Ladies and gentlemen, good evening. Assalamu alaikum. Welcome to Dhaka, Bangladesh. It is 7:30 P.M. at night, and, let me also welcome you to BRAC Bank's Q3 2023 earnings disclosure program. Can we have the presentation on the screen, please, Dev?
Yes, sir. To join.
Ladies and gentlemen, thank you for joining us. We expect this to be a one-hour program and ending with a question- and- answer session as well. Dear viewers, this is a live, live webcast in our earnings disclosure portal, and this link has been shared with different stakeholders. We are also live with this presentation on our Facebook page. Let's move on to the forward-looking statements, the usual caveats, and beyond that, let's look at the contents for today's program. We have the usual economic outlook and the market update from Shaheen Iqbal, Deputy Managing Director and Head of Treasury and Financial Institutions. Then the three segments, SME, Retail, Corporate, an update from Treasury and of course from Risk Management. And then our CFO will take us through the financial performance for the first nine months of 2023.
We'll get an update from, bKash, the CFO from bKash, and finally, we'll have a short Q&A as well. Let's move to the next slide, and I'll hand over to Shaheen Iqbal, Treasurer and Head of Financial Institutions here at BRAC Bank. Shaheen, over to you.
Thank you, Selim bhai. Good evening, everyone. I think let's move to the next slide. Yeah. Despite various macroeconomic challenges, like, the country managed to grow pretty well, the projection is to grow 6% in 2024 and 6.6% in 2025. I think, despite various challenges, this is still a commendable performance. If you can move to the next slide. From various agencies, like we can see, from lower bound of 5.6%- 7.5%, there are various projections, but in general, country is expected to grow something like 5.5%-7%. So this is still a good growth path for the country.
On the bottom part, you can see, like, the country is gradually improving from one of the worst FX crises that the country has faced so far. Trade balance has improved significantly. Remittance growth has stabilized. Current account balance has moved to positive side. Overall balance gradually improving, even though negative. So in our view, like, probably next six months' time, country would gradually coming out of this crisis. And you have already seen that interest rate has already increased. Exchange is gradually stabilizing. I think the next six months is a crucial period, and from there, gradually we could be coming out of this situation and probably moving to the normalized situation. That's an update from my side. I think I will hand over to Selim bhai again for the next slides.
Thanks, Shaheen. Thank you. Before we get into the business updates, let me give you a short precis of these nine months. We've had a strong balance sheet growth that continues, and if we compare BRAC Bank's loan growth, it's approximately 25% against 7% for the industry. That is August end figures. BRAC Bank's September end figures were 27% growth in deposits over the rest this year, and that again compares very favorably to a 13% growth as at August end for the industry. Deposits grew across all three segments. Loans were mainly focused in SME and corporate. Our cost of deposits has increased, but that is very much in line with market conditions, increased interest rates across the world and also here in Dhaka.
Our CASA mix has declined from the 50s to 49%. Customer numbers have grown very well, almost 290,000 new customers. That is, approximately a 20% growth in the first nine months of the year itself. Very importantly, despite the growth in customer lending, which is 25% year-on-year, asset quality has improved. 30-day portfolio at risk has improved from 5.7% in the pre-pandemic 2019 level to 4.7% already. Of course, our Head of Credit Risk Management, Ahmed Rashid Joy, will expand further in this area. We've maintained a strong liquid position with AD ratios below 80% throughout these nine months, and that, too, has been a deliberate strategy to ensure that we had strong liquidity and very little risk of any kind from the market.
If we move to the next slide, we can start talking about what happened in SME, and we'll hand over to our Head of SME and Deputy Managing Director, Syed Abdul Momen Tomal.
Thank you, Selim bhai. Good evening, everyone from Bangladesh. Actually, the SME growth momentum in all segment has continued, and you will be seeing we have experienced a 16% growth in our customer numbers year-to-date. And if it is year-on-year, we have seen a 22% growth in our customer numbers. And this is the first time, because we have invested a lot in growing our deposits, especially SME deposits, by involving or engaging the branches and all the channels together, along with the sales channel of SME assets. So you can see there is a significant growth in asset, like year-on-year, there is a 41% growth in our deposit portfolio, and YTD, it's a 28% growth.
As usual, the CASA mix has decreased because of the significant increase in interest rates of our deposits. This is the first time we have seen the deposit growth percentage is more than our asset growth percentage. Asset growth in SME year-on-year is 31% and YTD 20%, which is also very high compared to the market growth. This has happened because of our foresight of the market beforehand. You can see there is a significant improvement in our asset quality as well, despite the growth in assets. Like, if you see the yield, this has improved because of the rate change or in our asset and also deposits.
