Thank you, Masum. Ladies and gentlemen, good evening. Assalamualaikum . I'm calling from Dhaka, Bangladesh. My name is Selim Hussain, and I'm the Managing Director and CEO of BRAC Bank Bangladesh. It is 8:00 P.M. here in Dhaka, and we'd like to thank you for joining us in what is the 2022 full year earnings disclosure program. We expect this program to take a little less than 90 minutes. We'll give you an update on the different businesses, including a major subsidiary, bKash. Then we'll follow that up with a short question and answer session where we'll try to answer any questions that you may have. Let's start off by getting into the opening statements. Ladies and gentlemen, this is a live webcast in our earnings disclosure portal.
This link has been shared with different stakeholders through the different media. We are also live on Facebook with this particular presentation. Next slide, please. Thank you. These are the usual disclosures. I won't go through all of them. You know, they're pretty standard. What we intend to do today is initially take you through an update on the economic outlook and the overall market update. That will be done by Shaheen Iqbal, our Deputy Managing Director and Head of Treasury and Financial Institutions. Then we get individual updates from our SME, retail, corporate banking business heads, risk management, the distribution network, our digital transformation update, a short update on sustainable finance. This year we'll also like to spend a few minutes talking about our people and organizational update.
We'll follow all that with our CFO taking you through the actual financials, ending with an update from bKash, our largest subsidiary, and following that up with a short Q&A session as well. Ladies and gentlemen, let me hand over now to Shaheen Iqbal, Deputy Managing Director and Head of Treasury and Financial Institutions. Shaheen, over to you.
Thank you, Selim bhai. Good evening to you all from Dhaka. I think Bangladesh economy started well in 2023. We had some challenges in 2022 because of Ukraine war, oil price and commodity price. That really impacted our overall external balance. This year, we are seeing improvement in terms of US dollar liquidity, and also our overall reserve position is gradually stabilizing. We are still seeing upward pressure on interest rate because of high inflation. Dhaka is still under pressure against USD. We likely to see the pressure gradually ebbing out. Probably by the end of this year, situation would improve significantly from this level. Next slide, please. In a recent study, Boston Consulting Group has shown that Bangladesh is going to be a trillion-dollar economy by 2030.
This will be led by expanding middle and affluent class because of the higher consumer base. This is again a wonderful news. The country's brand value has increased by 37% in a year. Overall, the economic potential is really, really high. Every indicator is showing that the economy is moving nicely along. In the next slide, we'll be showing that, if you can move to the next slide. Even though we are going to see a little lesser growth in terms of GDP, even then the growth is quite significant, like more than 5% growth projected by each and every stakeholders like IMF, World Bank, ADB, and the government projected for 6.5%. That is going to again jump upward in 2024.
Country's fundamental in general is pretty good and that the country is one of the fastest growing economy in the world in the years to come. I think that's a small brief from my side. What about you, Selim bhai?
Thanks, Shaheen. I think the takeaway essentially is that 22 was a difficult year in terms of macroeconomic stress. The war in Ukraine, increases in oil commodity prices, foreign exchange liquidity challenges, inflation, all that put a lot of stress on the banking sector. Importantly, I think the country ended the year relatively much more stable than it had started it. As you just saw, while there are short-term challenges, in the medium to long term, Bangladesh is considered to have quite significant economic potential, something that has also been recognized by independent analysts. Let's move into our SME business, a very important business. SME loans represent 50% + of BRAC Bank's total loan portfolio. I'll hand over to Syed Abdul Momen. Tomal is his nickname.
Tomal, over to you.
Thank you, Selim bhai. Good evening, everyone from Dhaka. The year 2022 was another fantastic year for BRAC Bank's SME team. Last year, our overall customer numbers grew by 17%. We had a strong asset growth. SME assets, last year grew by 24% across all the business lines of SME, which has enabled us to remain the dominant player in the industry in terms of SME financing. The growth was mainly driven by our small business team, which is the core strength of our bank. Small business assets grew by more than 35%. On emerging corporate segment, we focused more on recovery because the customer of these segments are mostly manufacturing concerns, and they were still in the process of recovery from post-pandemic stress.
The MFI financing segments, which is another major segment for our SME growth, experienced a low growth due to the subdued fund requirement by the MFIs. Our specially designed proposition to increase access to finance to women entrepreneurs, has actually started producing results. Last year, we experienced a whooping 127% growth in our women entrepreneur portfolio. In 2022, we have redesigned our SME liability propositions as well, with an aspiration to become the preferred transactional bank for SMEs across the country. We have engaged and aligned all our channels, specifically the SME sales channel, the distribution network, and the agent banking network accordingly. This initial drive resulted in an 11% growth in SME liability portfolio.
As part of the SME liability drive, we have launched an unique customized priority banking service for the first time in Bangladesh for SME customers. We named it Boreno. For the first time in Bangladesh, such kind of proposition is being launched. Under this proposition, high-value SME customers across the country will enjoy all priority banking services of our bank. Last year, our SME trade volumes have also grown by 42% year-on-year. In 2022, we have also launched a new business proposition for financing the suppliers and distributors of large corporate customers. This is an end-to-end digital platform-based lending. We are expecting this business to grow significantly in 2023, and make this a good source of non-funded income for this business.
We have continued to be the leading bank in disbursing loans to the targeted SME segments from various government refinancing schemes. In 2022, BRAC Bank alone disbursed BDT 844 crore of loans from government packages. We have also maintained the quality of SME portfolio. The portfolio at risk 30-day overdue have reduced by 1.6% in 2022, which is in line with our core strategic objective to have the best portfolio quality in the industry. One of our core strategic objective is to bring down our cost of operation through digitization. In 2022, we have started rolling out the end-to-end digitization of SME small business loans, and we have launched a loan origination platform which has significantly improved the productivity of our sales force and reduced the turnaround time of processing any loans.
We have also launched, as I said, the supplier and distributor financing business, which is a complete digital platform. In 2023, we are confident that our growth momentum will accelerate further, and we will move ahead in full throttle on our journey to significantly increase our market share in a new, innovative, and cost-efficient way. Thank you. That's all from myself, Selim bhai.
