ANNUAL REPORT 2019 www.nrbbankbd.com ANNUAL REPORT 2019 Table of contents ABOUT US Letter of Transmittal 06 Disclaimer 07 Vision 08 Mission 08 Values 09 Statement Regarding Forward Looking Approach 10 NRB Bank At a Glance 11 Company Milestones 12 CORPORATE GOVERNANCE From the office of the Chairman 16 Managing Director & CEO’s Roundup 20 Board of Directors’ Profile 26 Sponsors & Shareholders 36 Board Committees 41 Senior Management Team 44 Directors’ Report 46 Report of the Audit Committee of the Board 52 CEO/CFO’s Declaration to the Board 54 Corporate Governance Report 55 Chief Risk Officer’s Report on Risk Management 80 Disclosures on Risk Based Capital (Basel-III) 99 Credit Rating Report 113 STAKEHOLDERS’ INFORMATION Financial Highlights 116 Statement of Value Added and its Distribution 119 Economic Impact Report 120 contents FINANCIAL STATEMENTS Independent Auditor’s Report to the Shareholders 124 Balance Sheet 126 Profit and Loss Account 128 Cash Flow Statement 129 Statement of Changes in Equity 130 Liquidity Statement 131 Notes to the Financial Statements 132 OTHER INFORMATION Sustainable Finance 188 Brand and Communications 194 Product and Services 195 Information Technology @ NRB Bank 198 Correspondent Banking 200 Key Activities 2019 201 Branch Network 207 ATM Network 209 annual report about us 2019 04 NRB Bank Limited 05 LETTER OF TRANSMITTAL To All Shareholders of NRB Bank Limited Bangladesh Bank Bangladesh Securities & Exchange Commission Registrar of Joint Stock Companies & Firms Dear Sir(s), Annual Report of NRB Bank Limited for the year ended 31 December 2019 We are pleased to enclose a copy of the Annual Report along with the Audited Financial Statements and Balance Sheet as at 31 December 2019, Profit and Loss Account, Cash Flow Statement, Statement of Changes in Equity, Liquidity Statement for the year ended 31 December 2019 together with notes thereon of NRB Bank Limited for your kind information and record. Thank you. Sincerely Md. Hasanul Haque Company Secretary annual report 2019 06 DISCLAIMER This Annual Report 2019 contains audited financial statements of the Bank along with other financial disclosures. Some parts particularly the financial statements of the Bank are audited which are presented in page from 124 to 185. Review of business and financial analysis presented in the Directors Report sections are based on audited financials as well as management information mostly unaudited unless otherwise specified. The Bank while recognizing financial transactions and presenting financial statements followed by relevant International Financial Reporting Standards (IFRS) except in some cases where the Bangladesh Bank instructed banks to follow their prescribed guidelines. However, if there grew any confusion, the Bank followed instructions of Bangladesh Bank being the prime regulator for banking companies. Business ‘outlook’ and management estimates and assumptions in recognizing certain Rising capital requirement: Basel III might financial transactions presented in different parts of this Annual Report can be no cause internationally active banks to assurance that actual outcomes will turn up to the tune of these projections. Some of the maintain more capital and follow more factors that may cause projected outcomes differ from the actual ones can be put forth, stringent rules. The Bank while doing trade which are not comprehensive as well: finance with those banks might have to Changes in macroeconomic outlook: The economy grow projection is likely to be 1.2-2.9% follow more stringent rules. Effective control for the year 2021. Slowing exports, falling remittances, weak internal and external demand, calls for higher investment in technology restrained industrial activities, rising food inflation, early floods and pandemic COVID-19 may and increased operating expenses. change the macro economic outlook. Climate change and natural calamities: General business and political uncertainties: Negative impact of political deadlock, associated Bangladesh as one of the vulnerable risks in business environment, price spiral, downbeat performance of capital market, countries to climate change effects and declining demand for bank finance, environmental erosion, etc may erode the bank’s earning natural disaster lies on an alarming substantially. In the absence of political agreement and stability, success in business is hard to geographical location and risks achieve. considerable loss in agricultural sector accounting for a significant portion of GDP. Changes in Government and regulatory policy: Amendment of Bank Company Act 1991 and impact of such changes on banking business, underperformance of tax revenue by NBR, Fraud or financial