Our 30-day PAR has significantly decreased year-on-year from 4.8% to 3.1%. NPLS have improved from 3.23% to 2.52%. Also, there is an improvement of trade volume by 5%. I would say that this is a very good performance in terms of SME business given the current scenario. Also our digital advancement initiatives have also started significantly, and we have actually deployed our loan origination platform across all the country. And this will significantly have an impact on our cost to income ratio. And we will, we are foreseeing to finish the year with very good numbers or even higher growth. So that's all from SME business, Selim bhai. Back to you.
Thanks, Tomal. Let's move to Retail Banking and Mahiul Islam, Head of Retail Banking.
Thank you, Selim bhai. Good evening, everyone. In retail banking, we continued our growth momentum, particularly in customer acquisition and deposit portfolio, and I will cover the major areas. Our total customer number grew by 28% year-on-year, and with 258,000 net inclusion in this year. Customer deposits portfolio grew by 22%, with around BDT 4,000 crore deposit growth, net growth. Compared to end December, we grew our deposits by 17%. Despite liquidity stress in the market, we have quite significantly grown our liability book, which is a reflection of customers' trust on BRAC Bank. However, due to rise in interest rates, our customers were more inclined towards fixed deposit, which reduced our CASA mix to 42%, and thereby the cost of deposit also increased by 60 basis points.
In terms of digitalization, we continued our strong focus by 83% of our CASA accounts opened digitally in September, and year to date, we opened more than 95,000 accounts digitally through e-KYC. We also opened more than 10,000 fixed deposits and 17,000 DPS digitally during this period through our Astha mobile app. As a result of rising inflation and macroeconomic situation, we have taken strategic approach to go for selective lending in specific customer segments, such as employee banking, government sector. So our customer assets portfolio growth was limited to 8% year-on-year. However, our yield improved by 60 basis points to 8.55%. In terms of portfolio monitoring, we continued our strong efforts that resulted in moderate PAR increase by 40 basis points and NPL increase by only 22 basis points year-on-year.
Compared to the industry, our retail portfolio remained in better position. We have introduced early warning system for credit cards, and the same is work in process for personal loan. In terms of credit cards, our portfolio grew by 22% year-on-year, and we crossed the BDT 1,200 crore milestone. Our merchant acquiring business also had a strong growth of 34% year-on-year, and particularly our regional remittance, despite this strong FX crisis situation, had an excellent growth of 117% to $612 million. That's all from my side. Thank you.
Thanks, Mahiul. So we can see good growth in customer deposits, strong growth in the credit card portfolio, slightly muted in other retail lending, which is a natural function of the reduced risk appetite. Let's move on to corporate banking now, and Tareq Refat Ullah Khan, Deputy Managing Director and Head of Corporate Banking. Tareq?
Thank you, Selim bhai. Good evening, ladies and gentlemen. Assalamu alaikum. The corporate banking division of BRAC Bank has consistently delivered outstanding results for over the last couple of years, and the numbers for Q3 2023 are in line with this positive trend. This sustainable growth can be attributed to a strong foundation, which we have built over the years, which essentially includes robust liquidity management, capable resources, solution-driven approaches, and a growing range of digital banking solutions.
These factors have not only helped us to attract industry-leading relationships, but also provided them with exceptional banking services that actually made us their preferred corporate banking partner over the years. In the realm of deposits, our extensive transaction banking wing and vast distribution network, along with competitive and solution-driven product offerings, have given us a competitive edge in driving deposit growth of over 31% year-on-year basis.
Maintaining a healthy CASA has been one of the top priority of ours, with a focus on transaction banking, particularly on robust digital banking solution, which we have already launched in our platform called CorpNet. Our CASA is among the best, among one of the best in the industry, while we serve over 950+ clients in digital platform, with an average monthly transaction volume of approximately BDT 15 million-BDT 20 million. In addition to liquidity, or local currency liquidity, our different teams have also contributed to foreign currency liquidity support, which actually supported us to actually have 13% year-on-year trade growth, even in challenging foreign currency market scenario.
In terms of loans and advance, our commendable 21% growth in loans and advance aligns with our risk appetite, and highlights our ability to serve a growing list of clients in competitive and challenging market. Leveraging our strong offshore banking capabilities and relationship management skills, we have successfully onboarded new limits of more than BDT 6,000 crore in 60 industry-leading accounts till quarter three, 2023. This year, we have also onboarded or added a couple of MNC clients in our portfolio, showcasing our ability to serve a diverse range of corporate entities. In terms of portfolio management, at this enterprise level, our portfolio management approach has seen significant enhancements over the years, which including strong trade underwriting standards, credit administrations, and operational oversight. Our vigorous portfolio monitoring system and de-risking initiatives have contributed to further improvements in portfolio quality.
