Page |1

Introduction
The City Bank is a Bangladeshi private commercial bank, operating throughout Bangladesh.
It is one of the few banks in Bangladesh with a centralized infrastructure.
The bank started its operation in 28 March 1983 as "The City Bank Limited". From 1983 till
date, City Bank has been a case study in evolution, having transformed over time from a
traditional organization to a critically acclaimed multi-faceted institution that embraces global
best practices and chooses to be at the forefront of technological initiatives. Unlike many, the
Bank's criteria for success are not only the bottom-line numbers but also the milestones set
towards becoming the most complete bank in the country.

Vision, mission & values

Vision:
The financial supermarket with a winning culture offering enjoyable experiences
Mission:
 Offer wide array of products and services that differentiate and excite all customer
segments
 Be the “employer of choice” by offering an environment where people excel and
leaders and created
 Continuously challenge processes and platforms to enhance effectiveness an
efficiency
 Promote innovation and automation with a view to guaranteeing and enhancing
excellence in service
 Ensure respect for community, good governance and compliance in everything we do
Values:
 Result driven
 Accountable & transparent
 Courageous & respectful
 Engaged & inspired
 Focused on customer delight

DIRECTOR’S REPORT OF CITY BANK

Dear Shareholders,

The Board of Directors of The City Bank Limited take pleasure and privilege in presenting
the 36th Annual Report and Audited Financial Statements for the year ended 31 December,
2018, along with the Report of the Auditors.

During the year 2018, City Bank embraced several transformational initiatives with a view to
stay relevant in an evolving industry context. Yet, the Bank remained steadfast in its
commitment to transparency and governance that form the bedrock of the institution.

Along with a broader re organization of certain business divisions to ensure greater customer
proximity, advanced blueprint creation for laying greater emphasis on retail banking to tap
into the vast under represented segments, focus on strengthening the book quality, while
 Page |2

preventing fresh slippages and using institutional mechanisms to aid in the recovery process
were some of the key end endeavours carried out throughout the year.

With these foundational initiatives now mostly in place, we believe that City Bank is
positioned well to capitalize on the prevalent opportunities and deliver sustainable value for
shareholders and other stakeholders.

With this structural precise of 2018, we present below the broader operating context in terms
of global economic review, Bangladesh’s economic narrative and a note on the country’s
financial services sector, while articulating the opportunities and challenges resident in the
sector.

Global economic context

City Bank operated in a dynamic economic environment in 2018. However, as the year
progressed, it became clearer that the peak of the expansionist cycle had been reached, and
risk tended to increase, giving rise to greater instability in the markets.

Trade tensions, despite the agreement reached in the renegotiation of NAFTA, and the
tightening of US monetary policy were the main causes of greater uncertainty, which
triggered underlying tensions of varying intensity, particularly in developing markets such as
Argentina and Turkey and, to a lesser extent, in Brazil and Mexico, which were also affected
by the electoral cycle during the year.

Global GDP growth rate

Global GDP is estimated to grow by 3.5% in 2019 and by 3.6% in 2020, as per the IMF,
which indicates a slowdown as compared to the 3.73% growth achieved in 2018. In fact, the
projected GDP growth rate over the next two years is lower than the growth rate achieved in
the past two years.

This indicates the fragile nature of the global economy, exacerbated by the China-US trade
relations; Br exit, with the date for the UK’s exit from the EU now pushed to October 2019
and the shape of Italy’s fiscal policy, in addition to a fragile overall sentiment, which
weighed on the markets.

Bangladesh’s economic review

Bangladesh Economy Overview

Defying the odds, overcoming the structural bottlenecks and displaying sheer resilience in
2018, Bangladesh achieved the historic transition from the status of a Least Developed
Country (LDC) into a developing country or lower middle-income nation, as per the United
Nations, on the back of sustained and buoyant economic growth.
This transition reinforces the country’s position as among the last significant frontier market
opportunities with irrepressible consumption powered by a large population placed at a
remarkable demographic advantage.
 Page |3

There emerged several positives for Bangladesh’s economy in 2018, with GDP growth at
7.86% in FY18, representing the highest-ever for the country. This is also the record 7%+
average growth achieved during the last several years, principally driven by a stable socio-
economic environment, robust domestic demand, continued Governmental investments in
large-scale public projects and recovery in private investments. Furthermore, inflation
targeting also helped, thereby containing price increases of most commodity resources.

