Introduction:

Mutual Trust Bank Limited a private sector commercial bank. It started operations on 24 October 1999 with an authorized and paid up capital of Tk 1,000 million and Tk 200 million respectively. The capital is divided into ordinary shares of Tk 100 each. In December 2004, the bank total equity and reserve funds were Tk 208.48 million and Tk 8.48 million respectively. The bank is a Bangladeshi joint venture company with equity participation from Advanced Chemical Industries Ltd., East West Properties Development Ltd. and Associated Builders Corporation Ltd. The management of the bank is vested in an 18-member board of directors, including representatives of the 3 sponsor firms. The managing director is its chief executive.

The bank conducts all types of commercial banking activities including foreign exchange business and other financial services. During the first two years of operations, the bank’s main focus was on the delivery of personalized customer services and expansion of its clientele base.

The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a public company limited by shares for carrying out all kinds of banking activities with Authorized Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each. The Company was also issued Certificate for Commencement of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the Company started its banking operation and entitled to carry out the following types of banking business:

All types of commercial banking activities including money market operations.
Investment in merchant banking activities.
Investment in company activities financiers, promoters, capitalists etc.
Financial intermediary services.
Any related financial services

The Bank operates through its Head office at Dhaka with 68 Branches & 12 SME service centers. The Bank carries out international business through a Global network of Foreign Correspondents Banks

Mutual Trust Bank Limited at a glance:

Company Registration No: C38707 (665)/99 on September 29, 1999

Bangladesh Bank Permission No: BRPD (P)744(78)/99-3081 on October 5, 1999

Registered Office: MTB Centre, 26, Gulshan Avenue, Plot-5, Block SE (D), Gulshan-1. Dhaka 1212.

Swift Code: MTBLBDDH

Corporate Website: www.mutualtrustbank.com

The Company was also issued Certificate for Commencement of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the Company started its banking operation and entitled to carry out the following types of banking business:

(i) All types of commercial banking activities including Money Market operations.
(ii) Investment in Merchant Banking activities.
(iii) Investment in Company activities.
(iv) Financiers, Promoters, Capitalists etc.
(v) Financial Intermediary Services.
(vii) Any related Financial Services.

The Company (Bank) operates through its Head Office at Dhaka and 36 branches and 5 SMEServiceCenters. The Company/Bank carries out international business through a Global Network of Foreign Correspondent Banks.

Memberships:

Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI, D)
The Institute of Banker’s Bangladesh (IBB)
Bangladesh Foreign Exchange Dealers Association (BAFEDA)
Bangladesh Institute of Bank Management (BIBM)
International Chamber of Commerce Bangladesh Limited (ICCB)
Association of Bankers Bangladesh Limited (ABB)
Bangladesh Association of Publicly Listed Companies (BAPLC)
American Chamber of Commerce in Bangladesh (AMCHAM)

Vision:

Mutual Trust Banks Vision is based on a philosophy known as MTB3V. They envision MTB to be:

One of the best performing banks in the country
The bank of choice
A truly world class bank

Mission:

They aspire to be the most admired financial institutions in the country, recognized as dynamic, innovative and client focused company that offers an array of products and services in the search for excellence and to create an impressive economic value.

We aspire to be the most admired financial institution in the country, recognized as a dynamic, innovative and client focused company, that offers an array of products and services in the search for excellence and to create an impressive economic value.

Mutual Trust Bank Limiter’s Strategic Objectives:

To ensure inflow of funds at combination of least possible cost
To maintain a discreet credit policy
To enhance versatility and diversification through the penetration of new market segments, thereby fulfillment unmet needs
To extend financial assistance to the citizens, living at dispersed locations by expanding the network of branches
To practice stronger IT-driven initiatives that will meet the challenges and requirements of the banks and its clients
To improve administrative and organizational structures in order to prepare the platform for the best practices of corporate government.
To enrich the banking sector with improved awareness on corporate social responsibility
To provide extensive career opportunities through competitive pay and benefits and a flexible environment.

Business Philosophy of MTBL

The philosophy of MTBL is to develop the bank into an ideal and unique banking institution. The perception is that MTBL should be quite different from other privately owned and managed commercial bank operating in Bangladesh. MTBL is to grow as a leader in the industry rather than a follower. The leadership will be in the area of service, constant effort being made to add new dimension so that clients get ‘Additional’ in the matter of services to commensurate with the needs and requirements of the country’s growing society and developing economy.