That is 92 basis points in PAR and 62 basis points in non-performing loans. Despite a challenging foreign exchange scenario, we have provided unwavering support to both existing and new clients, ensuring their trade requirements are made to sustain their growth in the business industry. We have achieved around $3.5 billion trade volume mark by September 2023. Our aim is to actually surpass $4 billion mark by this year- end, which will definitely establish ourselves as one of the best trade facilitating banks in the industry. Our strategic objective is to double our portfolio in terms of loans, deposits, and trade volume within next four years. That will definitely set our operation as substantial, impactful, and supporting bank for our customers.
Last year, we aligned fully with this objective, and during the last nine months of 2023, we have been on the right trajectory for growing our books in line with our objectives. Our intent is to sustain this growth and continue as the industry's most preferred corporate banking partner. Thank you. Thank you for your trust and partnership. Over to you, Selim bhai.
Thank you, Tareq. Let's now listen again to Shaheen Iqbal, who'll talk about Treasury and Financial Institutions.
Thank you again, Selim bhai. I think, Selim bhai, I earlier had highlighted, like, our AD ratio is below 80%, in fact, far below that one. We, we have built a, a considerable liquidity reserve, which has really supported us to support our clients' loan requirement, and also to build a sizable government treasury bill and bond portfolio. So in this market scenario, I think BRAC Bank is well positioned to support any requirement and also take position as per the requirement of the market. I think we are one of the strongest bank in terms of both local currency and foreign currency liquidity. So BRAC Bank is really well positioned to take advantage of the market movement and market situation. In terms of market making on both commercial securities and FX, we are market leader.
BRAC Bank also managed to attain sustainable rating from both S&P and Moody's. On S&P, recently, they have downgraded the industry outlook to negative, but they have maintained stable outlook for BRAC Bank. And also, we are the only bank rated equivalent to Sovereign by Moody's in this market. So these are very good achievement from BRAC Bank side, and I'm happy to present this before you. Thank you, Selim bhai.
Thank you, Shaheen. Let's now listen to Ahmed Rashid Joy, Head of Credit Risk Management, for an important update on risk.
Thank you, Selimbhai. G ood evening, everyone. We begin with the general enterprise-wide PAR and NPL slides, and we are continuing presentations till 2017. The recent trend is very good. You, you can see that the PAR ratio has dropped from 4.9% to 4.7%. It's, it's on 30 DPD basis, and the NPL ratio also dropped from 3.7% to 3.4%. And we are presenting it in a longer horizon, but I would like to draw or compare these numbers with the pre-pandemic number of 2019. So the ash color bar is the PAR volume, and that's in absolute term, and the blue bar is the NPL volume.
You can notice that the PAR amount from 2019 has increased from BDT 1,618 crore to BDT 2,074 crore as of Q3, which is an increase of 40% in terms of amount. And the NPL amount was BDT 1,053 crore, it's now BDT 1,652 crore, which increased by nearly 57%. But during the same time, from 2019, at that time, our portfolio was, like, BDT 26,000 crore, which is now is, like, BDT 48,000 crore. Portfolio increased by 84%. So against a portfolio increase of 84%, our PAR increase increased by 40%, and the NPL amount increased by 57%.
But having said that, I'd like to draw your attention that after 2019, we have noticed so much of crisis, like it was a once in a lifetime pandemic situations. And then there was forbearance and moratorium associated with this pandemic, and then the Ukraine-Russia war, the interest rate rate hike in the, you know, global level, the exchange rate in local market has hiked a lot. The local inflation also increased, fuel price was increased, and so much we have seen during this time. And even after that, we can confidently say that we are still holding on our portfolio quality. And we are going to... We are also going to present you segmental PAR and NPL ratio for better understanding. Dev? Yeah.
So this is the same thing, we are presenting from 2017 on SME, on retail, and corporate. And you can see even on the-- There was a spike, you know, after 2020 or 2021, post-pandemic and pandemic time, in all the segments. But you can look at the recent trend. For SME, the PAR is decreasing, and the, as Tomal said, the NPL is also decreasing. For retail, we are seeing a bit of spike from 4.5%-5%, increased by 50 basis points, from last year, and the NPL increased by only 30 basis points, points. Corporate PAR and NPL is static almost. But this is not only that. We look at the enterprise-wide PAR NPL and segment-wise.
We are diving deep into each segments and each subsegments. For example, let me give you one example: In SME, we finance in around 90 subsectors, like groceries, like pharmaceutical shops, like clothing stores, like, you know, steel mills, I mean, small scale steel mills and others. So what we did is that we check the PAR and NPL ratio for each subsegments and also each region-wise and product-wise. So we monitor all these things in three parameters, in three dimensions, like subsegments, region, and product-wise for the last 12 months, and we are seeing, witnessing is, the SME is performing in all the sectors, very consistently. In retail, what we did is that we segmented the retail borrowers in income group-wise and profession-wise and product-wise.
