A.QASEM & CO. Chartered Accountants Independent auditor's report and audited consolidated & separate financial statements of National Credit and Commerce Bank and its Subsidiaries As at & for the year ended 31 December 2019 mente im fmt 8 eng ltl ned te ot gol xno, ane oe athe nepentert mbar Es ofa Youn ibaA.QASEM & Co. Stes #0103 Len 07 ot 5 Roo 03 far: xozseeieas Chartered Accountants Guishan Avenue, Dhaka -1212, Bangladesh Email : agasometd.ey.com Independent auditor's report to the shareholders of National Credit and Commerce Bank Report on the audit of the consolidated and separate financial statements Opinion We have audited the consolidated financial statements of National Credit and Commerce Bank Limited and its subsidiaries (the “Group") as well as the separate financial statements of National Credit and Commerce Bank (the” Bank’), which comprise the consolidated and separate balance sheet as at 31 December 2019, and the consolidated and separate profit and loss account, consolidated and separate statement of changes in equity and consolidated and separate cash flow statement for the year then ended, and notes to the consolidated and separate financial statements, including a summary of significant accounting polices. In our opinion, the accompanying consolidated financial statements of the Group and separate financial statements of the Bank{the “financial statements") give a true and fair view of the consolidated balance sheet of the Group and the separate balance sheet of the Bank as at 31 December 2019, and ofits consolidated and separate profit and loss accounts, consolidated and separate statement of changes in equity and its consolidated and separate cash flow statement for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as explained in note # 2 and comply with the Banking Companies Act, 1091 (as amended up to date), the Companies Act, 1994, the rules and regulations issued by the Bangladesh Bank, the rules and regulations issued by the Bangladesh Securities & Exchange Commission (BSEC) and other applicable laws and regulations. isfor opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities Under those standards are further described in the auditor's responsibilities for the audit of the consolidated and separate financial statements section of our report. We are independent of the Group and the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional ‘Accountants (IESBA Code), rules & regulations issued by Bangladesh Bank and Bangladesh Securities and Exchange Commission (BSEC), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code and the Institute of Chartered Accountants of Bangladesh (ICAB) Bye-laws. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements for the financial year 2019. These matters were addressed in the context of the audit of the financial statements, and in forming the auditor's opinion thereon, and we do not provide a separate opinion on these matters. For each matter described below our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatements of the financial statements. These results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. Anentarfm fmt Young bln eters oatomaisasen a/r ne rma te ndepenet monte fms oe Youn ba LiesA.QASEM & Co. Chartered Accountants Since 1953, 01, Transition to International Financial Reporting Standard 16 Leases (IFRS 16)from International ‘Accounting Standard 17 Leases (IAS 17) With reference to Note 2 and 14.12 to the financial statements, ‘IFRS 16 Leases’ becomes effective for annual reporting beginning on or after 01 January 2019 which replaces the existing standard IAS 17. National Credit and Commerce Bank Limited decided to implement the modified retrospective approach for the transition accounting. The application of new lease standard resulted in the recognition, for the 31 December 2019 closing balance sheet, right of use assets of BOT 41,380,539 (net value) and an increase in lease liabilities of BOT 24,900,312 to the financial statements of the Group. We considered the implementation of IFRS 16 Leases as a key audit matter, since the balances recorded are material, management had to apply several judgments and estimates such as lease term, discount rates, measurement basis among others and undertake a significant data extraction to summarize the lease data for input into their lease calculation model. We obtained an understanding of the management's processes for implementing IFRS 16 including financial controls designed by the management to mitigate the risks assessed us independently. We adopted a substantive strategy for lease accounts. Furthermore, to mitigate the inherent risk in this audit area, our audit approach included Understanding of the management processes and. controls for leases, performing walkthrough procedures and substantive audit procedures, including: * Obtained and read the accounting policy for compliance with IFRS 16 Leases; = Obtained listing of all contracts from the management and tested the contracts to determine the impact under IFRS 16. In respect of the testing lease agreements and related right of use assets and lease liabilities: = Obtained and read bank borrowing rates correspondence; = Tested the assumptions used in the calculation model for the sample contracts selected for testing; Tested the completeness of additions and changes to the leases population = Performed test of details for measurement ‘and valuation of the right of use asset and | lease liability; = Assessed the disclosure within the financial statements, 02, Measurement of provision for loans and advances With reference to Note 145 to the financial statements, the process for calculating the provision for loans and advances portfolio associated with credit risk Is significant and complex. The bank calculates provision for loans and advances by considering various factors such as rate of provision, loan category, expiry date, outstanding balance, interest suspense amount, value of eligible collateral as per BRPD circular no. 14 dated 23 September 2012 and its subsequent amendments. We tested the design and operating effectiveness of key controls focusing on the following ‘Tested the credit appraisal, loan disbursement procedures, monitoring and provisioning. process; * Tested the controls related to provision for loans and advances; (Our substantive procedures in relation to the provision for loans and advances portfolio comprised 2 Amn oft Yeng ib init rnd te gol option, noo marci eptember fos fst Yong bal nedIn Bangladesh, non-performing loans have been increasing day by day. Banks need to maintain provision for additional non-performing loans in line with guidelines of the central bank. The bank identifies impaired loan accounts and calculates required provision manually. Furthermore, management has incentive to maintain lower provision for loan and advances to overstate profit. Considering these factors, we have considered ‘measurement of provision for loans and advances as, significant risk as well as a key audit matter. [At year end of 2019 the Group reported total gross A.QASEM & Co. Chartered Accountants the following: Tested the Group and the Bank’s general and specific provisions; Assessed quarterly classification ledger of loans and advances (CL); Assessed the methodologies on which the provision amounts based, recalculated the provisions and tested the completeness and ‘accuracy of the underlying information; | Assessed the presentation of disclosures against relevant accounting standards and Bangladesh Bank Toans and advances of BOT 181 96 billion (2018: aor | SU4*I"eS 176.87 billion) and the Bank reported total gross loans and advances of BOT 179,04 billion (2018: BOT 173.87 billion) whereas at the year end of 2019 the Group and the Bank reported total provision for loans and advances of BOT 7.62 billion (2018: BOT 6.21 billion) Other information ‘Management is responsible for the other information. The other information comprises all of the information In the annual report other than the financial statements and our auditor's report thereon. The annual report is expected to be made available to us after the date of this auditor's report. Cur opinion on the financial statements does not cover other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise ‘appears to be materially misstated. If, based on the work we have performed, we conclude that there is @ ‘material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard Responsibilities of management and those charged with governance for the consolidated and separate financial statements and internal controls ‘Management is responsible for the preparation and fair presentation of the financial statements in accordance with international Financial Reporting Standards (IFRSs) as explained in note # 2 and comply with the Banking ‘Companies Act, 1991 (as amended up to date), the Companies Act, 1994, the Rules and Regulations issued by the Bangladesh Bank, the Rules and Regulations issued by the Bangladesh Securities & Exchange Commission (BSEC) and other applicable Laws and Regulations and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Banking Companies Act, 1991 (as amended up to date) and the Bangladesh Bank guidelines require the management to ensure effective internal audit, internal control and risk management 3 Amenbetion Est oun belts fot bs ostinato ono as teen mambo ims ofa Your blindA.QASEM & Co. Chartered Accountants Since 195: functions of the Bank. The management is also required to make a self-assessment on the effectiveness