Thanks a lot, Tomal. Our takeaways from this SME business update, essentially good growth in loans and advances, driven also by very strong growth from the women's entrepreneurship business. Deposits starting to pick up. A lot of investment in new technology and new processes as well. Trade volumes also starting to grow very significantly. A number of new products, particularly the rollout of a new high net worth banking proposition called Boreno for SME customers. I think that is a big milestone for us. Of course, the loan originating system for SME which we've been waiting for, that is now partially rolled out already. Thanks very much, Tomal.
Let's move on to retail banking, and we'll get an update from Mahiul Islam, Head of Retail Banking Division.
Thank you, Selim bhai. Good evening, everyone. We have had good growth across all customer segments, sub-segments of retail banking during 2022. I will cover the major areas. Our customer assets continued to grow significantly during first half of 2022. After that, due to rising inflation, we have taken conservative approach and tightened our risk parameters. Our overall portfolio grew year-over-year by 16%. We have crossed the BDT 7,000 crore milestone last year, being the largest customer assets portfolio in this banking industry. We continued our strong portfolio monitoring and collection efforts that resulted in both PAR and impaired reductions last year, along with total recovery of BDT 85 crore.
Credit cards continued to be a good story for us with 26% year-on-year growth. Last year we crossed the BDT 1,000 crore milestone of card outstanding. Our customer deposits portfolio also grew by 17% year-on-year due to regulatory changes in particularly our fixed deposit rates. Customers were more inclined towards fixed deposits, which resulted in our cost of deposit increased by 65 basis points. In terms of sub-segment, we continued our focus on TARA, our women banking segment, where we have significantly grown our loan portfolio by 34% year-on-year and our deposit portfolio by 29% year-on-year. During last year, we introduced multiple new products to enhance our customer value propositions. Lastly, in terms of digital transformation journey, 66% of our CASA accounts were opened digitally in December last year. We opened total 52,000 accounts through the eKYC digital system.
We also opened 15,000+ fixed deposit and DPS digitally through our Astha mobile app. That's all update from my side. Thank you.
Thanks, Mahi. Takeaways again. Good balance sheet growth. credit cards are doing brilliantly. We've already become the second-largest player in the market. You will notice that the women's banking component here, TARA, there's a similar reflection in SME, is also growing very, very strongly. The merchant acquiring business is also doing quite brilliantly. You would also have heard Mahi speak about the investment in technology. A number of different digital lending solutions have already been rolled out, and I'm sure you'll hear more about that in 23. All said and done, a pretty strong growth across all sub-segments and a good showing for the full year. This despite the fact that, as Mahi mentioned, we deliberately slowed down in Q3 and Q4 with regard to lending.
There was a need to become a little bit more conservative because of the high inflation rates during that period. Thanks, Mahi. Let's move on to the next segment, which is corporate banking. We'll get an update from our Deputy Managing Director and Head of Corporate Banking, Tareq Rifatullah Khan.
Thank you, Sumit. Dear valued audience, a very good evening to you all. I'm delighted to present to you today the outstanding results achieved by corporate banking division over the past year. Despite the challenges posed by the pandemic, post-pandemic macroeconomy, war between Russia and Ukraine, and the impact of the same on global and local economy, we have successfully navigated through the storm and emerged even stronger. Our financial performance for the year has been exceptional, with a massive growth in asset for 38% year-on-year. In deposit even higher for 50%, and 50% of the same deposit is in CASA, mainly current account and savings account. I mean, low cost deposits. Also in trade, 32% year-on-year basis, which are very, which are way above the industry growth. This is evidence to the trust our clients have in us.
Our success are driven by the commitment to innovation, customer satisfaction, and risk management. We have continued to invest in cutting-edge technology to provide our clients with the exceptional digital experience. Our team has also worked tirelessly to ensure that our clients receive prompt and personalized attention no matter where their location is. We have also maintained a prudent approach to risk management, which has allowed us to weather the storm of the past few years with minimal impact. We have continued to invest in our risk management infrastructure to ensure that we are always above the curve. Reduction of PAR, I mean portfolio at risk and NPL by 1.4%, evident that we are on the right track. We are aware there are several challenges that could impact our business in the coming months.
Particularly first, I would like to highlight the foreign currency liquidity remains a significant concern for us, especially given the recent fluctuation in exchange rates. This fluctuation could impact our ability to provide our clients with the foreign currency if they need to conduct their businesses going forward. Secondly, we're also facing sluggish market conditions with which could impact our revenue growth as well. Finally, we're also aware about the current level of inflation. However, despite of the challenges, we remain confident that we are in our ability to navigate through this risk and continue to deliver strong financial results. We have a highly skilled team of professionals who are dedicated to provide our clients with innovative and effective financial solutions. We have been maintaining a robust FI relationships with various foreign banks, multilaterals, and financial institutions.
On top of it, a healthy remittance inflow is supported by our countrywide physical presence and collaboration with major remittance houses help us extending uninterrupted financial requirement of foreign currency to our customers. This is actually helping us to cater large ticket businesses and also increasing presence in multinational client spaces. We are also committed to investing in new technologies and expanding our product offering to new clients and to meet the evolving needs of our clients. In conclusion, I would like to express my gratitude to our clients, our MD&CEO, and board of directors for their continued support and trust on us. We remain committed to our objective to be the most preferred and trusted corporate banking partner in the industry by providing exceptional and tailor-made financial solutions in the coming days. Thank you, Sumit. That's all.
Thanks very much, Tareq. Absolutely outstanding results from our corporate banking division. And the wholesale bank, you will listen to treasury and financial institutions after this. The wholesale bank has really started to partner some of the best names in the country. There is serious recognition from not only local corporates, but also from large multinational corporates that BRAC Bank is now become a major player in the wholesale game. Thank you again, Tareq. Let's move to treasury and financial institutions. Shaheen Iqbal.