So we have seen that the lower income group, there is a tendency of increasing PAR and NPL, as expected, because the inflation is high. And for that matter, you know, the overall retail PAR has increased. So what I wanted to say is that, we are checking this. Since we are in an uncertain economic situations, we are diving deep into each portfolio, each segments and subsegments, and then monitoring the PAR and NPL. Next slide. Dev? This is our NPL coverage ratio, the last, at end of Q3, you can see that the, our coverage, increased to 122%. In the last quarter, in our presentation, we said that we will maintain it around our strategic level of 115%.
But this quarter we have been extra cautious and careful, but we will also witness our portfolio quality in Q4 and then restrategize what we will maintain. And for that matter, the credit cost has been 67 basis points in this quarter. So our NPL coverage is still strong. This is a portfolio quality, you know, in terms of international standards. You will see that our regular repayment is 96.17. That's regular repayment, I mean, terms. Our 90 DPD NPL ratio is 3.83. In the previous slide, the 3.4 NPL that we presented was as per the regulatory definition, the local definition, but as per the international standard is 3.83. We don't have any portfolio under our stay order, as we said earlier.
I mean, stay order from the court not to declare anyone NPL, which happens in this country. But on the bottom, as you see that we have a 0.47 of conventional rescheduling, that's 0.47% in our portfolio, and then there's an extended COVID restructuring of 3.29%. So even, you know, some people add this 90 DPD NPL of 3.83 and then add 0.47 and 3.29, the stress assets might be 7+. But our 30 DPD portfolio at risk ratio is only 4.7%. So even if the stress asset is 7+, the 30 DPD ratio is 4.7, which indicates that even our COVID restructuring portfolio is performing better with that 30 DPD ratio.
Ladies and gentlemen, we have recruited some data scientists and risk modeling, credit risk modeling experts. We are working extensively on the roll rate analysis for SME and retail, just to forecast the bucket movements in the next 12 months. We are also analyzing the vintage for each portfolio and also for the sub-segments. We are working on the 12-month ECL, expected credit loss, so that we can forecast our NPL accordingly. But for that matter, we required one econometric model that, given the macroeconomic, you know, uncertainties and disruptions, what our credit portfolio will be in the future. So we are working on that econometric models, and we are very close to that. We have also completed the credit bureau-based credit scoring, which gives us strong results.
And on the collection and recovery, we have also completed a behavioral scorecard for some products, and we will start working on the collection scoring model. So what I wanted to say is that we will have end-to-end credit risk models and these scorecard systems. And, when we have all these models will be in operations very soon, we can confidently more, you know, strongly monitor our portfolio and predict, you know, in a sophisticated way. So that's all from me, Selimbhai. Thank you.
Thank you, Joy. Ladies and gentlemen, as you can see from the presentation just made on risk, the BRAC Bank portfolio continues to improve year- after- year, and it is quite transparent as well. You'll notice that NPL 30-day PAR numbers are not just very good, but they are completely free of all stay orders, which is a perennial challenge in our country. Anyway, let's look into the next few slides, and what we'll do is I will take you through some graphs on customer deposits and loans and then hand over to Masud Rana, our Deputy Managing Director and CFO, who will then take you through the financials. So you can see that over the last four years, how our deposits have grown, and this is year-on-year for Q3.
So, 2022 same time to 2023, September 2023 over September 2022 represents a 28% growth. And not only have retail and corporate growth, but very importantly, our efforts in the relatively new segment in terms of deposit mobilization, SME, have also given us very strong growth. Next slide. And that is also represented by this pie chart, where you see that SME now represents 19% of our total customer deposits and continues to grow quite strongly. Retail is around the 49%-50% mark, and corporate has, over the last couple of years, grown to the 32% level as well. If you look at the next slide, which is essentially CASA term deposit mix, the mix is around 49%, when we were in the middle of the pandemic, but still, I think, quite head.
Quite healthy and, probably the best in the private banking sector, bar one, maybe two institutions. Next slide, we show you how loans have grown over the last year, Q3 2023 over Q3 2022. 23%, 2023 over 2022, and you can see the growth focus mainly in SME and corporate, slightly muted in retail, which is again a function of the enhanced risk measures that we have put in place. The segmental loans mix will show you that, SME is now 46%. There is a portion of SME that we manage, which is roughly 4%-5%, and sometimes even 6%, which is reclassified as corporate. Otherwise, it would have been, say, 51%-52% SME and 31%-32% corporate.