of anti- fraud internal controls and report to Bangladesh Bank on instances of fraud and forgeries. In preparing the financial statements, management is responsible for assessing the Group's and the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the ‘going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group's and the Bank's financial reporting process. ‘Auditor's responsibilities for the audit of the consolidated and separate financial statements Cur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our ‘opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements ‘As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: «Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or ‘error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is, sufficient and appropriate to provide a basis for our opinion. The risk of not detecting @ material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. + Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. ‘+ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. + Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Bank’s ability to continue as @ going ‘concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our ‘auditor's report. However, future events or conditions may cause the Group and the Bank to cease to ‘continue as a going concern ‘s Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a ‘manner that achieves fair presentation © Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group and the Bank to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the Group's and Bank’s audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance, among other matters, the planned scope and timing of the audit and significant aucit findings, including any significant deficiencies in internal control that we identify during our audit. Ameer of nt 8 Yong bal inte tvifontte etal rattn, nro bra te ndpenent memberis ots & Young ba inoA.QASEM & CO, Chartered Accountants We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that ‘may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not bbe communicated in our report because the adverse consequences of doing so would reasonably be expected ‘to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements In accordance with the Companies Act, 1994, the Banking Companies Act, 1991, and the rules and regulations issued by Bangladesh Bank, the Securities and Exchange Rules 1987, we also report that: |. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit and made due verification thereof; I. to the extent noted during the course of our audit work performed on the basis stated under the ‘Auditor's Responsibility section in forming the above opinion on the financial statements and considering the reports of the Management to Bangladesh Bank on anti-fraud internal controls and instances of fraud and forgeries as stated under the Management's Responsibility for the financial statements and internal control {a)_ internal audit, internal control and risk management arrangements of the Group and the Bank 13s disclosed in the financial statements appeared to be materially adequate; (b) nothing has come to our attention regarding material instances of forgery or irregularity or administrative error and exception or anything detrimental committed by employees of the Group and the Bank; IIL. financial statements of National Credit and Commerce Bank Limited's subsidiaries namely, NCB Capital Limited has been audited by Hoda Vasi Chowdhury & Co., Chartered Accountants and NCCB Securities ‘and Financial Services Limited has been audited by Shafiq Mizan Rahman & Augustine, Chartered ‘Accountants and have been properly reflected in the consolidated financial statements; IV. in our opinion, proper books of account as required by law have been kept by the Group and the Bank so far as it appeared from our examination of those books; V. the consolidated balance sheet and consolidated profit and loss account of the Group and the separate balance sheet and separate profit and loss account of the Bank together with the annexed notes dealt with by the report are in agreement with the books of account and returns; VL. the expenditures incurred and payments made were for the purpose of the Group’s and Bank’s business for the year; Vil. the financial statements have been drawn up in conformity with prevailing rules, regulations and accounting standards as well as related guidance issued by Bangladesh Bank; vill. adequate provisions have been made for advance and other assets which are in our opi recovery; 1X. the records and statements submitted by the branches have been properly maintained and consolidated In the financial statements; n, doubtful of X. the information and explanations required by us have been received and found satisfactory; -Amenterfin tis Yun st Lint refet t poalxpintn and/or rer tte neers mabe est ns Yung hbaseA.QASEM & Co. Chartered Accountants Since 1953 XI, we have reviewed over 80% of the risk weighted assets of the Bank and spent over 1,500man hours; and XIl, capital to risk-welghted asset ratio (CRAR) as required by Bangladesh Bank has been maintained adequately during the year. Dated, Dhaka A.Qasem, nen 27 April 2020 Chartered Accountants Amenvertm ms Young Ga ne eden bel ston aor oe nope amber ts ot st 8 You bal LitoNational Credit and Commerce Bank Limited and its Subsidiaries Consolidated Balance Sheet As at 31 December 2019 Note 2019 PROPERTY AND ASSETS cash Sta) 15,550,729,091 13,301,479,272 In hand (inluding foreign currencies) 125,589,092, 1,950 802,816 Balance with Bangladesh Bank and its agent bank (5) 13,425,139,998 11,350,576 456 {including foreign currencies) Balance with other banks and financial institutions ta) 9,161,085,268 5,300,986,508 In Bangladesh | 8,716 069,012 4,615,866, 121 Outside Bangladesh 445,016,232 685,080,383 Money at call and short notice 7 4,278,900,000 3,725,350,000 Investments Bt) 38,035,230,003 33,673,573,079, Government 32,905,771,568 28, 866,585,098 Others 5,128,458,435 4,806,887,581 Loans and advances sta) 181,957,691,470 176,869,945 883 Loans, cash credits, overdrafts ete. 175,768,869,329 171 149,202,123 Bills purchased & discounted 6,192,822,141 5,720,783,760 Fined assets including premises, furniture and fixtures 04a) 2,745,991,575 2,628,394,70 Other assets ua) 9,564,752,765 6,495,722,985 NNon-banking assets TOTALASSETS LUABILITIES AND CAPITAL abilities Borrowings from other banks financial institutions and agents Subordinated Bonds Other Borrowings Deposits and other accounts Current deposits and other accounts Bills payable Savings bank deposits Fixed deposits ‘Term deposits ‘ther liabilities ‘TOTAL LIABILITIES shareholders’ equity Paid up capital Statutory reserve General reserve Non-contrlling (Minority interest Other reserve including assets revaluation reserve Foreign currency translation gain/loss} reserve Surplus in proft and loss account TOTAL SHAREHOLDERS! EQUITY ‘TOTALLIABILITIES AND SHAREHOLDERS’ EQUITY [NET ASSETS VALUE PER SHARE 2a) 33 (a) 14a) 182 16 ” 58 8 193 1940) 258,294,380.189, 7995 412,053 14,337,350,370 33,484,241,901 @,000,000,000 “4,000,000,000 10,337 350,370 9.484,261,50 199,807,729,254 391,225,226,974 20,550,754,739 4,624,831,463 22,697,671,086 90,463,947,068 61,370,484,899 18,336 811,526 4,371,957,363 21,587,713,675 87,021,136 409 59,947,607,701 24,659,790,252 238,804 869,876 9,273,789,030 8,034,003,780 10,162,348, 209 465,724,171 301,360 1,705,528,375 19,489,510.273, 258,234,380,349 21.02 19,488,906,542 228,198,375,507 8,832,180,030 7,238,030,105 10,162,348, 209 458,110,718 242,340 1,248,311,196 17,797,036,986 241,995 412,453 49.19Particulars 2019 2018 OFF BALANCE SHEET ITEMS: Contingont liabilities Acceptances and endorsements 20.1 27,881,371,607 24,437,201,560, Letters of guarantee 202 31,585,272,385, 28,877,215,450, Letters of credit issued 203 24,345,999,613, 22,704 441,325 Bills for collection 20.8 154,971,974 117,732,750 Other commitments Claims against the bank not acknowledged as debt Capital commitments 11,225,324 2,116,261 Export development fund (EDF) TOTAL OFF BALANCE SHEETS ITEMS INCLUDING CONTINGENT LIABILITIES 4/038, 840,903 76,178,707 346 These financial statements should be read in conjunction withthe annexed notes from 1 to 46. Z ee Bp See annexed auditor's report to the Shareholders o ‘A. Qasem & Co. Chartered accountants, Dated, Dhaka 27 april 2020National Credit and Commerce Bank Limited and its Subsidiaries Consolidated Profit and Loss Account For the year ended on 31 December 2019 Interest income Less: Interest paid on deposits and borrowings Net interest income Income from investments Commission, exchange and brokerage Other operating income Total operating income Salary and allowances Rent, taxes, insurance, electricity etc Legal expenses Postage, stamp, telecommunication etc. Stationery, printing, advertisement etc. Chief Executive Officer's salary and allowances Director's fees & other meeting related expenses ‘Auditors’ fees Charges on loan losses Repairs maintenance,amortization and depreciation of bank's assets Other expenses ‘Total operating expenses Profit before provision Provision for loans and advances Specific provision General provision Provision for off-balance sheet exposures Provision for off-shore banking unit Provision for investment fluctuation in shares Provision for other assets Provision for nostro accounts Total provision Profit after provision for loans & advances and others items Contribution to NCC Bank's CSR Fund Profit before tax Provision for tax Current tax Deferred tax Profit after tax for the year Attributable to: Shareholders’ of the bank Non-controlling (Minority) interest Balance of profit brought forward from last year ‘otal profit available for distribution Appropriation Statutory reserve General reserve Retained earnings Earnings per share (EPS) ‘These financial statements shu Dated, Dhak ; 27 April2020 Note 22(a) 23(a) 24a) 25a) 264) 2710) 28a) 23a) 30a) 31a) 32 33(a) ala) 35(a) 36(a) 1as.ala) 1435.1(b) 146 a7 8.310) 14.2 14.41 149 aaa 144. 