Thank you, Selim bhai, again. I think the big success for BRAC Bank, one of the main success story is, like, the kind of growth we had on deposits and loan. We are early mover, and we took the advantage of the market, and we were liquid from the very beginning, we were able to grab all the available opportunities. Particularly, I must say, like, on the foreign currency side, there are a lot of stress, lot of liquidity challenges in the market. We remain liquid, and we were able to grab all the opportunities that were available in the market. This crisis period was an opportunity for BRAC Bank. I think we are rightly capitalizing on those as well. On the treasury side, like, we are making the market, and we have been the market leader.
On the standalone, like, the only FX trading platform that is being offered by a local bank, we have achieved number one position last year. We crossed 3 billion mark, and we achieved more than 75% growth. This is again a significant achievement. Altogether, I think, for both treasury and also for our internet lines like other businesses, we did a fantastic job in supporting both the segment, and this, the last year was a really very good year for our business. Thank you. On the next slide, I just like to add, on the credit rating side, like, we remain the best-rated bank in the industry. By Moody's, we are the only bank equivalent to sovereign. By S&P, we're the only bank rated by S&P.
By CRAB, you can see we're the AAA-rated bank, only bank rated AAA rating. All together, I think BRAC Bank really established itself as a top-tier bank in terms of all the credit rating as well. Thank you.
Thanks, Shaheen. Let me add to this slide. While this is a reflection of the international and independent credit rating agencies, you know these names, Standard & Poor's, Moody's, and ones on the left are local credit rating agencies. Let me also remind you that the central bank also conducts different assessments by themselves in terms of core risk guidelines, in terms of money laundering, in terms of internal control, in terms of technology assessment, et cetera. While I am not able to share details of all these ratings, because it's private, I would like to share with you the fact that BRAC Bank in 2022 received the highest ratings of any local private bank in the country.
We are very happy with the various ratings received from the central bank in these various areas, risk, credit risk, operational risk, information security, internal control, a number of different areas. That was very, very satisfying. Thank you, Shaheen. Let's move to risk and get a short update from our head of credit risk management, because I'm sure all of you would be interested in knowing how the portfolio is faring after quite strong loan growth.
Thank you, Selim bhai. Good evening, everyone. In 2022, in addition to managing asset portfolio, we actually worked extensively on risk governance and risk infrastructure just to build an efficient and effective risk functions. If you look at the left side, you will find that we are trying to set up a best-in-class credit underwriting process, introducing front-to-back workflow for small business loans and digital straight-through processing for retail loans. We have also enhanced digital monitoring by introducing early warning models, which is predictive models in certain portfolio, which we plan to roll out in across business segments. A performance management is also in place for risk managers with dashboard of metrics for risk efficiency. On risk governance and culture, we have initiated extensive discussions of things like ICAAP stress testing, portfolio analytics and capital adequacy in bank's board risk management committee.
On the right-hand side, you will notice that our non-performing loans in 2022 decreased by 20 basis points from 3.9- 3.7%, along with reduction of 30 days past due portfolio from 6.3- 4.9% if compared with 2021. We have presented the PAR and NPL trend of the bank on 6-year horizon, you will find that asset quality is consistent over the pre- and post-COVID period, which is very important.
Meantime, as of December 2022, our credit coverage stands at 111%, actually lower than the previous years, where we had excessive provisions in loan loss as per our conservative strategy considering the pandemic uncertainties. Please note that at present we do not have any forbearance in place. Given this fact, we believe 100+ credit coverage ratio is adequate as we speak. To sum this up, with better underwriting decisions in recent years and strong performance by our collections team in 2022, our asset quality has improved a lot. That's all from me. Thank you once again.
Thank you, Joy. I think Joy summed it up very nicely. Portfolio continues to improve. There is no forbearance in BRAC Bank. We are the only bank in the country that continuously reports portfolio, 30-day portfolio at risk or 30-day DPD as well. That, in our opinion, is a better indication of portfolio stress than NPLs. You can see that 22 is coming after the pandemic in 20 and 21. We've done away with all forbearance, the portfolio is starting to look better day by day. Thanks very much, Joy. The next slide is about distribution network and alternate banking channels. I would like to actually start off by giving you a quick sense as I have in the past, but I need to emphasize that. Next slide, please, Dab.
Our physical distribution coverage is a combination of, on the left-hand side, you can see, branches, sub-branches, SME unit offices, it's agent banking offices, et cetera. These are supplemented by the various digital solutions we have. Our app, the ATMs, the CDMs, the corporate banking payment solutions, POS machines, QRs, et cetera, et cetera. Ours is very much a hybrid solution, ideal for a country like Bangladesh, where we feel a digital-only or even a physical-only solution would not be ideal. Ours is a combination of the two. How this is working out will be further illuminated by Noor Nahar, our Chief Technology Officer, a little later. Let's hear from Sheikh Ashfaq, our Head of Branches first.
Hello, good evening, everyone. This is Sheikh Mohammad Ashfaque, the Head of Branches. As you know, in 2022, the banks in Bangladesh had quite a few challenges to deal with, and collecting deposits was at the top of all banks' agenda. Despite a interest rate-driven competition, our branches took a simple strategy of nurturing the relationship with customers and keeping a close tie. The fundamental strength of the bank was key factor for the customer to choose BRAC Bank, and branches played a pivot role to pitch on a continuous fashion. Our process and policies have already been reorganized to ensure great level of customer experience. Our deposit mobilization was extremely well.
While we kept on emphasizing our AML framework, our AML framework with great care and as part of our strategic expansion, we've greatly focused on increasing our presence through sub-branch vertical and started building the infrastructure in 2022. The results were quite impressive. As you can see, our deposit growth was around BDT 50 billion with 121,000 new customers acquisition. Although the number of cash and non-cash services have increased, and it is to inform you that 90% of our branches have been rated within the top 2 tiers of audit and AML rating. These were the updates from distribution network. I'm now handing over to Nazmur Bhai, who heads the alternative banking channel.