Retail is struggling a little bit at 17% in 2023, but again, that is a conscious strategy. So overall, if you look at deposits and loans, a very diverse portfolio. SME, largest in lending, retail, largest in deposits, and, corporate banking, providing strong support in the 30s in both deposits and in lending. I'll stop there and hand over to our CFO, Masud Rana. Masud?
Thank you, Selimbhai. Good evening, and Assalamu alaikum, everyone. Actually, up till Q3 2023, Bank has delivered a very strong set of results.
As you can, you know, heard from our Managing Director and also our business leaders. To start with, our deposit book has grown on an annualized 27%. I think, the, you know, the, these results, we must, you know, acknowledge the advisory from our Board, thanks to our Leadership team, and most importantly, our 11,000 staff who has executed the plan. And I think, we have, you know, delivered according to a plan, and, we could mostly execute most of it. As a result, that particularly in the deposit side, for last two years, we have grown into a, you know, kind of a machine.
I would like to, you know, express my gratitude to our channels, particularly our branches, which has done a fantastic job over the years, last year, and also this year. They have delivered a very good results in terms of acquiring new customers and new customer deposits. Our loan, annualized 25% growth, from the beginning of the year. Our revenue over a period or year-on-year has grown by about 21%. I will detail it a bit later. Our balance sheet as a total size has grown by 26% year-on-year, and it has now reached to about BDT 67,000 crore.
Our regulatory capital has moved into a sizable position, to my, you know, the best of my knowledge, it should be the second largest in terms of the market. Overall, the function of all this, you know, plan and execution, our reported profit after tax is BDT 503 crore, which is 28% higher from the last year, same period. If we look at our financial metric, particularly, ROE has improved by about 1%. ROA, slightly more or less similar to last year, and I believe this will improve further as we go along, and by the year end, it should remain more or less similar or slightly above. Our EPS has grown by about 28%, similar to our earning.
As our head of risk mentioned, we have increased our NPL coverage to 122%. But looking at our portfolio, you know, quality consistently over last three quarters, we would like to have a relook at this quarter, depending on the outlook and all. Perhaps, we would remain a bit conservative here, and perhaps we'd like to continue with a higher coverage ratio, which of course has an impact on our return on equity and return on asset. But, given the outlook, I think this justifies. In terms of our cost to income ratio, this has improved by about 2%, but if we only consider our OpEx, I mean, our gross income versus our OpEx, it has improved by 6%.
The 6% and 2%, the 4% is predominantly on the cost of liquidity, which has gone pretty high. I'll detail it in the next slide. Our net asset value has gone up. Coming back to the Capital Adequacy Ratio, I think since last year- end, it has dipped a bit, but we need to remember we have grown quite rapidly. I think we have put on some plans. If you remember in the last quarter, it was 13.25. In fact, we could improve it by about 26-27 basis points. I think by the year end, it should go a bit slightly up than what we have, you can see now. In terms of spread, we remain more or less similar last year.
Yes, while we have driven our yield on asset, but at the same time, the cost of deposit and cost of fund has gone up significantly. I think if we have a look at our consolidated or group performance, it's more or less similar reflection. The deposits, more or less similar. I think total revenues slightly up, mostly contributed by our major subsidiary, bKash. Total asset also gone. These are in line with the overall bank's solo performances. I think just to highlight, as a group, we have a very strong capital adequacy ratio. The cost of cost to income ratio has also improved by here a bit, and mostly coming from the bKash. Now let's look at our balance sheet overall. The solo balance sheet.
I think the solo balance sheet has, you know, strongly grown. I think the proportion and the overall remains same, and we fundamentally move. As our Treasurer mentioned, we move our monies to, you know, while we grow our deposit and remain very liquid over the last 12-13 months. And overall, I think given this liquidity is invested in our loans and advances, and also, as you can see, our investment book has also grown. Similar picture in our group balance sheet. The next slide. Now, the group balance sheet. Yeah. More or less similar picture. I think. No, the balance sheet. Balance sheet. Okay, yeah. The similar picture in the overall group balance sheet.
Predominantly, this is solo book and also bKash book, which is the most, the largest two, while I'll share that, you know, overall subsidiary sharing a bit later. If you look at our solo P&L, profit and loss, income statement, our income has grown year-on-year 21%. If we just to give you a sense how strong it strongly it has grown, I'll like to detail, go through that slide deck, the income revenue. Yes. The total revenue breakdown, we just wanted to give you a sense of our net interest income and non-funded income.
If you can look at our NI has grown by about 15%, but if we dissect it, our gross interest income grew 38%, while at the same time, our balance sheet grown on about 25%. So therefore, we have driven our balance sheet in terms of volume and also in terms of spread. While at the same time, our deposit and funding cost has gone up almost twice the rate we have grown our interest income, and therefore, you know, the net interest income is only 15%.