192 azfa) ‘Amount 2019 20,406,577,494 14,021,516 462 6,385,161,031 2,895,294,121 41,755,481,926 604,810,167 7i,640,747,245, 2877,121,476 ‘491,513,872 15,585,005 63,894,698 90,893,631 13,555,000, 5,751,331 639,250 493,118,858 459,112,253 399,924,514 4,901,109, 888 6,739,637,357 gor 2018 17,655,874,260, 12,015,579,635, 5,640,294,625, 2,856,783,733 1,449,310,512 558,600,021 2,631,074, 952 549,546,816 18,965,345 62,977,368, 85,371,009, 13151513 5,202,581, “408,250 401,871,468 495,408,921 264,018,334 6,240,970,557 2798,762,384 293020176 2osBG7EA76] [1 649.315517 2ecio6a76| |__ 685.663 7e228 93 217050288 41006 372 (36,009880) aaai 130,560,792 30239,690 (2387273) en 016 882.287 9521275366, 20,0000 3,000,000 3oae.502287 | 3406275366 1is62 108.022 __1661,044,646 {avez2Le47] [1727635863 (a16113825)| |__‘(66501217 —Raearaes 4825 290720, 23474264 7/825,230,720 365,093,195, 113,901,692 2,499,567,459 7,939,132,411, 795,973,675 692,806,436 795,973,675 92,806,436 7,703,593,784 7,246,325,976. 2.30 1.97 %e read in conjunction with the annexed notes from 1 to 46. A. Qasem & Co. Chartered AccountantsNational Credit and Commerce Bank Limited and its Subsidiaries Consolidated Cash Flow Statement For the year ended on 31 December 2019 A) Cath flows from operating activities Interest receipts Interest payments Dividend receipts Fees & commission recelpts Recoveries of loans previously written off cash paid to employees cash paid to suppliers Income taxes pald Receipts from other operating activities Payments for other operating activities Operating cashflow before changes in operating assets and liabilities Increase/{Decreata) in operating assets & liabilities: Purchase & sale of trading securities Loans and advances to customers (Other than banks) Other assets Deposits and borrowings from other banks Deposits from customers (Other than banks) Other lablites account of customers Other lablties Net Cash receipts from operating activities Cash flows from investing activities Proceeds from sale of securities Payment for purchase of securities Purchase of property, plant and equipment Sales proceeds of fined assets [Net cash used in investing act ‘cash flows from financing activities Borrowings from other bank's financial institutions and agents Issue of non-convertible subordinated bonds Dividend paid Net cash receipts/{payments) from financing activities 1) Net (decrease)/ increase in cash (ABC) £) effects of exchange rate changes on cash and cash-equivalents F)_ Cash and cash-equivalents at the beginning ofthe year 6G) Cash and cash-equivalents atthe end of the year (D4E+F) Q Net Operating Cash Flows Per Share ‘These financial statements naiys Ww Dated, Dhaka 27 April 2020 10 Note 370) 38a) 3943) 40 (a) ante) Amounts in 80T 2019, 23069,607,416 (13,522,239,206), 81,959,767 939,959,176 36,504,490 (2,584,326,077) (215,344,965), (1,743,307,088) 1,420,932,917 (938,751,303) 548,995,126 (4:924,990,978) (5,580,864,445) (1,218,846,239) (@,230,407,826) 13,748,626,512 (2,483,041,401) 4,414,781,747 270,212,499 02,928,007 (232,271,074) (274,749,071) 41,185,057 (202,907,083) (62,832,377) (243,608,002) (504,441,379) 3,662 864,039 59,020 22,334,919,176 25,997,842,235 4.60 2018 20,026,451,721 (23,269,061,408) 85,585,773 920,599,460 16,904,117 (2,600,173,400) (217,961,061) (1,286,417,952) 14077,207,624 (2,354,906, 869) 3,598,228,005 (2,128,105 489) (27,236,112,003), (96,974,976) 2,199,275,748 128,852,024,394 (1,371,452,835) 218,973,632 5085,857.476 388,201,369 (3,361,553,824) (433,984,856) 12,169,463 (396,267,848) 817,038,689 4,000,000,000 (148,183,404) 3,568, 855,285 5,318,484 913 (1,519,834) 17,018,084,096 22,334,919,176 | 5.44 | fe read in conjunction with the annexed nates from 1 0 46 Cho ‘A. Qasem & Co! Chartered Accountantssquewnosoy pasauey al Z zor wsdy 22 yeu ‘porea owe ovewe _[arcorresy | avecoror | sor’ ‘ev oar zee" ‘Bre woquiEING TE UO se aDURyeG| ‘ose toe | tev'vec'sov | ave'zoror | osc'eo0've0's | oev"eav'es'e 610 oquiazaq Te vO se o>UeIFG| a 5 ‘BLOT Ie ou 10} PUBPIA USED] : SELSSEL WaCvLVVETT_| vae'vev'vETz : fo00"6o3"tev) COOTSOTTHY oz0'6s ozo'es ose‘ose) (ose'osv) 6s'se6't (t6s'se6t) SreSEOLEL TE [ser tieereT | cor oreeee | SILOIVea [eve voror | sorocosere | cevosr ers aunoave ssoj pue | (Aavourm) | Nm anasa voneysuey anasas bormers | jende> dn pred sueonied eo ayosd uysnjding | Auyonuos | YONI! ye2u99 eye “ “won ‘9n9591 4940 ‘Tag u aunowy 6t0z 9qwa20q TE Uo Papua seOk a4 104 Aainba uy sauseipisqns sy pue jueyp Jo 1uaWaIeIS ParepIrosuoD wir] yueg a219WWE pue upA.D |EUORENa orgs sono. vewsteyy / pe Se yy Y -ueq a4 jo Auinbo ssapjoyueys, ayn stuaseido1 wourozers Aypinby 24 JO 49594 10N, OSCR ET SUSE TEE LES cosTeos'aaey [Inst aec'es) 25 BHOTSOT BEE KypbIeR| foceeasvow'see tat tsC'zav'ev __|ono'twr'zes'ts _|ezv'zss'ver'ss __|ovs'tes'eec'ov pewzao7ur ev esc o6res9 ve GOSLE EOE eoe'sicosc or | co0'vow 0Ev'e Orr Ose ZE6 B6E'9L5T89 eav'tes'veo'y = = cov rea v2" rec cea 7a Sot ear EICTIETE TEVEN vere [TerTWOEr YS | TET THOTORTEE PIVESCTEN CE oe ae eel aoa aa teed STORE ST oce‘ose'cee'vr arv'sso‘tr8't o1o'st9'tHt'y sou’9er‘ono't ‘9ct'v20's00'r rae'Tr6'8ec's a ana ig el Samia =sengen| CRUE TTR EW a BIET Jost ers wes [eawoarear ys [ssv'eervea'or eee ome - 3 2 esse BUTE UOH TLL OTE TSE EO TOE FTO TTI BEST vETE DELSOTESE SETI ses'te6'sve'? esv'ser'zs0'z teoeo'tte Tos'zov'se2 Trs'680't9 a9e'e82'0E Sr ae nao See pa WITT [rwoTN __[erezrrasce [era tee 07s ere ee vac DeFSOOESTTE SasUenpe @ sue FOO OE SEOTE 996 285 SST sessswlevor | eve'ez0'90s S0L'960' eT ¥SS'S967LVE (00'006'822"T = = = ‘on'00r'Fsz_ oco0s'Fe0T voz'seo't9r's 00'000'sr2"s e'sB0'9r6'e T6OezLO5S'St saovreerc tt SeOSTSZECY TOT HUONT revo. wuarsieaksonogy | wuorsieods-r | worsyuowzre | wuersquow et ian en it sueynonied Taqursunowy paywir yueg a2saww05 pue rpa.5 |euoNeN 6107 saquiazag Te Uo sy (sishjeuy Amey) Ayiiqer pue assy) quawiayers Aupinbr) payepljosuoDNational Credit and Commerce Bank Limited Balance Sheet, ‘As on 31 December 2019 PROPERTY AND ASSETS cath In hand (including foreign currencies) Balance with Bangladesh Bank and ts agent bank (s) (including foreign currencies) Balance with other banks and financial institutions In Bangladesh Outside Bangladesh Money at call and short notice Investments Government Others Loans and advance Loans, cash credits, overdrafts, et. Bills purchased & ciscounted Fixed assets including premises, furnitures and fixtures Other assets Non-banking assets ‘TOTAL ASSETS LUABILITIES AND CAPITAL abilities Borrowings from other banks, financial institutions and agents Subordinated Bonds Other Borrowings Deposits and other accounts ‘Current deposits and other accounts Bills payable Savings bank deposits Fixed deposits Term deposits Other abilities TOTAL UABILTIES ‘Shareholders’ equity Paid up capital Statutory reserve General reserve Other reserve including assets revaluation reserve Foreign currency translation gain/(oss) reserve Surplus in profitand less account TOTAL SHAREHOLDERS’ EQUITY ‘TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY INET ASSETS VALUE PER SHARE 10 u 2 a 4 152 16 ” 18a ‘Amounts in BOT 2019, 2018, 15,550,729,091, 13301479272 2,125,588,082 1,950,802,816 13,45,139,999, 11,350,675,456 9,064,360,052 5,125,360,520 3,619 343,820 “440,280,137 445,016,232 685,080,383 1,278,900,000 3,725,350,000 37,738,645,622 33,471,284,749 32,905,771 568 728, 866,685,498 4,831,874,054 4,604,598,251 179,036,556,986 173,866,789,055 172,883,734 845 168,146,045 295 6,192,822,181 5,720,7483,760 2,733,536,601 2,617,132,566 11,484,207,794 8,420,728,513 256 887,036,147 240,528,124,675 14,216,663,633, 13,383,330,906 4,000,000,000 4,000 000,000 10,216 663,633 9/383 330,806 200,018,313,775 191,343,745,663, 720,861,379,260, 18,455,380,515 4,628,831,463 4,371,957,363 22,687,671,086 21,547,713,675 90,463,947,068, 87,021,136 409, 61,370,484,899, 59,987,607,701, 23,288,650,278 18,126 438,813 237,519,627,682 9,273,789,030 1,034,003, 780 10,162,348 465,724,171 301,360 1,583,427,776, 79,367,408,465 256,587 036,147 20.88 222,851,515,382 8,832, 180,030 7,238,030,105 10,162,348, 468,110,718 242,340 1,127,883,752 17,676,609,293 240,528,128,675, 13.06.Particulars (OFF BALANCE SHEET ITEMS Contingent liabilities ‘Acceptances and endorsements 203 Letters of guarantee 202 Letters of credit issued 203 Bill for collection 204 Other commitments Claims against the bank not acknowledged as debt Capital commitments Export development fund (EDF) ‘TOTAL OFF BALANCE SHEETS ITEMS INCLUDING CONTINGENT LIA Amounts in 807 2019 27,981,371,607 31,545,272,385 24,345,999,613, 154,971,974 11,225,324 4038, 540,903 2018 24,437,201,560, 28,877,215,450 22,748,441,325, 117,732,750 2,116,261 76,178,707,346 “These financial statements should be read in conjunction with the annexed notes from 1 t0 46. Chairman See annexed auditors report to the Shareholders ofthe date. Dated, Dhaka 27 April 2020 14 2 ap (abe Se ‘A. Qasem & Co. chartered AccountantsNational Credit and Commerce Bank Limited Profit and Loss Account For the year ended on 31 December 2019 ‘Note Amounts in BOT 2019 208 ioerest roome m2 oases) 17702077284 tse Interest paid on