Thank you, Ashfaq. Good evening, everybody. Our alternative banking channels comprise of four major channels, namely alternate delivery channels, secondly, call center, thirdly, agent banking outlets, and finally, online banking app, Astha, with nearly 300,000 customers. Last year, we onboarded 295 new agents and reached 1,000 mark with the 4th biggest agent network in the country. We have acquired over 100,000 accounts which resulted closely to BDT 1,000 crore deposit base. As part of our penetration strategy, most of our deposit portfolio comes from SME. We have managed to be the biggest SME loan provider through agent channel by having 65% market share within three years. We have already built the capability which is the best in class in the local market.
Unlike many competitors, our agent banking solution straddles all segments, that is retail, for low-income accounts, SME for lending and deposit businesses, and corporate for distributors to enhance the transaction banking business. Through this coordination, agent banking has become an important addition to our overall armory. A number of initiatives have been taken last year, introducing toll-free phone banking service for the first time in Bangladesh by any bank, replacing the entire ATM fleet and introducing the real-time cash deposit machines. Expanding service features in mobile app Astha to enhance customer experiences. In summary, we believe that the customers of all segments will divert from the traditional channels to these low-cost and convenient channels, through these alternate banking channels is emerging to be an integral part to achieve our overall banking strategies. Thank you. Thank you very much.
Thanks, Nazmur.
As he emphasized, the agent banking solution is a very important channel which supplements branches and sub-branches and provides essential support to all three customer segments, SME, retail, and corporate. Thanks again, Nazmur. Let's move on to an update from our Chief Technology Officer, Nur Nahar Begum. Nahar will give us an update on our digital transformation.
Good evening, everyone, and Assalamualaikum. Our digital transformation journey continues to be focused on delivering tangible business objectives. We have implemented various solutions such as supply chain financing, litigation management, document management, loan origination system and more. In order to enhance our customer experience, our retail internet banking, Astha, has become one of the most popular app, we are currently in the process of transforming it into a super app. We continue to invest in technology to support business growth and improve operational efficiency by leveraging the latest technological advancement. Our digital customer onboarding and end-to-end lending apps transform business process. Our investment in middleware has made us more agile and responsive to changing customer needs, while also allowing us to easily collaborate with partners. We have taken necessary measures to better manage the bank's cybersecurity risks and ensure compliance with relevant regulations and standard.
Like other bank, we face some challenges as well. However, we are able to overcome them through proper planning and implementation. Next slide, please. I would like to show you how our bank is moving from manual to digital. 61% of our total transaction volume were being served digitally. We can see the trend has been increasing every quarter over the past three years. Thank you.
Thank you, Nahar. Thank you very much. This is a very illuminative graph. It shows how we've moved in a three-year period from 24- 61%. You'll notice that manual transaction levels more or less remain the same as they were at the start of 2020. The digital numbers have grown quite significantly. Thanks again, Nahar. I'll give you a quick update on our sustainable financing initiative. It's a very important part of the bank. It is a key business strategy. The bank today is one of the highest, in fact, the highest rated ESG bank in the country, as far as Moody's is concerned.
The central bank has also rated us in amongst the top 10 sustainable banks of the country. This is an area where we currently have about just under $700 million invested. The destination is going to be significantly more than this. We hope by the end of this year to have reached the $1 billion mark. That is just to give you a little bit of flavor of what we're doing in terms of sustainable financing. Our next slide is about people. We listen to Akhteruddin Mahmood, our Head of HR. Mahmood?
Thank you, Selim bhai. A very good evening, ladies and gentlemen. As strengthening the diversity of the bank is one of the key strategies, you set a very stringent target for us, which is to move up the male and female ratio, from current 22- 30% over next 36 months. We can go to the next slide. We are also proud to be the first company in the market to hire trans women or transgenders in the bank, breaking all social taboos that you've seen in the previous slide. Looking to this slide, as you can see that 80% of our workforce is millennial, and hence they are agile, fierce, and prone to fast-changing business landscape. They are also digitally savvy, which is a key to our journey towards becoming more digital in the coming years.
In order to serve the exponential business growth, the bank has introduced the HR business partnering role last year, and as a result, people agenda is dealt with more productivity, you know, more proactively and care. Talent management being one of the strategic pillars of our business, we rewarded our extraordinary performers in a differentiated manner, thus recognizing the good and outstanding performer last year. As we all know that right set of behaviors drives superior business results, we have redefined a new set of measurable behaviors manifested from our values, and we call it THRICE in short, and there are five values which we can, you know, share later on.
Moving on, leveraging the young and digital workforce, as you can see in the curve below, the bank has embarked into capacity building of our coworkers with rigor. As a result, we have introduced an internal e-learning platform called ALO, which stands for Alternate Learning Outlet. Coincidentally, alo means light...
In our local language, Bangla. One of the best achievements in the learning and development space, total training man-hour for the year increased from 170,000 to 200,000 hours, indicating bank's commitment to upskill our workforce. That's all from the people and organizational lens. Thank you all again, over to you, Selim bhai. Thanks a lot.
Thanks very much, Masud. Before we get into the actual financials, next slide, please. I spend a couple of minutes talking about what we call our overall franchise development. If you look at 2022, what has happened? Firstly, the year represented very healthy liquidity, both in local currency and in foreign currency. You heard from our head of treasury, you saw that the bank's AD ratio was approximately 79% or 80% throughout the year. You heard from our head of credit risk management how the portfolio quality has improved year on year. You learned about the expanded phygital hybrid distribution solution that we have rolled out. Better capital management. Our CFO will talk about that as well.
You see that, despite challenging circumstances, difficult macroeconomic environment, the bank has improved its earnings, both in terms of the bank itself and in its subsidiaries. Overall, our journey towards larger and more sustainable business growth is pretty much on. Let's move to the next slide, and we'll hand over to our Deputy Managing Director and Chief Financial Officer, Masud Rana. Masud.
