Retail Banking March 29, 2002 Introduction of ATM February 24, 2002 Commencement of Islamic Banking July 2, 2003 Going On-line April 1, 2004 Transition to Centralized Banking System (Flexcube) April 1, 2004 Launching of Brokerage Business February 5, 2005 Celebrating First Decade of Excellence in Banking July 5, 2005 Launching of Off-shore Banking Unit May 22, 2006 Launching of Credit Card March 1, 2007 Launching of Internet Banking September 5, 2007 Centralization of Trade Operations April 1, 2009 Centralization of Credit Operations April 1, 2009 AAA Guarantee Accorded by ADB under TFFP December 17, 2009 Celebration of Glorious 15 Years of Banking Maturity & Leadership July 5, 2010 Enhancement of Authorized Capital (from Tk. 600 Crore to Tk. 1000 Crore) July 4, 2010 Basel-II Compliance Issuance of Subordinated Bond December 6, 2010 Opening of 61st Branch December 23, 2010 Launching ‘DBL Securities Limited’ February 13, 2011 Formation of Research & Development Unit December 28, 2011 DHAKA BANK LIMITED ANNUAL REPORT 2011 | 05 2011 Financial Achievements-DBL NPL decreased to from 3.45% 4.57% in 2010 Operating Prot enhanced to 4,321.00 from million Tk.3,842.00 million in 2010 CAR EPS enhanced to above enhanced to from 10.70% 10.00% required by Basel-II 6.03 Tk. 4.68 in 2010 ROA Number of Accounts increased to from surged by from 2.22% 2.00% in 2010 86,600 226,663 in 2010 Number of Delivery Channels from increased to 101 92 in 2010 Tier-1 net 7.54% capital ratio 4.30% interest margin Credit Rating improved signicantly to AA3 Long Term & ST-2 Short Term in 2011 2011 Business Achievements Good progress against strategic plan targets Core banking played dominant Non-core business stayed out of strategic choice Corporate Governance role of the Board of Directors strengthened Awards & Accolades Certificate of Merit Award for best published Annual Report & Accounts 2010 by Institute of Chartered Accountants of Bangladesh Best Performance Award – 2010 to Mr. Khondker Fazle Rashid, Managing Director by Bankers’ Forum DHAKA BANK LIMITED 06 | ANNUAL REPORT 2011 Group Composition Structure Group Dhaka Bank Bank Subsidiary Dhaka Bank Limited O -Shore Banking Unit DBL Securities Limited (Shareholding Position 99.99%) Islamic Banking Business Credit Rating Report Dhaka Bank Limited was rated by Credit Rating Agency of Bangladesh Limited (CRAB) on the basis of audited Financial Statements as on December 31, 2011. The rating has improved significantly this year. The summary of Rating is presented below: Status 2011 2010 Long Term AA3 A1 Short Term ST-2 ST-2 Credit Rating Agency of Bangladesh Limited (CRAB) has assigned “AA3” (Pronounced as Double A Three) rating in the Long Term and “ST-2” in the Short Term to Dhaka Bank Limited. In 2010, Credit Rating Agency of Bangladesh Limited (CRAB) awarded “A1” (Pronounced as Single A One) rating in the Long Term and “ST-2” in the Short Term to Dhaka Bank Limited. Commercial Banks rated ‘AA3’ in the Long Term are adjudged to have very strong capacity to meet their financial commitments. They differ from the highest-rated Commercial Banks only to a small degree. AA is adjudged to be of very high quality and is subject to very low credit risk. Commercial Banks rated ‘ST-2’ in the Short Term are considered to have strong capacity for timely repayment. Commercial Banks rated in this category are characterized with commendable position in terms of liquidity, internal fund generation and access to alternative sources of funds is outstanding. DHAKA BANK LIMITED ANNUAL REPORT 2011 | 07 Vision At Dhaka Bank, we draw our inspiration from the distant stars. Our vision is to assure a standard that makes every banking transaction a pleasurable experience. Our endeavor is to offer you supreme service through accuracy, reliability, timely delivery, cutting edge technology and tailored solution for business needs, global reach in trade and commerce and high yield on your investments. Our people, products and processes are aligned to meet the demand of our discerning customers. Our goal is to achieve a distinct foresight.