deposts and borrowings 2 __14o17.989.503 1012.90.83 Net intrest income 639720315 $09 74661 Income om Investments 2» varia 736 2.788181.336 Commision, xchange and brokerage 3 11668300 584 iri rasa? Other aperating income 26 ou 267480 segue are Total opeatng Inco Tape oaa0s” ——woauv.so0 236 Sotory and allowances 2” 2536 190026 500 500.653 Rent tates, insurance elect ete. 28 arna7aa7e $36 282488 Legal expenses 3 15)538(008 18.568 345 Pentage stamp, telecommunicatio et 30 6.273.790 62700237 Stationery. pritng edvertsement ete 3 90.47.122 sasoness Chet Execatve Officer's salary and allowances 2 151388,000 teases biretors fees & other meeting related expenses 3 Sias6 151 398.991 sualor'Tees 3a $75,000 $45.00 Charges on loan losses ao3i8.888 Romsvermaintenance amortization and depreciation of bank's assets 35 wseanna 3o9027.315 Other expenses 38 374512 303 81 705516 ‘Total operating expences 7526.859.25 ais 872887 Prot before provision e 717.234.1860 ei 727365 Pravin for oan and advances 350 a2 358 3530201174 Space provision asa) [2032675476 iets a15511 General provision 1430) 26106878 586 885,668 provson for f-balance sheet exposures ae 76228983 797 080.288 Provision for offshore banking unt 187 1008372 (16029,850) Provslon for nvstment futution in shares 33 306 128446 130,680,792 Provilon for other assets a 30.219690 (2as773) Provision for nostro accounts tan ! : Total provision LTTE DS TBI Frantafer provision for loans & advances and others items $900:860375 3.439 032178 Contbuton to NCE Bank’ CSR Fund us e000.000, __ 3,000,000. Prof beter tan 5579868375 368 032.178 Provision for tax ‘1807068268 i1648.192679 Current tax aaa [tees 102.000 iia 7as.886 Deferred tax (116,113,825) (66,591,217) Profit ter tx for the year 132 800.110 715 899.459 Gatance of prt ought forward from last year tea “aaasses7s0_ 2,865,468. Total poftavalablefor distribution ass 7s 7006 Neocon: Statutory reserve TESTES SRE General veserve ; : Ee aE iaeicnoes Tseiasz 08 725 898.531 Earnings per share EPS) e>paaavnaite*” ypemseeeeeeoel “These financial statements should bp read in conjunction with the annexed notes from 3 to 46 Zt See annexed auditor's report to the Bhareholders of the dat Dated, Dhaka A.Qasem & CO. 27 April 2020 Chartered Accountants 15National Credit and Commerce Bank Limited Cash Flow Statement For the year ended on 31 December 2019 AA) Cash flows from operating activities Interest receipts Interest payments Dividend receipts Fees & commission receipts Recoveries on loans previously written off Cash paid to employees Cash paid to suppliers Income taxes paid Receipts from other operating activities Payments for other operating activities Operating cash flow before changes in operating assets and li Increase/(decrease) in operating assets & liabilities Purchase & sale of trading securities Loans and advances to customers ( Other than banks} Other assets Deposits and borrowings from other banks Deposits from customers ( Other than banks) Other liabilities account of customers Other liabilities [Net cash receipts from operating activities 8) Cash flows from investing activities Proceeds from sale of securities Payment for purchase of securities Purchase of property, plant and equipment Sales proceeds of fixed assets Net cash used in investing activities ) Cash flows from financing activities Borrowings from other bank's financial institutions and agents Issue of non-convertible subordinated bonds Dividend paid in cash Net cash receipts/(payments) from financing activities ) Net increase/(decrease) in cash (A+8+C) £) Effects of exchange rate changes on cash and cash-equivalents F) Cash and cash-equivalents at the beginning of the year 6G) Cash and cash-equivalents at the end of the year (O+E+F) Net Operating Cash Flows Per Share Note 37 38 39 40 a Amounts 80r 2019 2018 23078010981 —-20072,640998 (13,518,682,287) (13,265,719,319) 73,2232 74,998,640 253,067,934 849,074,395 36,504,490 16908117 (2s4e39q627) (2,565, 989,122) (206,412,772) (216226.133) (2,733,084,253) (1,261,410,351) 1437,390,200 1075 534,478 (o14.731026) ___ (125,786,588) 3536,790.771 3.658 01,008 (4924990976) ——_(1118,105489) (5,662,886,785) ——_(27,232,907438) (a.229.424516) (113,501,393 (250188478) ——_-2,098.364,663 saeio.sez30s 28,819 329,068 (1480397/560) ——_(2247,738,368) 313.741.787 218,973,632 az7a3aisaa 5,070 384,768_ 377,605,703 269,336,139 (05200117) (3234026656) (371,922,312) (433,155,317) 1321044 1.169.463 (8,399,682) ___(3,386,676.371) (82,608,028) 736,27,603 ; 4,000,000,000 (441,609,002) (1,148,183,404) —arazi7030) 33567 988,199 3,741,728,832 5,259,652,592 59,020 (619,824) su om 2158 383.192 et “These financial statements should be sead in conjunction with the annexed notes from 1 40 46. Dated, Dhaka 27 April 2020 16 Chartered Accountantsswuewunoaoy pase 0p 3 waseD'y Were wrew art [ore ere BO ase weweror | soroevaere ‘Bioe HqUATIG Te wo Te BUTT sav 80v 198 6T SiC caveest [09 TOE TAT wee'S8e ‘avevoror | osc'e00've0'@ Gr0e 7aquEPeG TE LO se aTUEIEA| [z00's09"twrI = a - BLOT 9A Bu 20) BUBB USED] SES Dror were r : = fooo'e0o' Tr) OTST ozo'es ozo'ss (os6'050) (sss'osv) t6s'se6't \t6s'se5) 6c e099 wre iert | ore ‘aor aoe wevaror _[sorovowere | oevoar zens ‘oz Menuey To vo ve suet ‘anasos | ansosoa vonentenas n022e 550) reuse won ‘nasseSuipnpur | anasasyesoua9 | aniesas Aoimers svejnonied 38 youd u sedan dn pre ue yosd ursmidins| een a] ansoean 040 prea ‘Taawaunouy 6107 saquiaraq TE UO papuD 129A 947 404 ‘Aynb uy saBueyp jo aowarers penn yueg aos9UU0D pue ypa.D ]euORENsoweuig EY AEF queg 249 40 Aainbe ,stapjoysieys, ayy syuasaidas quowayers Aajpinby| 943 JO 3)N594 ION [sav'a0n79F eT ‘suvaoo sew oT [se SWOT oso vores [Ir6s7a6 Sez) VaVEET ONE fees'ces'ets'cez [rav'isc'zcv'ev __|vvo'sve'sse'os _|zas'tas'zec'es | oac'€zs'050'0 Bor sas'rer ey lsva'sce'ove'e es cay Sirs fravetorove'e ce F09'7e6 aor esr tas = av tee rea crecevece ser [eo erctieze TEV EDL VEL SE loce't9e'sve's eve cev sve ee peV cee ost ce asodea| UBEE FSU ees'ess‘ere'or§——etv'eso‘tre'r oro'sto‘thr'y sev'osz'zas't srs‘ses'ec6 rav'ess’zee's ray ime aaipO Ta eovSROCew SEC [BEVSSCOIE YS [OSE OSU TOTS __[eeELDALES [caw oavTESOW ester Sor ses : 7 Sosse HUIS TON peccorver tt |eavoTaETT Ser Ter eos eeoTeSTINE Ree TRO RS Tse Tao oT sear i ros'ses‘eec'z lscr‘oee’cvo'z tvc'oe0'soe tos aer'e8z rrsee'e9 s9e'esr'0E Pian Said Rieti ae pee SBTeSS SEAT [ZONES TROT eceeee scoot evr ves TEces ere ver Tae psorsesere ze rene sue] ecs"sra'eer ce _[oas casrtec ar se5'ss8 288 0r ZT EETOONY ‘Ose'606z2"t frou'v96'c5b7 swans oon 006'#22"T = z oon o0r'¥s2 ‘doa'o0s ve0T SaOT VOUT Be ve FOUON STOTT FeSUEaT PU 2s0'09¢'+90'6 (000'000'ste’s eso'ose'eve'e syueg sao wpa s20utoq eoreecoss'st | sso'vtv'ere'tr sco'stscce'v 4829] Tas WaT ATONT een uiarsieaksonogy | worsieost | worsquowzre | wiersqwuow er ieee ia sveinonued| Tog ursunowy 6T0Z 4aquiazag TE uO sy (sishyeuy Agungew Augen pue yassy) pay yueg a219WWO pue ypas9 jeUCREN,aa aaa 442 113 11.31 11.32 National Credit and Commerce Bank Limited & Its Subsi Notes to the Financial Statements ‘As at and for the year ended on 31 December 2019 Status of the Bank The National Credit and Commerce Bank Limited (NCCBL) was formed as a public banking company, limited by shares, incorporated in Bangladesh with primary objective to carry on all kinds of banking business in and outside Bangladesh ‘The registered office of the Bank is located at NCC Bank Bhaban, 13/1-2 Toyenbee Circular Road, Motijheel Commercial Area, Ohaka-1000. It commenced its banking business with 16 branches from 17 May 1983 under the license issued by Bangladesh Bank. Presently the Bank has 121 branches all over Bangladesh and 02 (Two) booths at Uttara Model Town, Uttara, Dhaka and Maniknagar, North Golapbagh, Dhaka. The Bank has no overseas branch as at 31 December 2018. It carries out all banking activities through it branches in Bangladesh ‘The Bank went for initial public offering in 1989 and its share is listed with Dhaka and Chittagong Stock Exchange Limited as a publicly traded company. Principal activities ‘The principal activities of the Bank are to provide all kinds of commercial banking services i.e. loans and deposits services, personal and commercial banking, trade services etc. to its customers through Its branches. Offshore banking units Offshore banking unit (OBU) is a separate business unit of NCC Bank Limited governed under the rules and {guidelines of Bangladesh Bank. The Bank obtained permission for operation of offshore banking units located at NCC Bank Bhaban Branch & Agrabad Branch vide Bangladesh Bank letter no. BRPD (P-3}744(113)/2010-1648 dated on 02 May 2010, Our Offshore banking unit operation/transactions involve with fully foreign-owned enterprises in EPZs, PEPZs, EZs and Fli-tech Parks shall include all normal financial services including accepting deposits, making short term loans/advances and investments, discounting bills, negotiating bills, issuing letter of credit and guarantee ete. Separate financial statements of offshore banking unit are shown in Annexure-N. Information regarding subsidiary The Bank has 02 (Two) fully owned subsidiary companies as on 31 December 2019. One of them has been in ‘operation on the reporting date. This Is NCCB Securities and Financial Services Limited. Although the subscription of another fully owned subsidiary 'NCCB Capital Limited’ has completed, full fledged operation of this company is yet to start. Information of subsidiary companies are given below: CCB Securities and Financial Services Limited (NCCBSFSL) NCCB Securities and Financial Services Limited is