Thank you, Selim bhai. Good evening, and assalamualaikum to all. I think, as Selim bhai was mentioning in the previous slide, you know, underpinning this, you know, development or I would say call these as a strength of our bank, we have embarked on a new journey last year, starting from the last year. We actually strategized that this is the time when most of the other banks would, you know, trying to reorganize, we tried to grow ourself exponentially. As you can see, and you have heard from our business leaders, our, you know, technology, people and all front, we have actually had a very good year in 2022. Bank has actually delivered a very strong set of results, aligning its strategy.
To start with, if you look at our deposit, customer deposit has grown by about 24%, which is approximately three, three and half times of the industry. On the other hand, if you look at our lending book, it has grown by about 28%, which is roughly two and a half times of the industry average. Our revenue has grown year-over-year 14%, resulting profit after tax is about 4%. I'll come to that a little later, and we'll walk you through how it has happened. Our overall balance sheet has grown by about 25%. Given the circumstances and the business environment, it's a staggering growth. Our capital, this is regulatory capital by the way, this has also grown by 11%.
On an underlying basis, this is the highest, you know, volume of equity base, underlying basis. We believe in going forward, you'd get to see it's going to, you know, strengthen further. On the right-hand side, if we look at the financial metrics, particularly ROE and ROA, return on equity and asset, has been a little softer. We all understand given the restriction on the, you know, interest rate and all, it remained a bit challenged to, you know, push it. However, the way we have strategized and the way we are growing, going forward, let's say, after 2024 and onwards, you'll get to see these are coming back to the previous level, like, 11-12%. If you look at the earning per share, it has grown to 3.85 taka per share.
Our net asset value has also grown. NPL coverage, we have heard from our, you know, credit head that we have at about 111%. Fundamentally, our book quality has gone better, and it's improving over a period. Shortly we'll also share the Q1 results. You'll get to see that it's improving further. In terms of capital adequacy ratio, it's 14.4%. Most of it, about 90% is Tier I. If I'm not mistaken, it's the highest Tier I in terms, in terms of percentage and volume together. We are the highest in terms of the core capital. Coming back to the cost to income ratio, one of the efficiency ratio, if I may call it has gone a bit soft.
Predominantly, led by the cost of funding. As we understand in 2022, the landscape was quite, you know, challenging. Given our deliberate strategy, we have, you know, restrategized our funding, you know, tactic and thereby, you know, increasing our term deposit. Particularly, when I come to the latest stage, you will see that the combination has, you know, got a bit different than other years, but it was a deliberate, you know, strategy to go and, you know, increase our deposit base with a different mix. Therefore, we had to incur a little bit higher cost in terms of, you know, in comparison with the previous years. If we exclude the cost of funding, our OpEx ratio in terms of our revenue remains 41%.
However, the incremental cost-to-income ratio of 5%, if we, you know, look at it, 3% of it constitute coming from the funding cost and the remaining 2% coming from the operating cost. We need to be mindful that we have grown our balance sheet, our franchise about 25%. The spread, yes, it has contracted because the incremental cost of fund and perhaps you all are aware there's this, you know, regulation that and the expectation from the regulator is to manage, you know, a banking business within 4%. We have been designing our businesses and going forward, the strategy is to remain at 4% and deliver, you know, the superior financial numbers. If we move on.
This is the customer deposit, and we, you know, would like to share this, the journey of the last 6 years, and it has been consistently growing at a good rate. However, as I say, you know, along with our strategy, we have undertaken a new journey, and 2020 was the first year and was perhaps it could have been even better. In the, you know, first two quarters we have grown quite rapidly and accordingly, according to the market and all we have, you know, refocused and adjusted the pace a little bit. We believe, and strongly believe this year we can do even better, given the, you know, conducive environment.
I think the, you know, the strength that Selim bhai mentioned in the very first slide, has helped us, you know, making this business more nimble. Due to this, you know, adaptability and resilience, we could, you know, refocus our energy and the, you know, the approach and fit accordingly. Therefore, if you look at the customer deposit has grown in all the fronts SME, retail, corporate. As I said, our... deliberately, we have grown our corporate deposit base. If we move on. The share of, you know, deposit remains more or less similar and, of course, as we, you know, expanded our, hold on the corporate side, it has gone up. The future plan is to grow the deposit of retail and, particularly SME.
As, you know, Kamal was mentioning, we have had a number of initiatives and plans to further, you know, grow our SME deposit. We had a wonderful, you know, growth in our transaction banking, both in corporate, and we have just introduced it for the SME and we hope to grow it multifold in the years to come. If we move on. Customer deposit mix. Our CASA, it was 51% at the end of the last year, which is a bit. Yes, it has decreased, but I think given the context, it was necessary. Going forward, we the outlook is it will remain a bit challenging, the liquidity will be tight and so therefore that it was appropriate for us to, you know, work on this mix and take it forward.
Moving on. Customer asset. Predominantly our business is SME-driven, and as you can see, the major growth has come from the SME and of course driven by the small businesses. Retail has also grown and corporate has a fantastic year last year. You may have a question that, okay, I mean, particularly on the corporate side, it was a particular, selective growth and of course within our risk appetite. We have had a long discussion before we, you know, launch this, you know, drive. We hope to, you know, grow our business in a balanced, you know, fashion, like, having this mix of, if you look at the next slide, the customer. This is regulatory by the way, SME, retail and we would like to grow our balance sheet in a balanced fashion.
Next. If you look at... I think Selim bhai would like to, you know, say a few words here, resulting to this, you know, fantastic growth in our balance sheet, we could see a very handsome growth in our market share. Selim bhai.
Yeah. Thanks. Thanks, Masud. I just wanted to emphasize that our the strong 25% odd growth in funds under management has realized resulted in us, in a very handsome growth in both loans and deposits in terms of market share. You look at 2021 - 2022, our market share for loans has grown by 31 basis points, and the market share for deposits has grown by 35 basis points. In both cases, this is quite significant. If we can keep this up over the next three years, 2023, 2024 and 2025, we will certainly achieve our objective of being about 4.5% of the whole market by the end of 2025.