But at the same time, this has been supplemented by the incremental balance sheet, in terms of, commission brokerage from the growth, and also, we had a, very, you know, strong growth in terms of our trade, business, which has also produced a, you know, non-funded income. FX, well, last year was a special year where the volatility was quite high, and therefore, few one-offs. This year it has been stabilized a bit, but still we, there is a good, you know, flow of FX gain in the, last nine months. So overall, I think, the 21%, as you can see, that it's not, mainly contributed by our strong balance sheet growth driven and also non-funded income. If we, go back to our profit and loss account of solo. Yeah.
Our OpEx or operating expenses, that's that has remained, you know, at a level which we maintained for last two quarters, particularly as I said, the cost to income ratio has improved by 2%. But, if you exclude the funding cost, it has actually improved by about 6%. And as you can see, and for last two quarters, we have been, the bank is producing a positive job. The income growth is higher than the expense growth. We remain very conservative in terms of our loan provisioning. As you can see, the general provision is growth driven, but specific provision, we remain a bit conservative here. And the function of all the quarter three numbers is 503 growth, which is about 28% higher than last year.
So I'd like to share our subsidiaries, share of our last 9 months results. If you look at, we have got two capital market subsidiaries, one merchant bank and one a brokerage firm. The merchant bank, actually this reported BDT 2 crore losses predominantly from the M2M, losses from the, you know, its security holding. And on the brokerage side, it's BDT 2 crore compared to last year. It's gone down because of the market condition. However, I think brokerage has done quite well. It has deconcentrated its income stream from mainly, you know, to some group two, and we have gone into retail market, which is paying quite good dividends. I think once the market is up and running or it's stabilized, we'd see much better results from these 2 subsidiaries.
One of our subsidiary exchange house is actually reestablishing itself in the UK, and last nine months have been very turbulent from them. They're repositioning themselves, however, they have reported net loss. However, we would like to hear from bKash CFO about bKash performance. But put all together, bKash has done pretty well compared to last year, and overall, at a group level, our results is about 53% higher than last year, which is definitely, you know, contributed by bKash positive number. If Moinbhai has joined, I would like to request Moinbhai to take us through the bKash performance, you know, results for Q3.
Good day, and a very good evening to all the viewers. As always, I will take you through the first slide, which is the six key health indicators as to how bKash performed. Starting off with the customers. So at the end of September 2023, we clocked 72 million verified customers. So over the past nine months, we added 6.7 million customers to the base, which roughly is about 25,000 customers being added to the system every day. Moving on to the active customers. At the end of September, our active customer base was 38 million, which is defined as one transaction every three months.
So 38 million customers of 72 million registered base translates to a 53% active ratio. Our market share was 64.2%. In terms of merchants, we were about 300,000 merchants across the country who accept bKash as a channel for payments. Our average monthly transaction was almost BDT 700 billion. This is a 22% rise over the same time, compared to the same time last year. In terms of number of agents, there are about 340,000 agents across the country, which is 27,000 more than what it was in September 2022. Dev, if you could move the next slide. So the first line, gross revenue.
We finished the first three months of the year with BDT 303,468 crore of gross revenue. The gross revenue comprises of two distinct parts. One is the fees of the commissions that we earn from cash out and P2Ps and merchant payments, and the other one is the interest income that we earn from the customer float. So the transaction increase was 17%, while the interest from float was 43%. Combining the two, we were at 21% increase. So that brings us a net revenue after VAT of BDT 3,050 crore, which is a 22% increase over prior year. Cost of services increased by 17%. It's exactly in line with the increase in operations of 17%.
So cost of service has remained the same, which translates to a gross profit of BDT 909 crore, which is a 36% increase over prior year. So the difference between the increase in gross profit and net revenue is interest earnings. Next, operating and administrative expenses. There are three drivers of this increase of 22% over prior year. The first driver is the technology-related annual maintenance charges. They all went through an increase at the backdrop of the FX rates increases. The second one is the increase in depreciation as we invest more into technology. And the third one is the increase in staff costs. There are about 144 staff more compared to the same time last year. Commercial expenses increased by 26% or BDT 50 crore.
The primary reasons are the increase in customer acquisition. As we acquire more customers, the expenses of customer acquisition cost increases. And we have made investments behind communication in the Asia Cup. Part of a portion of the World Cup Cricket cost is there. So those are the two big reasons as to why this commercial expenses increase. So that leaves us with an operating profit of BDT 12 crore, as opposed to a BDT 61 crore loss at the same time last year. Net finance income is the interest earning that we made from our own working capital. So there were BDT 122 crore that we earned as net finance income. Again, this is at the backdrop of higher interest rates.