a subsidiary company of NCC Bank Limited incorporated as @ private company, limited by shares, on April 04, 2010 with the Registrar of Joint Stock Companies and Firms vide certificate of incorporation no.C-83683/10 dated April 04, 2010 under the Companies Act-1994. NCCBSFSL commenced its operation from March 07, 2011. The main objective of the company is to act as a full fledged stock broker & stock dealer to execute buy and sell order and to maintain own portfolio as well as customers portfolio under the discretion of customers. Financial statements for the year 2019 of the company are shown in Annexure-O. [NCCE Capital Limited (NCCBCL) NCCB Capital Limited (NCCBCL) isa subsidiary company of NCC Bank Limited incorporated as a private company, limited by shares, on April 01, 2010 with the Registrar of Joint Stock Companies and Firms vide certificate of incorporation no.C-83649/10 dated April 01, 2010 under the Companies, Act-1994, The main objective of the company Is to provide full fledged merchant banking services like issue management, underwriting, advisory services & 38 and when regulators permits the company to carry out such activities as per their guidelines. NCCBCL was not in operation till 31 December 2019. Financial statements of the company are shown in Annexure-P. 19Significant accounting poli 9 and basis of preparation of financial statements Basis of preparation ‘The separate financial statements of the Bank as at and for the year ended 31 December 2019 comprise those (of Domestic Banking Unit (Main operations) and Offshore Banking Unit (OBU), and the consolidated financial statements of the group comprise those of ‘the Bank’ (parent company} and its subsidiaries (together referred to-as ‘the group’ and individually referred to as ‘group entities/subsidiaries'). Financial Statements of the Bank are prepared on a going concern basis under the historical cost convention and in accordance with First Schedule of the Bank Company Act 1991, as amended 2013, BRPD circular no. 14 dated 25 June 2003, other Bangladesh Bank circulars, International Accounting Standards, (\ASs) and International Financial Reporting, ‘Standards (IFRSs) as adopted by the Institute of Chartered Accountants of Bangladesh, the Companies Act, 1994, the Bangladesh Securities and Exchange Rules 1987 and guideline of Financial Reporting Council (FRC) under Financial Reporting Act, 2015. Wherever appropriate, such principles are explained in succeeding notes. ‘Statement of compliance The Financial Reporting Act, 2015 (FRA) was enacted in 2015. The Financial Reporting Council (FRC) under the FRA has been formed in 2017 but the Financial Reporting Standards (FRS) under this council is yet to be issued for public interest entities such as banks. The Banking Companies Act, 1991 (as amended up to date) was amended to require banks to prepare their financial statements under such FRS. {As the FRS is yet to be issued as per the provisions of the FRA, the consolidated and separate financial statements of the Group and the Bank have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the Institute of Chartered Accountants of Bangladesh (|CAB) and the requirements of the Banking Companies Act, 1991 (as amended up to date) , the rules and regulations issued by Bangladesh Bank (BB), the Companies Act 1994, the Securities and Exchange Rules 1987. In case any requirement of the Banking Companies Act, 1991 (as amended up to date), and provisions and circulars issued by Bangladesh Bank differ with those of IFRSs, the requirements of the Banking Companies Act 1991 (as ‘amended up to date), and provisions and circulars issued by Bangladesh Bank shall prevail. Material departures from the requirements of IFRSs are as follows: |) Presentation of financial statements IFRS: As per IAS 1 financial statements shall comprise statement of financial position, comprehensive income statement, changes in equity, cash flow statement, adequate notes comprising summary of accounting policies ‘and other explanatory information. As per para 60 of IAS 1, the entity shal also present current and non-current assets and liablities as separate classifications in its statement of financial position. Bangladesh Bank: The presentation of the financial statements in prescribed format (ie. balance sheet, profit ‘and loss account, cash flow statement, statement of changes in equity, liquidity statement) and certain disclosures therein are guided by the First Schedule (section 38) of the Bank Company Act 1991 (amendment up to date) and BRPD circular no. 14 dated 25 June 2003 and subsequent guidelines of Bangladesh Bank. In the prescribed format there is no option to present assets and liabilities under current and noncurrent classifications, ii) Investment in shares and securities (Equity Share, Mutual Funds etc.) IFRS: As per requirements of IFRS 9 Financial Instruments, classification and measurement of investment in shares and securities will depend on how these are managed (the entity's business model} and their contractual cash flow characteristics. Based on these factors it would generally fall either under “at fair value through profit and loss account” or under “at fair value through other comprehensive income” where any change in the fair value (as measured in accordance with IFRS 13) at the year-end is taken to profit and loss account or other comprehensive income respectively. 20‘Bangladesh Bank: As per BRPD circular no. 14 dated 25 June 2003 investments in quoted shares and unquoted shares are revalued at the year end at market price and as per net asset value (NAV)/book value of last audited balance sheet respectively. As per instruction of DOS circular letter no. 3 dated 12 March 2035 and 28 June 2015, investment in mutual fund (closed-end) is revalued at lower of cost and (higher of market value and 95% Cf NAV}. As such, provision is made for any loss arising from diminution in value of investments (portfolio basis); otherwise investments are recognised at casts. Provision shauld be made for any loss arising from diminution in value of investment; otherwise Investments are recognized at cost. Ii) Revaluation gains/losses on Government Securities IFRS: As per requirement of IFRS 9 where securities will fall under the category of Fair value through Profit and Loss account, any change in the fair value of held for trading assets is recognized through profit and loss ‘account. Where securities are measured ‘at fair value through other comprehensive income’ then gains or losses shall be recognised in other comprehensive income (OCI), except for impairment gains or losses and foreign exchange gains and lasses. The loss allowance arise from impairment shall be recognised in OCI and shall not reduce the carrying amount of financial assets in the Financial Position. Securities designated as amortised cost are measured at effective interest rate method and interest income is recognised through the profit and loss account. Bangladesh Bank: According to Department of Offsite Supervision (DOS) Circular # 0S, dated 26 May 2008 and subsequent clarifiation in DOS Circular # 05, dated 28 January 2009 of Bangladesh Bank, loss on revaluation of Government securities (T-bill/T-bond) which are categorized as held for trading will be charged through Income accounts, but any gain on such revaluation should be recorded under revaluation reserve accounts. However, at the year-end if there is any revaluation gain for any particular held for trading T-bill /T- bonds, such gain can be sed to the extent of any revaluation loss for that particular held for trading T-bills/T-bonds. T-bills/T-bonds designated as held to maturity are measured at amortized cost method but interest income / gain should be recognized through revaluation reserve. Iv) Provision on loans and advances/investments, IFRS: As per IFRS 9: Financial Instruments, an entity shall recognize an impairment allowance on loans and advances based on expected credit losses. At each reporting date, an entity shall measure the impairment allowance for loans and advances at an amount equal to the lifetime expected credit losses ifthe credit risk on these loans and advances has increased significantly since initial recognition whether assessed on an individual or collective basis considering all reasonable information, including that which is forward-looking. For those loans and advances for which the credit risk has not increased significantly since initial recognition, at each reporting date, an entity shall measure the impairment allowance at an amount equal to 12 month expected credit losses that may result from default events on such loans and advances that are possible within 12 months after reporting date. Bangladesh Bank: As per BRPD Circular # 14, dated 23 September 2012, BRPD Circular # 19, dated 27 December 2012, BRPD Circular # 05, dated 29 May 2013, BRPD Circular #16, dated 18 November 2014, BRPD Circular # 08, dated 02 August 2015, BRPO Circular # 15, dated 27 September 2017 and BRPD Circular # 01, dated 20 February 2018 a general provision at 0.25% to 5% under different categories of unclassified loans (standard and SMA loans) has to be maintained regardless of objective evidence of impairment. Also provision for sub-standard foan, doubtful loans and bad losses, should be provided at 20%, 50% and 100% respectively for loans and ‘advances depending on the duration of overdue. Again as per BRPD Circular # 10, dated 18 September 2007 and BRPO Circular # 01, dated 03 January 2018, a general provision at 1% should be provided for all off-balance sheet exposures except general provision against the LC for First Track Power Supply Projects. -v) Recognition of interest suspense IFRS: Loans and advances to customers are generally classified at amortized cost as per IFRS 9: Financial Instruments and interest income is recognized by using the effective interest rate method to the gross carrying amount over the term of the loan. Once a loan subsequently become credit-impaired, the entity shall apply the effective interest rate to the amortized cost of these loans and advances. Bangladesh Bank: As per BRPD circular no. 14 dated 23 September 2012, once a loan is classified, interest on such loans are nat allowed to be recognized as income, rather the corresponding amount needs to be credited to an interest in suspense account, which is presented as liability in the balance sheet. 