I think this strong market share growth is a very good outcome of everything that we've done in 2022. Thanks, Masud. Let's move on
I think let's go, move on. I think this would give you a fair idea of how our, you know, performance in terms of our profit and loss. Let's start with this, you know, interest income. Gross interest income has grown by about 32%. Of course, this has come from the balance sheet growth that we had. At the same time, the cost of fund, as I was mentioning, about gone up by 74%. Investment income, the fixed income portion, remained a bit flat, slightly, you know, down year-on-year, particularly because of the, you know, the yield, particularly from the G-Secs. Our capital market return has been quite good as we, you know, refurbished our investment in the stock market.
On the other hand, because of the volume driven, you know, last year, the fees income has also grown. Of course, there has been, you know, other, like our trade was about nearly $3 billion. If we look at our expenses has grown by about BDT 3 billion, which is about 24%. A part of it, I mean, if we look at, about 70% of it is actually the people cost. One portion of it, of course, was the regulatory advice of, you know, minimum wages for the lowest cadre of the bank.
Of course, we had also had some market adjustments, but we look at it as an investment because as I said, for our strategy and for the growth, we are actually investing on our, in our people, our technology infrastructure, so that going forward we can support this huge growth that we aspire to. If you look at our general provision and specific provision, the loan impairment piece, we have actually had some positives because as our book has improved, the quality has improved, we could, you know, release year-on-year, we could have lesser loan impairment. Particularly, if we look at whatever the credit cost was, about 50 - 4 basis points, but within that there was some buffering.
In the tax, there has been some reform in the tax law, therefore, like the capital gain we used to have in the G-Secs, the government bond or the fixed income portion that was not there. Overall, our effective tax rate has increased a bit. Net-net, our profit after tax, which was about BDT 555 crore last year, has become BDT 576 crore this year, about 4% growth. Just moving to our consolidated results. Next slide. If you look at our consolidated performance, I think the assets, deposit loans remain more or less similar, but look at the profit after tax. It has grown by about 32%.
As I will explain in the later slide or the next slide, that it has predominantly coming from the subsidiaries, the bKash, which has moved to profitability and therefore this staggering growth of 32% year-on-year. Our balance sheet as an group, become about BDT 65,000 crore, which is about 24% more than last year. Our capital is quite strong, on a group basis, the adequacy with an adequacy of 19% +. If we look at the next slide. Our two capital market subsidiary has done relatively well in a sense. If we look at the market, most of the, you know, capital market, merchant banks or broker has had a very rough time. But even within that situation, I think our merchant bank and brokerage has done pretty well.
Our exchanges, BRAC Saajan, the exchange business that we have in U.K., is restarting its journey in 2023. Overall, I think bKash has made it possible for us to, you know, get a good number. bKash posted in its I think about in 3 years, positive numbers. We'll get to hear from CFO of bKash. Overall, our, you know, last year consolidated profit of BDT 465 crore become BDT 612 crore. If we look at in terms of our share, it would be about BDT 601 crore. We'd like to hear from Moinuddin Rahgir , CFO of bKash on the bKash journey of 2022.
Masud, thank you. Good evening to everyone. As always, I will take you through six key health parameters of bKash. I'll start off with the customers. We clocked 65.3 million customers at the end of 2022, which was 57.6 same time last year, meaning that we. Our net addition to our customer base was 7.7 million. Roughly, we were acquiring about 36,000 customers a day in 2022. Moving on to the right side. Of the 65.3 million, 36.1 million were active clients. This is about 55% of the total customer base were active. Market share, 67%.
This number was around the same. To be precise, this number was 66.3 at the end of 2021. Despite fierce competition, we gained a percentage point in terms of market share. Merchants, 287,000 merchants were on our net. This the same number was about 275,000 in the end of 2021. Meaning we added about 12,000 more merchants in 2022. Average monthly transaction volume was 584 billion. That's the average every month. In total, we had about BDT 7,000 billion worth of transactions in 2022, which was about 20% more than 2021.
Number of agents was 340,000 agents spread across Bangladesh, which we added about 71,000 agents more in 2022 over 2021. Those were the key highlights of bKash. To the financials. Gross revenue went up by 22%. We did about 3,910 crore taka worth of gross revenue, which was, as I said, 22% higher. The primary driver of this is increased volumes, as I mentioned. We did 20% more volumes in 2022. That's the primary driver of the increase in gross margins. 20% increase in volumes. Our interest income increased.
Our float interest income increased, which is a part of gross revenue, is because our float increased. Taking off that, we did a net revenue of BDT 3,431 crore. Our cost of services was BDT 2,493 crore, making the gross profit at BDT 938 crore. If you notice, if you observe that our gross profit ratio was 27% in 2022, as opposed to 23.7% in 2021. That is a significant increase given the huge volumes that we have, a serious increase like that in gross profit actually led to our margins increasing. Our operating and administrative expenses in total increased by about 23% over 2021 and 2022.
That leaves us with an operating profit, or rather an operating loss of BDT 77 crore in 2022. The next line, net finance income is the income that we derive from our own working capital, which increased to BDT 121 from BDT 7 crores in 2021. The primary driver of this is we received the funding of SoftBank in December 2021. The full 2022, we bKash derived the benefit of this fund. Just taking that into account, we make a net profit, and the rest is the 5% is the profit, WPPF contribution, which is two.
The profit before tax is BDT 43 crore, and we had an income provision, income tax provision of BDT 25 crore, thus making a profit after tax of BDT 17 crore. As Masud Bhai mentioned, the last time we made profits was in 2018. After three consecutive years, bKash finally made a profit of BDT 17 crore. Those were the two quick slides from my end, and I'm happy to take any questions.
Thank you, Moinuddin Rahgir. What we'll do now, Masud, if you're also finished, what we'd like to do is actually give you a wrap up first on what the whole year was about. Essentially, as you see, the year started off quite difficult, with great difficulty. Macroeconomic stress, high inflation, trade deficits, balance of payment challenges, massive depreciation in currency, foreign exchange liquidity, scarcity, et cetera, et cetera. It was a very difficult year overall. Despite all that, BRAC Bank has grown at approximately 25% in terms of funds under management, and profits have been 4% higher than last year.