Our effective interest rates was a little, almost touching 8%, for 2023. That brings us to a profit before contribution to Workers' Profit Participation Fund of BDT 135 crore. Of that, contribution to WPPF 7, PBT is BDT 128 crore. With the income tax of BDT 40 crore, it. We landed at profit after tax of BDT 88 crore, as opposed to a profit of BDT 4 crore in the first quarter of 2022. That is in a nutshell how bKash has fared financially for the first nine months of this year. Thank you.
Thanks, Moin. Let's get into a question- and- answer session, where we will be answering questions from the different stakeholders, and we'll end that with an outlook over what we expect to happen over the next three months. Dev, can we look into the actual questions, please?
Yes, sir. Should we start with the bKash one first?
Please, let's finish Moin off first.
Okay. Moin, the first question says, bKash profit increased significantly over last years, and it is coming predominantly from the finance income that you have already presented.
Mm.
So do you believe if this float balance income disappear from next year, in that case, could bKash make positive profit contribution?
So if you just recall the numbers that I gave you, yes, interest income did, well, was the largest contributor to the increase in profits. However, we've, f rom operations, there was a 17% growth in revenues. If the question is, if interest income declines, will that have an impact on the profitability of bKash? The short answer is yes, it will have a serious impact on the profitability. And compared 2023 with 2022, the yields on both, particularly with government securities, dramatically increased, which has been the key driver of this profit increase.
Thank you, Moin. The next question is, w hy is bKash not more aggressive in expanding its payments network?
We, as we have made some significant investments in the payments platform, it's in the process of being implemented, and hopefully by the end of quarter one of 2025, bKash is expected to, you know, come to the market with more serious and a more organized approach to building the payments ecosystem.
Thank you, Moin. The next question is about the digital banking part. So the question is that, will bKash get a digital banking license? And what will be the shareholding structure look like for this new digital bank?
Well, it's really up to the regulators. To answer the first question is, the regulators will award the license. And the shareholders of bKash will be the proposed shareholder to the digital bank license whenever we can.
Thank you, Moin. That's the all question that I have for you. So, sir, can we go back to our solo bank-related questions?
Please, please.
The first question is that, historically, BRAC Bank is known for its high CASA ratio, and this allowed it to have a higher interest rate than other banks. But in Q3, 2023, CASA, CASA ratio fell below 50%, and net interest margin has also declined. So what do you expect going forward regarding CASA ratio? And as interest rate is rising, so is there any initiative to make or keep the CASA ratio above or, around 50% level?
Okay. Firstly, with rising interest rates, it is very difficult for us to attract more deposits in retail CASA. Obviously, for every individual, it makes so much more sense now to place funds in term deposits, one-month, three-month, six-month term deposits, as opposed to leaving their funds idle in a lower rate savings account or a current account. That's predominantly because the interest differential between a savings account and a term deposit is quite high now. That would be less so in a lower interest rate environment. Therefore, the CASA mobilization effort is mainly driven by transaction banking in the corporate banking business, and that has done very well over the last couple of years.
We actually expect that by the end of the year, we will get back to the 50% level that we normally have. But still, I must highlight that at the current levels, we are the second best bank in the country. There is perhaps one, maybe two banks at most, private sector banks, which have better CASA levels than us.
Thank you, sir. The next question is that, with private sector credit growth on the overall decline and rising inflation forcing banks to increase the deposit rates, how will BRAC Bank navigate the ongoing and coming quarters? And will the current macroeconomic condition affect BRAC Bank's medium-term strategy?
For a start, you will notice that we have been heavily focused on strong liquidity for almost two years now, and that is to give our shareholders much more comfort in times of stress. So even today, we have an AD ratio considerably below 80%. We have not yet tapped our wholesale banking limits at all. So close to BDT 2,000 crore of limits are available for us to use in the interbank market. So we remain very conservative in that area, and will continue to do so over the next year as well. Sorry, what was the last question there again?
Last question was that, this current macroeconomic condition, that just in the first question, that.
Mm-hmm.
Whether that will affect in our midterm strategy or not?
To an extent, yes. Firstly, with private sector credit having come down significantly in the industry over the last 1 year, we remain very much an outlier with our 20%+ growth rates. That is also a function of our very strong SME growth, small business in particular, an area where we are predominant. Going forward, private sector credit is likely to drop further, and with the overall macroeconomic situation still quite stressful, and with some clouds on the horizon in terms of the overall political environment over the next three months or so, we expect that private sector credit growth is going to slow down even further. And frankly, I would be surprised if the third quarter BRAC Bank asset growth was anywhere near what it was during the first three quarters.
That is, I think, quite normal.