24vi) Other comprehensive income and appropriation of profit IFRS: As per IAS 1 other comprehensive income (OC!) is a component of financial statements or the elements of C1 are to be included in a single other comprehensive income statement. IFRS do not require appropriation of profit to be shown on the face of the statement of comprehensive income. Bangladesh Bank: Bangladesh Bank has issued templates for financial statements which will strictly be followed by all banks in Bangladesh. The templates of financial statements issued by Bangladesh Bank neither include ‘other comprehensive income nor are the elements of other comprehensive income allowed to be included in a single other comprehensive income (OCI) statement. As such the Bank does not prepare the other comprehensive income statement: However, elements of OCI, if any, are shown in the statements of changes in equity vii) Financial instruments - presentation and disclosure In several cases Bangladesh Bank guidelines categories, recognize, measure and present financial instruments differently from those prescribed in IFRS 9: Financial Instruments. As such full disclosure and presentation requirements of “IFRS 7: Financial Instrument- Disclosures” and “IAS 32: Financial Instruments-Presentation” cannot be made in the accounts. vill) Financial guarantees IFRS: As per IFRS 9: Financial Instruments, financial guarantees are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor falls to make payment When due in accordance with the original or modified terms of a debt instrument. Financial guarantee liabilities are recognized initially at their fair value plus transaction cost that are directly attributable to the issue of the financial liabilities. The financial guarantee liability is subsequently measured at the higher of the amount of loss allowance for expected credit losses as per impairment requirement and the amount initially recognized less, income recognized in accordance with the principles of IFRS 15. Financial guarantees are included within other liabilities. Bangladesh Bank: As per BRPD 14, financial guarantees such as letter of credit, letter of guarantee will be treated as off-balance sheet items. No liability is recognized for the guarantee except the cash margin. Ix) Cash and cash equivalent IFRS: Cash and cash equivalent items should be reported as cash item as per IAS 7. Bangladesh Bank: Some cash and cash equivalent items such as ‘money at call on short notice’, treasury bills, Bangladesh Bank bills and prize bond are shown as cash and cash equivalents. Money at call on short notice presented on the face of the balance sheet, and treasury bills and prize bond are shown in investments. x) Repo and Reverse Repo transactions IFRS: As per IFRS 9: Financial Instruments, When an entity sells a financial asset and simultaneously enters into fan agreement to repurchase the asset (or a similar asset) at a fixed price on a future date (REPO), the arrangement is treated as a loan and the underlying asset continues to be recognized at amortized cost in the entity's financial statements. The difference between selling price and repurchase price will be treated as interest expense. The same rule applies to the opposite side of the transaction (reverse repo).rest expense. ‘Same rule applies to the opposite side of the transaction (reverse repo) Bangladesh Bank: As per BRPD guidelines, when a bank sells a financial asset and simultaneously enters into an agreement to repurchase the asset (or a similar asset) ata fixed price on a future date (REPO or stock lending), the arrangement is accounted for as normal sales transactions and the financial assets are derecognized in the seller's book and recognized in the buyer's book. xi) Non-Banking Assets IFRS: No indication of non-banking asset is found in any IFRS. Bangladesh Bank: As per BRPD 14, there must be stated a face item named as non-banking asset. 2223 il) Cash flow statement IFRS: The Cash flow statement can be prepared using either the direct method or the indirect method. The presentation is selected to present these cash flows in a manner that is most appropriate for the business or industry. The method selected is applied consistently Bangladesh Bank: As per BRPD 14, cash flow is the mixture of direct and indirect methods. xiil) Balance with Bangladesh Bank: (Cash Reserve Requirement) IFRS: Balance with Bangladesh Bank should be treated as other asset as itis not available for use in day to day operations as per IAS 7. Bangladesh Bank: Balance with Bangladesh Bank is treated as cash and cash equivalents. xiv) Presentation of intangible asset IFRS: An intangible asset must be identified and recognized, and the disclosure must be given as per IAS 38. Bangladesh Bank: There is no regulation for intangible assets in BRPD 14, xu] Off-balance sheet items IFRS: There is no concept of off-balance sheet items in any IFRS; hence there is no requirement for disclosure of off-balance sheet items on the face of the balance sheet. Bangladesh Bank: As per BRPD 14, off balance sheet items (e.g. Letter of credit, Letter of guarantee ete.) must be disclosed separately on the face of the balance sheet, xvi) Loans and advances/Investments net of provision IFRS: Loans and advances/investments should be presented net of provision. Bangladesh Bank: As per RPO 14, provision on loans and advances are presented separately as liability and cannot be netted off against loans and advances. Basis of consolidation ‘The consolidated financial statements include the financial statements of NCC Bank Limited and its subsidiary companies - NCCB Securities and Financial Services Limited & NCB Capital Limited. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards 10- "Consolidated Financial Statements", The Consolidated Financial Statements are prepared to common financial ‘year ending 31 December 2019, Subsidiary Subsidiary is the enterprise which is controlled by the Bank. Control exists when the Bank has the power, directly and indirectly, to govern the financial and operating policies of an enterprise from the date that control commences until the date that control ceases. The financial statements of subsidiary are included in the consolidated financial statements from the date that the control effectively commences until the date that it control effectively ceases. Subsidiary company is consolidated using the purchase method of accounting, ‘Transactions eliminated on consolidation, All intra-group transactions, balances, income and expenses are eliminated on consolidation. Profit and loss resulting from transactions is also eliminated on consolidation. Use of estimates and judgments In the preparation of financial statements, management requires to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results mav differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. 2324 25 26 27 28 29 210 240.1 Functional and presentation currency ‘The financial statements are presented in Bangladeshi Taka which Is the Bank's functional currency except OBL. Foreign currency transaction/translation a) Foreign currencies transaction/translation Foreign currency transactions are converted into equivalent taka using the ruling exchange rates on the dates of respective transactions as per 1AS-21 "The Effects of Changes in Foreign Exchange Rates”. Assets and liabilities in foreign currencies at 31 December 2019 have been converted into Taka currency at the average of the prevailing buying and selling rates of the relevant foreign currencies at that date except "Balances with other Banks and Financial Institutions” which have been converted as per directives of Bangladesh Bank vide its circular no. 8RPO(R) 717/2004-959 dated 21 November 2004. b) Commitments Contingent liabilities / commitments for letters of credit and letters of guarantee denominated in foreign currencies are expressed in BOT at the rates of exchange prevailing on the balance sheet date. ) Translation gains and losses ‘The resulting exchange transaction gains and losses are included in the profit and loss account, except those arising on the translation, Cash flow statement Cash flow statement has been prepared in accordance with the BRPO Circular No. 14, dated June 25, 2003 issued by the Banking Regulation & Policy Department of Bangladesh Bank. It reported cash flows during the year classified under operating activities, investing activites and financing activities, Liquidity statement ‘The liquidity statement of assets and liabilities as on the reporting date has been prepared on residual maturity term as per the following bases i) Balance with other banks and financial institutions, money at call and short