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Credit Rating Report

BASIC Bank Limited


Ratings Long Term Short Term AA2 ST-2

Date of Rating: 31 May 2011 Validity: 30 June 2012 Rating Based on: Audited financial statement up to 31 December 2010, and other relevant quantitative as well as qualitative information up to the date of rating declaration. Methodology: CRABs Bank Rating Methodology (www.crab.com.bd) Analysts: Fareba Naz Shaule fareba.naz@crab.com.bd Shahtaj Noor shahtaj.noor@crab.com.bd

Fin an c ial Hig h lig h ts Y ear en ded Dec em ber 31 2010 ROAA (after tax) % Return on RWA (after tax) % Cost to Income Ratio % RWCAR % Gross NPL Ratio % SMA to Total Loans % Loans to Deposit Ratio % Total Loans (Mil. BDT) Total Deposits (Mil. BDT) * Under Basel I
40

PROFILE
The BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) hereinafter referred as BBL or the Bank was incorporated as a banking company and started its operation from January 1989. In 2001 the Bank changed its earlier name Bank of Small Industries and Commerce Bangladesh Limited and registered the new name with the Registrar of Joint stock Companies. Initially the Bank started its operation as a joint venture enterprise of the BCC Foundation, a welfare trust in Bangladesh and the Government of Peoples Republic of Bangladesh. On 4 June 1992 the Government of Bangladesh took over 70 percent shares held by the then BCC Foundation and became the sole owner of the Bank. BBL is unique in its objectives. It is a blend of Memorandum and Articles of Association of the Bank
2009 1.4 1.7 31.5 13.4* 4.8 0.8 84.8 29,261.5 34,501.7

1.2 1.2 44.4 9.4 4.8 0.5 94.1 46,341.5 49,259.6

30
% 20 10 2006 2007 2008 Year 2009 2010

stipulate that 50 percent of loanable funds shall be invested in small and medium industries sector.

ROAA (%)

ROAE (%)

60,000 40,000 20,000 2006 2007 2008 2009 2010

6.0 4.0 % 2.0 -

RATIONALE
Credit term Rating rating of Agency BASIC of Bank Bangladesh Limited at Limited AA2 (hereinafter called as CRAB) has assigned the long (pronounced Double A two) and short term rating at ST-2. CRAB performed the rating based on audited financial statements up to 31st December 2010 and other relevant information.

M il. BDT

Year Credit Portfolio (Mil. BDT)

Gross NPL Ratio (%)

CRAB I CRAB Ratings on Bank Credit Digest I 28 June, 2011

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CRAB Rating Report

development and commercial banking functions. The

Bank

Commercial Banks rated AA 2 have very strong capacity to meet their financial commitments. They differ from the highest-rated Commercial Banks only to a small degree. AA 2 is judged to be of very high quality and is subject to very low credit risk. Commercial Banks rated ST-2 are considered to have strong capacity for timely repayment. Commercial Banks rated ST-2 are characterized with commendable position in terms of liquidity, internal fund generation, and access to alternative sources of funds. The rating reflects the Banks strength in satisfactory profitability. Moreover, the Bank has its strength as a 100 percent govt. owned bank as well as of its unique objectives of business by its Memorandum & Articles of Association. The rating however is constrained by non performing loans and marginal regulatory capital. In 2010 net interest income dominated the revenue stream having 42.2% of total operating income. Banks net interest margin grew marginally backed by high growth in loans & advances. On the other hand, return on average assets declined marginally mainly due to decrease in net profit margin. In 2010 net profit margin declined by 6.9 percentage points due to higher operational expenses as well as higher provision expenses. Banks returns on average equity also turned down in 2010 by 3 percentage points resulted from reduced ROAA. Cost to income ratio of the Bank grew by 12.9 percentage points to 44.4% due to high growth (90.3%) in oper ating expenses than that of operating income. Staff cost to income ratio also grew by 8.6 percentage points for high growth (93.1%) in staff expenses. In 2010 the Banks loans & advances portfolio experienced substantial growth of 58.4%. But higher loan gr owth may deteriorate the loan quality in future unless strictly monitored. In 2010 non-performing loans (NPL) of the Bank grew by 58.6% resulted fromhigh fresh NPL generation. However, the Bank was able to maintain a stable gross NPL ratio due to high loan growth. During the period, fresh NPL generation decreased by 11.8% which was 2.9% of total loan (2009:5.1%). However, in 2010 the Company recovered BDT 284.2 million (0.6% of total loans) and rescheduled BDT 215.3 million (0.5% of total loans). The Bank invested 97.5% of its investment portfolio in govt. securities. The Banks exposure to quoted shares was very insignificant, 2.2% of total portfolio. The market value of quoted shares was BDT 515.9 million against cost value of BDT 146.7 million as on 31st December 2010. The yield on investment was 10% in 2010 (2009:12.7%). The risk weighted capital adequacy ratio of the Bank was 9.4% against regulatory requirement of 9% under Basel II at the end of 2010. Regulatory Capital adequacy ratio requirement will be 10% from July 2011. It will be very difficult to attain the required capital adequacy ratio for the Bank without fresh capital infusion or issuing tier II bond. BBL is mainly funded through customer deposits and internal capital generation. In 2010 the Banks total deposit reached BDT 49,259.6 million registering a growth of 42.8%. Top 10 depositors of the Bank are different govt. organizations which contribute 41.7% of total deposits. Of the deposit mix 72.7% belonged to term deposits followed by short term deposits, 13.3%. However, savings deposit was only 2.7% of its total deposits. Low contribution of stable deposit in the deposit mix may bring liquidity constrain as competition for govt. deposit is increasing. The loans & advances to deposits ratio of the Bank was 94.1% at the end of 2010 (2009: 84.8%). However, the average loans & advances to deposit ratio was 85.5%. The Bank had assets sensitive position only in 1-3 months bucket up to 12 months period.

www.crab.com.bd; www.crabrating.com 2011

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