For the consolidated entity, overall profitability is significantly better, because bKash is, as Moin just said, has finally given us some positive news as well, and hopefully that will continue. Let's now get into the question and answer session. What we'll do is if, Dab, if we have any questions for bKash.
Yes, sir.
We'll ask Moin to answer those first, and then we'll get into questions for BRAC Bank.
Okay, sir. We have received couple of questions for bKash. Moinuddin Rahgir . The first question is that: What led to bKash gross profit margin increase?
Okay. Thank you. That, the simple answer to that is, there are two reasons why gross profit margin increased. one is, our source of fund cost declined. We essentially have four sources of funds. one is, one is the fund sourcing through the agent, one is fund sourcing through banks, one is fund sourcing from cards, one is inward foreign remittance, and 1 is direct disbursement. Our proportion of funds coming in from banks, cards, remittance and government disbursement increased in 2022 over 2021. That led to a weighted average cost of funding declining. The other factor is our effective commission that we pay to our agents declined in 2022.
Those are the two real factors as to why the gross margins increased in 2022.
Thank you, Moinuddin Rahgir . The next question on, what is the revenue model of deposit and lending products of bKash?
Okay. Let me go one by one. The revenue model for lending is bKash partners with a bank and the revenue that comes out from the bank, which is in the form of interest income or other income, that is shared between bKash and the bank. That's how it works for lending. For savings, we partner... bKash is again, we're just a channel through which we help the ultimate institution whose books the savings will be. It's a percentage of what. It's a percentage of the savings that we channel for the institutions.
Thanks, Moinuddin Rahgir . The next question is what is the current revenue mix of bKash? Meaning, how much is coming from the cash in, cash out, and.
The revenue, the revenue mix?
Yes. About the revenue.
Okay. Okay. Okay. I'll tell you the three big revenue drivers of bKash. The first one is cash out revenue, which is about 67% of the total revenue. The second biggest one is interest income from float, which is about 11%. The third biggest one is the peer-to-peer or the P2P transaction, which is roughly 8%. Those are the drivers of revenue for bKash.
Thank you, Moinuddin Rahgir . That's the question that we received till now for bKash. If we get something else, we'll come back to you again.
Sure.
Sir, can we start for the BBL's question?
Sure. Please.
The first question is about the rate cap. The question is: What is your expectation regarding reference-based lending rate? Do you expect due to this change, bank-bank spread to improve after that?
All discussions around this new corridor in terms of the lending rate are conjecture only at this moment. We will learn more about it as it is rolled out, probably in the month of June, not before that. Initial discussions suggest that it will be say a 3% margin added on to the six-month T-bill rate. The six-month T-bill rate will be considered as indicative of the market rate. The 3% spread, which is a maximum spread of 3%, will be considered the premium on that rate. Currently, for example, that T-bill rate would be close to 7%.
3% on top of that would come to about 10%, which is roughly 1% higher than the existing 9% lending rate. What would the impact of that be? Quite significant actually. If we end up with a 10% lending rate cap, then that's a good 1% over what we have today. Our interest expenditure could increase theoretically almost 25% overnight. Very significant increase. How that will be, still be structured because there are other rules and regulations. For example, there are restrictions around the overall net interest margin that a bank is allowed to work in. Our CFO Masud Rana referred to that earlier. That is 4%. The question is whether that kind of restriction will remain going forward.
We will know more about it, as we enter into June, perhaps. All the same, I think it's a positive move from the central bank, a move away from the current restrictions which were put in place April 2020, and a move towards a more market-based interest rate regime.
Thank you, sir. The next question is on our BRAC Bank's overall success. The question was about that BRAC Bank has made the most remarkable financial success in 2022. In which area this success were actually coming?
Firstly, it was kick-started by, I think Masud Rana, our CFO, referred to a strategic agenda, the strategic agenda that we put in place end of 2021. That is the bank felt that we were fit for growth and set us a target. We set ourselves a target, this was later on agreed by our board, to double our business and almost double the market share over the next four years. That is 2022, 2023, 2024 and 2025. To achieve that, we needed to grow at roughly 21-22% year on year. A CAGR of 22% over the four-year period would have delivered that doubling of business and almost doubling of market share.
The first year, 2022, has reflected almost 25%+ growth in funds under management. We've exceeded our plans and that is a significant validation of not only our strategy, but also our belief in our overall capacity. Now, what delivered? All three business segments delivered. It's not as if one did and the other did not. This is despite us slowing down the retail banking business in the lending business in the second half of the year when inflation rates became quite high and there were some concerns around lending to individuals. We became a little conservative with our risk appetite controls. Despite all that, the year still ended very, very strongly. Challenges for us really are around the cost.
The cost income ratio for 2022, as you can see, is quite high, 58 compared to 53 last year. That is mainly born out of, as our CFO, Masud Rana, showed you, a significant increase in staff costs, which were a result of certain regulatory changes made in the first quarter of the year. Masud considers this to be an investment in people. We all do as well. I think that helped our entire team stretch further than we had even believed possible ourselves. The fact that we have, in a very difficult year, grown strongly is an indication that all parts of the bank have done very well. I also must refer to the continued support received from our technology and operations teams, our logistic teams, our internal control, anti-money laundering teams, HR, finance.
Every part of the bank has stood up and has been counted. Overall, a very collaborative effort. Thanks, Deb.
Thank you, sir. Referring to the earlier question, what was the key reasons of growth in corporate banking during 2022?
So-
Which was more-
Let me respond to that. Firstly, loans grew almost 40%. Firstly, sorry, that growth in lending is very much in line with our risk appetite statement. You'll notice that overall, the bank and even the corporate banking loan portfolio has improved. The customers we have lent to are all top-notch customers. Secondly, the growth in deposits is really a reflection of the very strong transactional banking capabilities that the corporate bank has now rolled out. These include different products and services to transaction banking clients and a very, very effective corporate payments module called CORPnet. That has done quite brilliantly and is continuing to completely decimate the opposition.