notice, etc. are shown on the basis of their maturity term; li) Investments are on the basis oftheir respective maturity; i) Loans and advances / investments are on the basis of thelr repayment schedule; Iv) Fixed assets are on the basis of their useful lives; \v) Other assets are on the basis of their realization / amortization; vi) Borrowing from other banks, financial institutions and agents, etc. are as per their maturity / repayment terms; vii) Deposits and other accounts are on the basis of their maturity term and past trend of withdrawal by the depositors; vill) Provisions and other liabilities are on the basis of their payment / adjustments schedule. Reporting period These financial statements cover the period from 01 January to 31 December 2019. Offsetting Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, realize the asset and settle the liability simultaneously Assets and basis of their valuation Cash and cash equivalents Cash and cash equivalents include notes and coins on hand, balances held with Bangladesh Bank & other Banks and Fl and price bond which highly liquid financial asset which are subject to insignificant risk of changes in their fair value and are used by the bank management for its short-term commitments, 242.102 2103 Loans and advances a) Loans and advances are stated in the balance sheet on gross basis. b) interest is calculated on a daily product basis but charged on quarterly basis and accounted for on accrual basis, Interest on classified loans and advances are kept in suspense account as per Bangladesh Bank instructions and such interest is not accounted for as income until realized from borrowers [please refer Note- 9.11 (x). Interest is not charged on bad and loss loans as per guidelines of Bangladesh Bank, Records of such Interest amounts are kept in separate memorandum accounts. ) The Bank are providing concessional interest rare to its good borrowers. {) Provision for loans and advances is made on the basis of quarter-end review by the management following. instructions contained in Bangladesh Bank BRPO Circular no.14 dated 23 September 2012 and BRPD Circular 1n0.19 dated 27 December 2012, BRPD Circular no. dated 29 May 2013 BRPD Circular no.16 dated 18 November 2014.8RPO circular no 12 dated 20 August 2017, BAPD circular no 15 dated 27 September 2017, BBRPO circular no 1 dated 3 January 2018 and BRPO circular no 1 dated 20 February 2018 The provision rates are given below: Particulars Rate |General provision on unclassified loans.and advances [standard general loans and advances i [standard House Finance loans and advances 1% tandard-small & medium enterprise financing 025% [standard loans to merchant banking/6Hs/S0s 2% Isd. Housing Fin. and loans for professional to set up a business 2% [standard consumers loan scheme other than HF and LP 5% [standard Shor term agriculture and Micro credit 1% Special mention aecount general loans and advances 1% Special mention account House Finance loans and advances, 1% Special mention account small & medium enterprise Financing 025% Special mention account loans to BFs/MBs/Sds 2% Special mention account HF and UP 2% Special mention account consumer's loan scheme other than HF & LP 5m Specific provision on classified loans and advances Substandard (Agriculture & Micro credit) a Doubtful (Agriculture & Micro eredit 5% [substandard 20% Doubtful 50% Bad or Loss 100% €¢) Loans and advances with no realistic prospect of recovery have been written off against which full provisions fare made and legal cases has been initiated, Detailed memorandum records for al such written off accounts are maintained. Investments, All investments on securities are initially recognized at cost, being fair value of the consideration given, including acquisition charges associated with the investment. Premiums are amortized and discounts accredited, using the effective yield method and are taken to discount income. The valuation methods of Investments used are. Held to maturity (HTM) Investments which have fixed or determinable payments’ and are intended to be ‘held to maturity’ other than those that meet the definition of ‘held at amortized cost-others’ are classified as held to maturity. These investments are subsequently measured at present value as per Bangladesh Bank guideline. Investments in securities have been revalued as mark to market as at 31 December 2019. The gain of revaluation from the held to maturity securities has been shown in the statement of changes in equity of 31 December 2018. 252.10.4 Held for trading (HFT) Investments classified in this category are acquired principally for the purpose of selling or repurchasing in short trading or if designated as such by the management after inital recognition, investments are measured at alr value and any change in the fair value is recognized in the profit & loss account for the period in which it arises ‘These investments are subsequently revalued at current market value on weekly basis a5 per Bangladesh Bank guidelines. Revaluation gain has been shown in revaluation reserve account & revaluation loss has been shown In profit & loss account. Value of investments has been enumerated as follow: tem ‘Applicable accounting value [Government treasury bils-HTM Amortized value [Government treasury bills-HFT ‘Market value [Government treasury bonds-HTM, “Amortized value [Government treasury bonds HFT Market value Prize bonds AL COST Investment in listed securities ‘These securities are bought and held primarily for the purpose of selling them in future or held for dividend income. Unrealized gains are not recognized in the profit and loss account. But provision for diminution in value of investment is provided in the financial statements which market price is below the cost price of investment. Provision against mutual fund calculated as per B. DOS Circular No-10 dated 28 June 2015 (Note-8.3) Investment in unquoted securities Investment in unquoted securities is reported at cost under cost method. Adjustment is given for any shortage of book value over cost for determining the carrying amount of investment in unquoted securities, Investment in subsidiary Investment in subsidiary is accounted for under the cost method of accounting in the Bank's financial statements in accordance with the IRFS-10. Accordingly, Investment in subsidiary is stated in the Bank's balance sheet at cost, less impairment losses if av. Property, plant and equipment Recognition and measurement Al fixed assets except land and buildings/office premises are stated at historical cost which land and building/office premises at revalued amount (whenever applicable) less accumulated depreciation as per JAS - 416" Property, Plant and Equipment". The cost of acquisition of an asset comprises its purchase price and any directly attributable cost of bringing the assets to its working condition for its intended use inclusive of inward freight, duties and non refundable taxes. Subsequent cost ‘The cost of replacing part of such an item of fixed assets is recognized in the carrying amount of an item of property, plant and equipment if itis probable that the future economic benefits embodied with the part will flow to the company and the cost ofthe item can be measured reliably. The cost of day to day servicing of fixed asset is recognized in orofit and loss as incurred Capital work in progress Some development work is under process is recognised and reported under fixed assets as per IAS 16 as capital work in progress until the construction wark is completed and the asset is ready for intended use, This asset's stated at cost and depreciation of the asset will be charged from the date ofits intended use. 262105 2.10.6 2.107 2.108 2.109 2.10.10 Depreciation Depreciation is charged for the year at the following rates on reducing balance method on all fixed assets other than vehicles, Computer Equipment and software on which straight line depreciation method is followed and no depreciation is charged on lands [Category of fixed assets Rate of depreciation rand Nil [Building/OMfice premises 250% Furniture & fiture 10% to 20% [Machineries & equipment 20% [Computer equipment 20% [Vehicles 20% 4) For additions during the year, depreciation is charged for the remaining days of the year and for disposal, depreciation is charged up to the date of disposal b) On disposal of fixed assets the cost and accumulated depreciation are eliminated from the fixed assets schedule and gain or loss on such disposal is reflected in the profit and loss account which is determined with reference to the net book value of the assets and net sale proceeds. Intangible assets 4) An intangible asset is recognized if itis probable that the future economic benefits that are attributable to the asset will flow to the entity and the cost of assets can be measured reliably. b) Software represents the value of computer application software licensed for use of the Bank, other than software applied to the operation software system of computers, Intangible assets are carried at its cost, less accumulated amortization and any impairment losses. Initial cost comprises license fees paid at the time of purchase and other directly attributable expenditures that are incurred in customizing the software for its intended use. } Software is being amortized using the following method and rates: [Category of intangible assets Rate of amortization [Sofware (straight line) 20% Other assets Provision for other assets Other assets have been classified as per BRPD circular no. 14 dated 25.06.2001 of