Key economic developments of 2018 in a nutshell

 Transition into a middle- income nation as per un’s parameters
 Robust inflation- targeting, which kept inflation low
 Record remittance inflows
 Strong and stable foreign exchange reserves

Agriculture sector
Bangladesh’s agricultural sector has a disproportionate impact on employment by being the
largest livelihood generator, its contribution to the national GDP dims in comparison. The
country’s agri sector contributed 14.23% to Bangladesh’s GDP, while recording growth of
4.19% during the year. Today, the Government is focused on transforming the agri sector,
focusing on output enhancement to feed a growing population and moderate reliance on
external procurement, while also ensuring productivity gains for the farming communities.
Increasing disbursal of agri-subsidies and agri-credit is a step in this direction, showcasing
the Government’s intent.

Industrial sector
Bangladesh’s industrial sector’s contribution to GDP is projected at 33.66% in FY18, as
compared to 32.42% in FY17. The sector recorded growth of 12.06% in 2018, rising sharply
from 10.22% growth achieved in FY17. This growth was principally driven by
manufacturing, construction, electricity and gas and water supply. Today, concerted efforts
are required to transform the industrial sector with respect to ensuring enhanced credit
disbursal to the right constituents, while also creating a proper policy framework for
manufacturing entities to plan their future investments.

Service sector
The broader services sector of Bangladesh recorded growth of 6.39% in 2018, almost flat as
compared to the previous year. Within the services sector composition, real estate, wholesale
and retail trade and hotel and restaurants recorded improved growth .

Financial services sector overview

Initial data of the Integrated Budget and Accounting System reported that the FY18 National
Budget deficit was 3.96% of GDP (excluding grants), with domestic sources contributing
3.68% and external sources comprising 0.28%. However, the revised FY18 National Budget
estimated a deficit of BDT 1,075 b comprising 4.78% of GDP of this:

 BDT 415 b was to be financed from external sources, including foreign aid
 BDT 660 b was to be supplied by domestic sources

In terms of revenue receipts, satisfactory growth was recorded in 2018. During the period, the
revised target for revenue receipts was BDT 2,594 b (11.53% of GDP), with tax revenue from
 Page |4

NBR sources at BDT 2,250 b (10% of GDP), tax revenue from non-NBR sources at BDT 75
b (0.33% of GDP) and non-tax revenue at BDT 269 b (1.21% of GDP). According to the
provisional data of iBAS++, tax revenues received during the period amounted to BDT 2,015
b. Non-tax revenues declined by 4.15% to BDT 223 b during the same period. Total revenue
receipts in FY18 increased by 14.38% to BDT 2,318 b. In the revised budget for FY18,
public expenditure as a percentage of GDP rose from 14.41% in FY17 to 17.45% in FY18
with developmental expenditure recorded the fastest growth as the Government focused on
infrastructure-led economic resurgence.

Non-performing loans (NPLs)

The country continued to witness strong growth in NPLs on the back of loose credit norms,
slack in regulatory enforcement and mala-_ide intentions of promoters. The bigger concern
here is that the increase in non-performing loans may impact financial markets and portfolio
selection, with the result that monitoring may become tighter. This may have a negative
impact on credit growth.

Remittances
The Bangladeshi diaspora is settled across the world. So, even though the migration rate has
declined to some extent, remittance into Bangladesh remains strong. Though work-related
immigration declined in FY18 by about 3%, remittance inflows grew by a substantial 17%+
in 2018, also thanks to USD BDT exchange rate fluctuations. Heightened remittances despite
lower migrations indicate the establishment and maturity of the remittance platform, which is
expected to continue to contribute to economic growth, going forward.

Imports
Bangladesh’s total imports stood at USD 58,865 m in FY18, up from USD 47,005 m in the
preceding year. China was the biggest source of imports for Bangladesh in FY18,
representing about 27% of the country’s total imported commodities. India stood at the
second place at about 15% and Japan third at approximately 4%.

Exports
Bangladesh’s export earnings amounted to USD 36,668 m in FY18, about 6% higher than in
the previous fiscal year. During FY18, the increase in export earnings was primarily
attributed to increasing exports of agricultural products, handicrafts, cotton and cotton
products, ceramic items, knitwear, jute goods and chemical products, among others.
Category-wise data on export earnings for FY18 indicated that agricultural products and
ceramic products increased by 38.55% and 32.70%, respectively, the largest in the export
basket.