The last point that I must also recognize is that the bank has grown stronger and better over the last 2 or 3 years. Much of the wholesale banking success story is based on the fact that there is a certain amount of flight to quality or flight to safety. Many large, better-known wholesale banking partners are now interested to do business with BRAC Bank. In other words, we have reached a position in the market where our wholesale bank is now generating mindshare.
Thank you, sir. The next question about recently Bangladesh Bank issued a circular about the off-balance sheet provisions. How management thinking that will impact BRAC Bank's performance?
I don't think it will impact us negatively at all. I think it's very positive from the overall industry perspective. The industry needs to migrate towards more internationally accepted provisioning standards, so we welcome the, these sort of regulations. They will not impact us negatively at all.
Thank you, sir. The next question is, where do you see USD BDT rate to stabilize?
I think it firstly, the central bank is following a cautious and conservative approach towards move it, as it moves towards a market-based rate. I don't think we'll see a fully market driven exchange rate this year. As you may have already noticed, that the current rates offered by the BAFEDA, as we call it, the foreign exchange dealing organization, that is already quite close to what we call the curb market rate. You will also notice that the real effective exchange rate for the taka is in a lot better than what it was perhaps five or six months earlier. As the rates are progressively improved... or sorry, as the taka is progressively depreciated, I think we will end up with some...
What rate we will end up with is difficult to really say right now. Perhaps in the short term, rates may jump up a little bit, but I think by the end of the year, we expect to be nothing absolutely out of the ordinary. I will ask Shaheen Iqbal to comment on this, without actually referring to a particular number, Shaheen.
Absolutely. Selim bhai, it is really difficult to really indicate particular number. We can see so far, from a base taka has depreciated around 27%. Then probably, another 5% will be enough to stabilize taka against US dollar, in my view. As we have already seen that import obligation has come down, export and remittance is doing good. I think, we have passed the peak, and probably taka is going to stabilize gradually. I think, going forward, I don't see significant volatility. Rather a rise in volatility. Thank you.
Thank you, Shaheen bhai. Reference to that question, do you expect treasury yield to go up in later part of 2023 and early of 2024?
It is likely, but it depends on a number of factors. As you know, like, how much government need to borrow from the market, how much government would borrow from central bank. All these factor would come into play. In a free market scenario, like as interest rate moving upward, inflation is on the higher side, would you expect to see gradually yields moving upward. Also, like, as there will be lesser liquidity, like if a contractionary policy, central bank pursues that, then we do expect to see the yield moving upward gradually.
Thank you, Shaheen Bhai. We have received some questions about our one of the subsidiary, BRAC Saajan Exchange. The question was about that BRAC Saajan Exchange has come back to business in the UK.
Yes.
Is Saajan facing challenges to return to business in full swing?
Yes, of course. The company BRAC Saajan Exchange was rendered inoperational for more than two years. As a result, it had laid off most of its staff, had stopped. All this is now coming back. More people are being recruited to fill up the vacant positions and the relationships with all the different agents who were the backbone for their business is now being renegotiated. It is going to take a bit of time, but we're already getting about $200,000-250,000 worth of remittances every day. That is still no more than 10% of what it was back in 2019.
We are investing heavily in that business and expect that within the next one year, BRAC Saajan will be back to pre-pandemic levels, which was close to $400 million of remittances, annually.
Thank you, sir. We came to the last question about. This is on agent banking and our sub-branches. The question is about, how many agent outlet and sub-branch you are looking to open in 2023?
Okay. We'll ask Nazmur Rahim, Head of Alternate Banking Channels, to answer the question on agent banking. Ashfaque, our Head of Branches, can respond to the question on sub-branching. Nazmur?
Yeah. Yeah. Thank you, Selim bhai. We are expecting to increase the agent banking number by 1,400 by this year-end. Thank you.
is that 1,400 new agents?
The total number of agents.
how many-
This year we started with BDT 1,000.
So you-
400 new agents will be there.
Yeah. 400 new agents this year.
Yeah.
How many new sub-branches do we plan to open?
We would like to open 50 sub-branches this year. One also needs to remember that there has been regulation changes from the central bank. There has been new rules imposed regarding urban and rural ratios. We are working on it and we still hope to open around 50 sub-branches this year.
Sub-branches, branches, agent banking outlets, all are important components of our bricks-and-mortar solution. As I keep on repeating, they are a part of the total hybrid solution for BRAC Bank. You have the digital solutions on one hand, and you have the physical solutions on the other. Both high touch and high tech working together. In our country, that makes sense. A pure digital or neo banking solution would, we feel, not make much sense in Bangladesh. Are there any other questions there?
We have one last question, sir. This is about our product Borno. The question is that, is priority banking for SME customer is same as retail or corporate?
It is very similar. It is not exactly same. Importantly, Bor represents a milestone in BRAC Bank in the sense that, our attempts to corporatize our SME business and step up the delivery of customer solutions to all kinds of SME customers, not just lending customers. That's what Borno is all about. Tomal?
Thank you, sir.
Borno?
Yes, actually, the Borno is slightly different because for Borno, we have seen the need of, or we are trying to find out the need of large SME customers. Mostly, they go and take services from the branch. For large or higher segment SME customers, we have provided some additional features which are services which will be provided from our channels to the Borno customers. These are not. These are a bit different customized for SME customers. There are some services which are similar to the, our priority customers as well. There is something more which serves the purpose and needs of high-ticket SME customers.
Thank you, Tomal brother. These are all questions that we have received from our shareholders.
Okay.
Thank you for that, sir.
We're just under 90 minutes, pretty much in line with what we planned earlier. Gentlemen, thank you for joining us and sharing the update on what's been a very good year. The expectation is that 2023 will also be another very good year for BRAC Bank, and we'll, of course, share with you the first quarter results quite shortly, I think. I think in what? By the end of this month, Masud?
Yes. Yes. Perhaps even earlier.
Okay. Okay. Thank you again, ladies and gentlemen, for joining us. Goodbye from Dhaka, Bangladesh.