Thank you, sir. Linked with the other question, treasury rates are rising. Lending rate is also tied with 182 days treasury bill rate. Now, what is the probable impact on spread and NIM of BRAC Bank?
We shouldn't just think that just because the lending rates are rising, yields on customer assets are rising, that all of those rising rates will be converted or translated into higher rates for the customers. At BRAC Bank, we firmly believe that we need to find a balance between lending interest rates and what customers can repay. We do not want to be a usury. So while we could increase rates up to 11%, 11.5%, maybe going forward 12%, whether we will actually do so depends upon our overall assessment of the creditworthiness of the clients and their ability to repay their loans.
So at the moment, while it does seem that spreads will increase, we must also remember that customer deposits tend to rise faster than lending rates. So there may be a lead-lag time in that area as well. Overall, I think our anticipation is that for most of the next quarter, our interest spreads will remain roughly where they were as at end September.
Thank you, sir. The next question is that, as BRAC Bank's loan book is growing rapidly, so, what is the outlook of Capital Adequacy Ratio in coming days?
You will notice that the Capital Adequacy Ratio has fallen, and there are some initiatives in that area in terms of ensuring that all of our book is properly credit rated. We do only the best business, the business that generates best return for ourselves. And also, there is a subordinated debt initiative that we plan to roll out shortly. So the expectation is that we will get back to 14% capital adequacy levels by the end of the year.
Thank you, sir. The next question is that, inflation hits very hard this year, and people's earning and purchase power shrinks rapidly. So do you see any probability of increasing NPA in coming days?
That is always a challenge, and that is the reason why we have significantly slowed down our retail or consumer finance. That, you'll notice, has grown at roughly 8%-9% over the last nine months. And we've strengthened our risk parameters around the personal loan, the home loan, and the auto loan, all other credit retail credit facilities. And I think we need to be more and more mindful of the fact that a lot of our customer disposable income has evaporated.
Thank you, sir. The next question is, as FX liquidity is very tight in the market, do you see any impact in your trade and corporate business in coming days?
Well, our strength, as our Head of Treasury and our Head of Corporate Banking mentioned earlier, our stability to generate foreign currency liquidity, particularly at relatively lower rates, is an important driver for our wholesale banking business. That continues to be the case. I see no reason why we should not do even better in that area going forward.
Thank you, sir. The next question is that, have you already implemented SMART plus margin in all segments? And can you please give some color on how to plan to raise these loan yields all segments?
No, we, we've done it selectively, as we see fit, where depending upon our relationship with each customer, in each segment, sub-segment. So we are not going to do a blanket increase rates across all segments to the highest level possible. That is not a good business strategy. So it is selectively implemented as and where we see fit.
Thank you, sir. This question is related to NIM on corporate segment. So the question is that, NIM of corporate peers of BRAC Bank have improved in third quarter. Why have seen BRAC seeing a year-on-year NIM compression? Can you explain why are the corporate bank doing better than BRAC, who have higher retail and SME loan mix?
Tareq Refat Ullah, would you like to answer that?
Yes, we have already implemented gradually implemented revisiting our corporate banking pricing of different customer segments. And by this, by the end of this year, probably we will be able to fully reprice our loan books. That is the, you know, behind all the, you know, in.
We must also remember, let me add here to Tareq, that the BRAC Bank investments in the corporate banking portfolio are really at the top end of the, echelon. In other word, Tareq and his corporate team bank with the best of the best. Therefore, the interest rates at that level are very different from the medium or commercial segments or slightly lower end customers that many other banks would be, partnering.
Thank you, sir. We are just one question left. The last question is that: recently, BRAC Bank got approval to issue TakaPay card. What will be the bank's plan regarding this?
Well, the TakaPay card is an important milestone in the Bangladesh banking industry. It is a payment scheme similar to Visa, Mastercard or American Express, that the central bank is rolling out. It is very much in a pilot stage right now, but one expects that over the next year, the debit card will have stabilized, and we will be able to roll it out to all customer segments. And then gradually, different services will be added on to the debit card, and from there, we will also be able to graduate to a TakaPay credit card. The expectation is that within a couple of years' time, every service that we are able to offer on a Visa or a Mastercard will also be available on the TakaPay card.
Thank you, sir. That's all from my side.
Okay. Let me just end by reminding everybody that inflationary pressures are still high in Bangladesh. With the overall uncertain global geopolitical environment, the difficult economic outlook, a slight slowdown in export of orders, and very importantly, with general elections in January 2024, the expectation for the last quarter of 2023 is relatively muted compared to the earlier three. And going forward, one will have to look at everything from a different perspective after elections. So till then, while BRAC Bank is still in a very strong situation, ladies and gentlemen, I would like to wish you good night, and thank you for joining us tonight.