crime: Increasing increased borrowing by government from banks, central bank directives for charging lower on frauds and financial crimes in the banking banks’ fees earnings, discontinuation of guidelines related to provisioning and rescheduling and industry is denting industry confidence. others. The incidence is a direct outcome of weak corporate governance, control Deterioration in borrowers’ credit quality: Risk of deterioration of credit quality of borrowers is loopholes and IT inefficiencies. NRB Bank inherent in banking business. This could be driven by political unrest, economic slowdown and is all vigilant to prevent such untoward supply side disruption. Abrupt changes in the import pricing may affect the commodity sectors. incident by virtue of strong and effective Banks are under obligation to maintaining provision against potential credit loss. control system, high ethical practices, good corporate governance and risk Power crisis and immature infrastructure: Stumbling block of adequate infrastructure, storage management mechanism. However, the of sufficient supply of power to production facilities, political turmoil, soaring of cost of surviving Bank cannot rule out any such surprise businesses may push to cause slower growth of manufacturing and industrial activities. as the industry closely intertwined with Challenges in managing business: Excess liquidity has burdened the Banking Industry in sophisticated financial relationships. Bangladesh due to lower demand of credit for private sector. Govt. borrowing sometimes distorts the business plan of the banking sector in Bangladesh to maintain the liquidity management. Unhealthy competition of the banking sector becomes risky to face the challenge to meet required ROI. Corporate tax burden hinders to meet the expected EPS of Shareholders. NRB Bank Limited 07 VISION To be the leading dedicated financial institution for NRBs to invest in Bangladesh and for Bangladeshi individuals and corporates to access international markets. MISSION NRB Bank aims to be the preferred provider of targeted financial services as a conduit for investment to and from Bangladesh for our Bangladeshi communities both domestically and internationally, to accelerate the industrialisation of Bangladesh. annual report We will strengthen these relationships by providing the right solutions that combine professionalism, expertise and financial strenght. 2019 08 VALUES We are trusted financial advisors; valuing our local roots and remaining dedicated to our global presence by being different than any other banks. D DYNAMIC We strive to change and perform to progress I INNOVATIVE We foster ideas through finding better ways to improve G GLOBAL We empower to create competitive edge to set international standard I INTEGRITY We govern by the principles of ethics and transparency T TECHNOCENTRIC We step ahead of technological advancement NRB Bank Limited 09 STATEMENT REGARDING FORWARD LOOKING APPROACH The Annual Report contains some forward looking statements regarding the business environment and its likely effect in the financial conditions of the bank. We wish to caution you that these statements are based on management’s expectations, estimates, projections and assumptions. Words such as “expects,” “anticipates,” “plans,” “believes,” “scheduled,” “estimates” and variations of these words and similar expressions are intended to identify forward-looking statements, which include but are not limited to projections of revenues, earnings, cash flows. These statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Therefore, actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors, which are: Changes in the general economic condition resulting from natural calamities and political disturbances; Changes in monetary & fiscal policy budget; The effect of changes to our credit rating; Amendments to, and interpretations of, risk-based capital guidelines and reporting instructions; The risk that the Bank’s risk management models may not take into account all relevant factors; Changing customer demand or preferences for business, including the effects of economic conditions on the business; Changes in government policy issues; Increase in Tax, VAT on banking services; Increase in CRR and SLR of the banks; Lending rates to finance essential items; Provisioning requirement would change the ROA and ROE; Volatility in interest rates and currency values; Volatility in capital market arising from speculations; Changes in international prices of essential which is putting pressure on foreign exchange market resulting in volatility in the Foreign Exchange market; International embargo on certain countries is likely to affect remittances and