Performance of capital market of Bangladesh in 2018 and way forward in

2019
The ratio of stock market capitalisation-to-GDP stood at 17.21% as on the last capital market
trading day of 2018. The ratio is significantly lower than many of the neighbouring countries,
such as India (86.34%), Pakistan (28.25%), Thailand (110.33%) and Malaysia (142.24%),
which can be construed of showcasing the growth potential of the domestic markets.

After posting a robust return of 24% in 2017, the DSEX declined by 13.8% in 2018, wiping
out USD 4.3 b of market capitalisation. The market correction was largely driven by decline
 Page |5

in the stocks of the financial sector. During the year, this sector was adversely impacted by
such themes as rising interest rates and growing NPLs, which dominated its stock market
performance. Financial composites, which includes banks, NBFI and insurance companies,
declined by 18.6%, against the overall market decline of 13.8%.

Capital markets’ performance

For the capital markets of Bangladesh, the year 2018 was one of subdued sentiment with a
decline in both the turnover, index and foreign investments. This sentiment was amply visible
on the last trading day of the year, during which the DSEX, the bellwether index of the
Dhaka Stock Exchange, ended down by a substantial 858.88 points, or 13.75%, from 27
December, 2017, to 5385.64 points. Furthermore, the total transaction volume stood at BDT
13,359 cr in 2018, which was as much as 38.43% lower than last year.

Capital markets, 2018 in a nutshell

The country continued to witness strong growth in NPLs on the back of loose credit norms,
slack in regulatory enforcement and mala ide intentions of promoters. The bigger concern
here is that the increase in non-performing loans may impact financial markets and portfolio
selection, with the result that monitoring may become tighter. This may have a negative
impact on credit growth.

 DSE’s average daily turnover was BDT 5,520 m,as compared with BDT 8,748 m in
the previous year
 Market capitalisation declined by 8.42% to BDT 355,990 m
 Overall price earnings (P/E) ratio rose to 15.09x at the end of 2018
 Net foreign investments declined to negative BDT 5,935 m, which was a positive
BDT 17,049 m during the previous year

Outlook 2019
The Bangladesh government expects GDP growth at 7.8% in 2019, which is clearly among
the fastest-growing economic growth rates in the world. Also, inflation is expected at about
5.6%.

With a stable post-election political and socio-economic environment, plus exports and
remittance demonstrating signs of improvement, current account balance is expected to
improve, easing pressure on the currency. Bangladesh Bank expects the trade deficit to be at
USD 17.2 b and Current account deficit at USD 6.4 b, which is lower than last year.

A large population, an attractive demographic and under-consumption across a large number

of industries and sectors has created the platform for attracting domestic and foreign
investments to boost growth, continuing with the three large M&A activities of 2018 in the
mobile financial services, consumption and consumer goods sectors.

Overall, optimism is cautioned by reality, and it is hoped that the capital market performance
of 2019 will be better then last year.
 Page |6

Financial statement(consolidated balance sheet)

PARTICULARS 2018

Property And Assets

Total Cash 28,498,384,942

Money at call and short notice 89,379,167

Investments 33,488,220,237

Loans and advances 231,874,954,522

Fixed assets and Other assets 13,549,076,231

Total assets 326,940,438,782

Liabilities And Capital

Total liabilities 302,023,153,874

Total shareholders' equity 24,917,284,908

Total liabilities and sequity 326,940,438,782

Performances in 2018 in brief

 Net interest income increased by 22.8% to BDT 9,201 m, backed by rise in loyal and
digital customers, increased business volumes (loans and deposits) and focus on
achieving a better product mix
 Focused on controlling credit quality through intensifying our efforts in improving
credit underwriting practices and collections
 Page |7

 Cost of credit increased by an average of 1.2%, hence our focus continues to remain
on diversifying our deposit base with an emphasis on CASA and lending mix
enrichment to derive better spreads
 Higher provisioning to the extent of BDT 2,324 m subdued profitability–net profit
declined by 44.4% to BDT 2,018 m
 This one-time provisioning is not only aligned with regulatory provisions, but also
enables us to start on a new and more resilient note. It represents a Paradigm Shift in
the way we now endeavour to reposition the Bank in terms of sustainable profitability
and value creation
 Declaration of 11% as consolidated dividend (6% cash and 5% stock) for the year,
which balances capital strengthening on the one hand, while enabling value
generation in the hands of our shareowners on the other

Total income
Total income amounted to BDT 15,902 m in 2018, representing a 6.6% growth over the last
year. Net interest income and fee income accounted for almost 57.9% of the total income
pool, which was 50.2% in the previous year.