Risk Management:

The board and the management of MTBL acknowledges that risk is an integral part of business and gives full cognizance to the importance of various risks involved in the banking business. The bank has taken initiatives to structure the business units in line with Bangladesh Bank risk management guidelines.

The bank takes/ will take care of /analyzes the risks involved with Cross Border lending. Risks associated

with import of a commodity are kept in mind which may basically take the form of failure of the foreign supplier to:

Supply goods of specified standard and quality.
Supply the contracted goods timely.

These risks are tried to be handled by obtaining satisfactory credit report on the supplier before opening L/C. Track record of the exporter, past performance, capability of the seller to comply with the terms of sale- purchase, timely shipment etc are examined before opening L/C. Advance payment against import is avoided in order to avert credit associated risk. Risks involved in export deal are also taken care of. Capability of the consignee is, when required, ascertained by obtaining credit report on them. Here also past record, past payment behavior, instances of payment refusal, instances of taking discount, frequency of raising of objections on minor grounds and making delay in payments etc a carefully perused and the results form the basis of proceeding properly avoiding risks associated with export deal. Besides, the country risks both of importing & exporting are kept in view in respect of handling the import-export deal.

Corporate Social Responsibilities (CSR):

MTBL has always responded to its commitment to the society and has been taking part in corporate contributions and donations to various charitable, educational and healthcare institutions across the country. The Mutual Trust Bank Foundation has been formed to carry out these benevolent activities. If any situational changes occur in the stipulations in terms of which the loan was extended or if the capital of the borrower is impaired due to adverse conditions or if the value of the securities decreases or if the recovery of the loan becomes uncertain due to any other unfavorable situation, the loan will have to be classified on the basis of qualitative judgment. Besides, if any loan is illogically or repeatedly re-scheduled or the norms of re-scheduling are violated or instances of (propensity to) frequently exceeding the loan-limit are noticed or legal action is lodged for recovery of the loan or the loan is extended without the approval of the proper authority, it will have to be classified on the basis of qualitative judgment .Despite the probability of any loan’s being affected due to the reasons stated above or for any other reasons, if there exists any hope for change of the existing condition by resorting to proper steps, the loan, on the basis of qualitative judgment, will be classified as ‘Sub-standard’. But even if after resorting to proper steps, there exists no certainty of total recovery of the loan, it will be classified as ‘Doubtful’ and even after exerting the all-out effort, there exists no chance of recovery, it will be classified as ‘ Bad & Loss’ on the basis of qualitative judgment. The concerned bank will classify on the basis of qualitative judgment and can declassify the loans if qualitative improvement does occur. But if any loan is classified by the Inspection Team of Bangladesh Bank, the same can be declassified with the approval of the Board of Directors of the bank. However, before placing such case

to the Board, the CEO and concerned branch manager shall have to certify that the conditions for declassification have been fulfilled.

Developing annual business plans, strategies and steps to be taken to achieve targets.
Planning, developing and managing MTBL non-personal- corporate, commercial and institutional businesses to ensure high profitability and sustained growth in line with MTB strategic plan, credit policy and business objectives.
Providing overall co-ordination of marketing efforts for the bank’s non-personal business.
Formulating strategy for joint campaigns with other banks/departments.
Formulating/establishing performance tracking system of Relationship Managers.
Maximizing profitability through cross sales of all bank products and appropriate loan pricing.
Contributing to the development of relationship management skills of the Relationship staff in Corporate Banking.
Ensuring compliance with MTBL credit policies and regulations of Bangladesh Bank and other regulatory authorities.
Guiding and supporting the marketing team comprising of Relationship Managers both at Head Office and Branches.
Ensuring that RM Team maintains thorough knowledge of borrower’s business and industry through regular contact, factory/warehouse inspections etc.
Ensuring that deterioration in borrower’s financial standing is highlighted and amendment in the borrower’s Risk Grade takes place in a timely manner. Changes in Risk Grades are advised to and got approved by Head of CRM.

Foreign Correspondents:

Bank’s foreign correspondent relationship facilities for foreign trade operations in respect to export, import and foreign remittance. The number of foreign correspondents and agents of the bank in the year 2010 stood at more than 300, which covers important business and trade centers of the world. The bank maintains excellent relationship with the leading international banks, for handling all foreign correspondent and maintaining all foreign business there is an International Division, which is called ID. Foreign Exchange, like foreign trade, is a part of economic science. It deals with methods by which wealth in one country’s are currency is converted into those of another currency. The fluctuation of a Bank in foreign exchange is very important. Bank helps to import, export and maintain exchange rate. A person opens a Letter of Credit (L/C) with the help of bank to export or to import anything from other person. Thereby Banks are helping to balance the economy of the world. Money is a medium of exchange for all transaction that takes place inside the country as well as outside the country. Foreign trade financing is an integral part of banking business. With the globalization of economics international trade has become quite competitive. Timely payment for export; quicker delivery of goods is therefore a pre-requisite for the success of international

trade operation. Growing complexity of international trade underline the need of evolving a

system that balances between the expectation of the seller and the buyer. According to Foreign Exchange Regulation Act, a Revocable Letter of Credit is one which can be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary, but the issuing bank is bound to reimburse the negotiating bank or any payment made prior to receipt of notice of cancellation, against shipping documents which are apparently in accordance with the terms of L/C. So this is clear that Revocable L/C can be amended any time without prior notice to he beneficiary. So, revocable letter of credit is very risky. Unsecured Open Account terms allows the importer to make payments at some specific date in the future and without the buyer issuing any negotiable instrument evidencing his legal

commitment to pay at the appointed time. These terms are most common when the importer/buyer has a strong credit history and is well-known to the seller. The buyer may also be able to demand open account sales when there are several sources from which to obtain the seller’s product or when open account is the norm in the buyer’s market. This mechanism offers the seller no protection in case of non-payment. However, an exporter can structure his open account sale transaction to minimize the risk of non-payment. For example, the exporter can reduce the repayment period and retain title to the goods until payment is made. Even then, it is difficult to enforce this especially if the goods have been either resold by the buyer or consumed in some other processing activity. Despite the dangers, open account terms with extended dating are becoming more common in international trade. Exporters that offer open account terms are increasingly obtaining credit insurance to mitigate the potential open account credit risks. There are many advantages and disadvantages of open account terms. Under an open account payment method, title to the goods usually passes from the Seller to the Buyer prior to payment and subjects the Seller to risk of default by the Buyer. Furthermore, there may be a time delay in payment, depending on how quickly documents are exchanged between Seller and Buyer. While this payment term involves the fewest restrictions and the lowest cost for the Buyer, it also presents the Seller with the highest degree of payment risk and is employed only between a Buyer and a Seller who have a long-term relationship.

SWOT Analysis of the MTBL:

SWOT Analysis is an important tool for evaluating the company’s Strengths, Weaknesses, Opportunities and Threats. It helps the organization to identify how to evaluate its performance and can scan the macro environment, which is turn would help the organization to navigate in the TurbulenceOcean of competition. Following is given the SWOT analysis of Mutual Trust Bank Ltd:

Strengths:

MTB has strong non-interest earning Base.

Wide Branch Network among the 3rd generation Banks.
Low infection in loan exposure.
Wide product line.

1. Top Management

The top management of the bank, the key strength for MTBL has contributed heavily towards the growth and development of the bank. The top management officials are highly educated and some of the most experienced banking personnel of our country.

2. Company Reputation

The reputation of the bank is increasing day by day. People are relying on this bank gradually.

3. Sponsors

The sponsors of the bank are some of the top companies and top business personnel of our country. In assessing the collateral aspect of a loan request, the loan officer must ask, does the borrower possess adequate net worth or own enough quality assets to provide adequate support for the loan? The loan officer is particularly sensitive to such features as the age, condition, and degree of specialization of the borrower’s assets.

4. Modern Facilities and Computer

From the very beginning MTBL tries to furnish their work surroundings with modern equipment and facilities. For speedy service to the customer, MTBL had installed money-counting machine in the teller counter. The bank has computerized banking operation under software called PC banking. More over computer printed statements are available to internal use and occasionally for the customers. MTBL is equipped with telex and fax facilities.

5. Stirring Branches

From the formative stage of MTBL tried to furnish their branches by the impressive style. Their well-decorated branches gets attention of the potential customer, this is one kind of positioning strategy. The Basundhara City Branch is also impressive and is comparable of foreign banks

6. Interactive Corporate Culture

The corporate culture of MTBL is very much interactive compare to other local organization. This interactive environment encourages the employee to work attentively. Science the banking jobs is very much routine work oriented and lovely environment boots up the work capability of the employees.