Net Interest Income grew 22.8% to BDT 9,201 m during the year on account of respectable
business growth. The year 2018 continued to be characterised by intense competitive
pressures and liquidity challenges, which raised our weighted average cost of borrowings by
118 bps to 5.6%, while on the other side, our weighted average lending rate remained fairly
stable at 9.7%. This pressurised the net interest margin (NIM), which decelerated by 48 bps
to 4.1% during the year. However, our concerted efforts in low-cost deposit mobilisation and
focus on high-yield retail banking will expectedly enable us to sustain the growth in our
NIMs, going forward.

Operating expenses
Overall, the year 2018 comprised one of investment as City Bank reinforced its Agent
Banking network, demarcated SME-S operations with the resultant creation of infrastructure
with dedicated service centres, and also invested in technology, principally digital.
Furthermore, rise in salaries and allowances (employee costs constitute about 53% of our
total operating costs) and growth in rent, taxes, electricity, etc., and rise in other general
expenses pushed up the Bank’s operating expenses by 14.6% to BDT 9,223 m.

Operating profit
Accelerated growth achieved in our net interest income over expenses helped stabilise pre-
provisioning profits to BDT 6,679 m, representing a 2.8% de-growth over the previous year.
In the context of a fairly challenging year, this represents a resilient achievement.

Earnings per share

During 2018, earnings per share (EPS) stood at BDT 2.1, a decline of about 48.8% from BDT
4.1 in the previous year. Decline in net profitability was the chief reason of EPS moderating
in 2018.

Shareholders’ equity
 Page |8

Total shareholders’ equity stood at BDT 24,430 m as on 31 December, 2018, as compared

with BDT 24,869 m on 2017. Paid-up capital increased by 5% due to issuance of bonus
shares as dividend for the year 2017. While statutory reserves grew 12.2% to BDT 8,002 m,
other reserves declined by 27.3% to BDT 1,830 m. Subdued profits for 2018 also dampened
surplus P&L account, which declined 27.3% to BDT 2,882 m.

Risk management
In the course of our operations as a Bank, we invariably face different types of risks. To
mitigate any potential adverse impacts on the business, we have established a comprehensive
and reliable risk management system, integrated in all business activities, to ensure the
Bank’s risk profile is in line with the risk propensity.

Protection of interest of shareholders

The Bank operates in accordance with the Articles of Association and all applicable laws and
regulations of the land, to ensure the best interest of all shareholders of the Bank. The Bank is
committed to sound governance practices based on integrity, openness, fairness,
professionalism and accountability in building confidence among stakeholders. City Bank
strongly believes in equitable treatment of every shareholder. Any complaint received at the
AGM or through the year from any shareholder is resolved on a priority basis, even as we are
committed to address grievances/queries within the timeframe stipulated by the Bank.

Shareholding pattern of the Bank

 Shares held by directors and their spouses

 Shares held by CEO, CFO, Company Secretary and Head of Internal Audit
 Shares held by top executives of the Bank There are no shareholders in the Bank who
hold 10% or more voting interest in City Bank. Hence, the corresponding BSEC rule
does not apply.

Auditor’s Report
The Audit Committee works closely with all of the Bank’s segments and measures its
performances against set policies and procedures. I believe everything is ultimately about
being risk-aware. This is what differentiates the good organizations from the great ones.

K. M. Tanjib-ul Alam
Convener, Audit Committee

Auditors
 Page |9

Name Status With The Bank

K. M. Tanjib-ul Alam Independent Director

Mrs. Syeda Shaireen Aziz Director

Mr. Rafiqul Islam Khan Director

Mrs. Savera H. Mahmood Nominatead Director

Mr. Farooq Sobhan Independent Director

Acknowledgement
For the unrelenting support and assistance, the Board of Directors of City Bank would like to
convey its thanks to all honorable sponsors and shareholders, valued clients and well-wishers.

The Board also takes the pleasure to express earnest appreciation to the Government of the
People’s Republic of Bangladesh, Bangladesh Securities and Exchange Commission, Dhaka
Stock Exchange Ltd., Chittagong Stock Exchange Ltd. and Registrar of Joint Stock
Companies and Firms for their suggestions and directions extended to the Bank.

Aziz Al Kaiser
Chairman
(on behalf of Board)