Weaknesses:

It has high cost of fund.
It has highly exposed to volatile garment business.
It has excessive dependency on term of deposit.
Inadequate delegation of power.
Inadequate IT infrastructure.

1. Limitation of Information System (PC Bank)

PC bank is not comprehensive banking software. It is desirable that a more comprehensive banking system should replace PC bank system.

2. Hierarchy Problem

The hierarchy problem treated as a weakness for MTBL, because the employee will not stay for a long. So there will be a chance of brain drain from this bank to other bank. Another important aspect of credit policy is pricing of loans. MTBL bank’s management determine rate of interest through considering the cost of their allocated fund. Bank’s management proves their skill by determining their loan pricing which reflects on their high rate of profitability. Comparing to the newly established Bank’s, MTBL bank’s loan pricing is competitive

3. Advertisement Problem

There is another weakness for MTBL is advertisement. Their media coverage is so much low that people do not know the bank thoroughly.

Opportunities:

It has credit card business.
It has scope of market penetration through diversified products and wide banking network.
It has regulatory environment favoring private sector development.

1. Diversification

Mutual Trust Bank can pursue diversification strategy in expanding its current line of business. They do not serve not only the army but also the general people. At the initial stage, Concerned Branch manager has the Authority to consider whether the bank is going to give loan to the particular borrower. After submitting the proposal to the Head office, it is their responsibility to take the final decision to disburse the loan.

2. Business Banking

The investment potential of Bangladesh is foreign investors. So MTBL has opportunity to expand in business banking. Loan follow-up means the technique of supervision (of loan). The branch manager keep a close and constant watch on all their loans and advances to ensure that timely action is initiated in each case for adjustment of account or its renewal, if it is decided to continue the facility. For this purpose each branch maintain a diary or card in prescribed format in which the due date of expiry of loan facilities are noted down. At least thirty days before the date of expiry of any loan facility, a notice send to the borrower reminding him of the due date of repayment and making formal demand of repayment are renewal as the case may be. Vigorous follow up actions there after taken by issuing repeated reminders and putting pressures on the borrower by calling on him personally.

3. Credit Card

There is an opportunity to launch Credit Card in Bangladesh by MTBL. Beside this, MTBL can acquire services for cards like VISA, MASTER CARD etc. So that they can enhance the market based card service

Credit policy is the guideline for the bank’s credit division. It generally aims at firstly creating healthy loan assts to ensure good interest earnings for the bank, secondly ensuring ultimate

safety through good selection of assets based on its salability and thirdly improving discipline on use of resources. It providing limit to total loan of a bank in relation to its deposit funds, limits of its exposure to different sectors, limits of risk assets on types of security, limits of loans to single borrower entity and limits of loan approval authority at different tiers is the single most important document of guidance to managers and executives of a bank.

Threats:

It has increased competition for the market for public deposits.
Market share for lowering interest rate.
Deteriorated export, import and guarantee business due to indecent competition as well as economic slump.

1. Contemporary Banks

The contemporary banks of Mutual Trust Bank like: Dhaka Bank, Dutch Bangla Bank, National Bank, The Trust Bank, Mercantile Bank is its major rivals. They are carrying out aggressive campaign to attract lucrative clients as well as big time depositors. MTBL should remain vigilant about the steps taken by these banks, as these will in turn affect MTBL strategies.

2. Multinational Bank

The Rapid expansion of multinational bank poses a potential threat to new PCB’s. Due to the booming energy sector, more foreign banks are expected to operate in Bangladesh. Moreover, the existing foreign banks such as HSBC, AMEX, CITI N.A, and Standard Chattered are now pursing an aggressive branch expansion strategy. Since the foreign banks have tremendous financial strength, it will pose a threat to local bank to a certain extant in terms of grabbing the lucrative clients.

3. Default Culture

Default culture is very much familiar in our country. For a bank, it is very harmful. As Mutual Trust Bank is new, it has not faced it seriously yet. However as the bank grows older it might become big problems.

After determining the total extendable limit of loan in the policy, it becomes essential for MTBL Bank to fix limits of loans for disbursing the loans in the different sector to diversify the risk. MTBL Bank. MTBL Bank emphasis in the following sector to disbursement of their loan.