Bangladesh Bank and necessary provisions have been made thereon accordingly and for item not covered under the circular, adequate provision have been made considering their recoverability Securities purchased under re-sale agreement Securities purchased under re-sale agreements are treated as collateralized lending and recorded at the consideration paid and interest accrued thereon. The amount lent is shown as an asset either as loans and advances to customers or loans to other banks. ‘The difference between purchase price and resale price is treated as interest received and accrued evenly over the life of REPO agreement. Receivables Receivables are recognized when there is a contractual right to receive cash or another financial asset from ‘another entity. Inventories Inventories are measured as per IAS-2, Leases NCCBL has applied IFRS-16: Leases for the first time with the date of initial application of 01 January 2019. As IFRS 16 supersedes IAS 17: Leases, the bank has made recognition, measurement and disclosure in the financial statements of 2019 both as Lessee and Lessor as per IFRS 16. Bank as lessee: ‘The bank assesses at initiation of a contract whether the contract is, or contains a lease. That i, ifthe contract conveys the right to control the use of an identified asset for a period of time in exchange of consideration, then the bank consider the contract as 2 lease contract, 27The bank as a lessee applies a single recognition and measurement approach for all leases, except for short- term leases, or, and lease of low value of assets. The bank recognises lease liabilities to make lease payment ‘and right-of use assets representing the right to use the underlying assets. If tenor of a lease contract does not exceed twelve months from the date of initiation/application, the bank considers the lease period as short term in line with the recognition threshold of ROU assets as per Fixed Asset policy of the bank. In case of low value of lease assets, the bank has set a materiality threshold which is 0.10% of Total capital of the Bank. However, as it’s adopted for the first time, the bank used a flat threshold of BOT 20 rmillion and above’ which is 0.078% of total capital of the bank as of 31 December 2019. The reason behind considering the materiality threshold of BOT 20 million and above is that the bank operates many ATM booths, sub-branches with short and single contracts; recording of which as ROU assets would inflate the balance sheet tooth in assets and liabilities. Moreover, frequent changes of those establishments would create misreporting as ‘well as complexity in recording. Right-of-use assets (ROU): The bank recognises the right-of-use assets (ROU) at the commencement date of the lease (i.e. the date the underlying asset is available for use). RoU assets are measured at cost less any accumulated depreciation and impairment of losses and adjusted for any measurement of lease liabilities. The cost of ROU assets includes the ‘amount of lease liabilities recognised, initial direct cost incurred, and lease payment made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight line basis over the lease term, or remaining period of the lease term. ‘The bank assessed all lease contracts live in 2019 and recognised as RoU of assets of all leases, except short term and low value of assets as parameter guided by Bangladesh @ank and Banks’ own policy set as per IAS 16 and IFRS 16. As leases under IFRS 16 has been first time adopted by the bank, the bank has followed modified retrospective approach of adoption with the date of intial aplication of O1 January 2019. Therefore, the bank considered a cut-off date beginning of the year 2019 and reassessed unadjusted advance payment and remaining lease period of each contract, and recognised those in the financial statements for the year ended 32 December 2019 without giving retrospective impact in earlier presentation. The ROU assets are presented in the rote 10.2 of these financial statements, Lease Liabilities (Bank as a lessee): ‘at the commencement of the lease, the bank recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed and variable lease payment (less ny adjustment for initial payment), and amount is expected to be paid under residual value of guarantees. The Tease payments also include the exercise price of purchase option reasonably certain to be exercised by the ‘bank and payment of penalties for terminating the lease. 1n 2019, the bank reassessed all lease payment of existing contracts for remaining peried considering a cut-off date Le, 01 January 2019, The lease liabilities are presented in the note 14.12 of these financial statements. ‘The bank as lessor When the Bank acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. The Bank has no such lease in reporting date. 282.10.11 Non-banking assets 241 242 233 244 2as 216 2a7 Non-banking assets were acquired due to failure of borrowers to repay the loan in time taken against mortgaged property. The Bank has been awarded ownership of few mortgaged properties vide verdict under section 33(7) of the Artharin Adalat Act, 2003. Such properties have not been recognized as non banking assets as value measurements of the properties are under orocess. Reconciliation of inter-bank and inter-branch account ‘Accounts with regard to inter-bank (in Bangladesh and outside Bangladesh) are reconciled regularly and there are ne material differences which may affect the financial statements significantly. Un-reconciled entries / balances in case of inter-branch transaction as on the reporting date are not material Share capital Ordinary shares are classified a5 equity when there is no contractual obligation to transfer cash or other financial assets Statutory reserve The Bank Companies Act, 1991 (Amended up to date} requires the bank to transfer not less than 20% of its current period profit before tax to reserve until such reserve equals to Bank's paid up capital. Revaluation reserve When an asset's carrying amount is increased as 2 result of a revaluation, the increased amount credited directly to equity under the heading of revaluation surplus/reserve as per 1AS-16: “Property, Plant and Equipment", The Bank revalued the assets of land and building which is absolutely own by the Bank and the increased amount transferred to revaluation reserve. 'Non-controlling (Minority) interest in subsidiary Non-controlling (Minority) interest in business is an accounting concept that refers to the portion of a subsidiary corporation's stock that is not owned by the parent corporation. The magnitude of the non-controlling (Minority) interest in the subsidiary company is always less than 50% of outstanding shares; else the corporation would cease to be a subsidiary of the parent. Non-controliing (Minority) interest belongs to other investors and is reported on the consolidated balance sheet of the owing company to reflect the claim on assets belonging to other, non-controlling shareholders. Also, non-controlling (Minority) interest is reported on the consolidated income statement as a share of profit belonging to non-controlling (Minority) shareholders. Deposits and other accounts Deposits by customers and banks are recognized when the bank enters into contractual provisions of the arrangements with the counterparties, which is generally on trade date, and initially measured at the consideration received. Borrowings from other banks, financial institutions and agents Borrowed fund include call money deposits, borrowings from Bangladesh Bank and other Banks, They are stated in the balance sheet at amounts payable. Interest paid/payable on these borrowings is charged to the profit and loss account. Disclosures on borrowings against REPO are shown in Annexure), 29218 248.1 2.182 2183 Basis for valuation of liabilities and provisions Provision for taxation The current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Profit & Loss Account because it excludes items of income or expense that are taxable or deductible. The ‘Bank's liability for current tax is calculated using tax rates that have been enacted or substantively enacted before the date of balance sheet. Provision for current income tax has been made @ 37.50% on accounting profit made by the Bank after ‘considering some of the add backs of income and disallowances of expenditure as per Income Tax Ordinance 1984. Deferred taxation Deferred tax liabilities are the amount of income taxes payable in future periods in respect of taxable temporary differences. Deferred tax assets are the amount of income taxes recoverable in future periods in respect of deductible temporary differences. Deferred tax assets and liabilities are recognized for the future tax consequences of timing difference arising between the carrying values of assets liabilities and their respective tax bases, Deferred tax assets & liabilities are measured using tax rates and tax laws that have been enacted or substantially enacted at the balance sheet date. The impact on the account of changes in the deferred tax assets and liabilities has also been recognized in the profit and loss account as per |AS-12 "Income Taxes", Disclosures on deferred taxes are shown in note-14.4.1. Retirement benefits to the employees ‘The retirement benefits accrued for the employees of the Bank as on reporting date have been accounted for in accordance with the provisions of IAS-19 "Employee Benefits". The Bank operates retirement benefits scheme for its permanent employees. Elements of which are as under: a) Provident fund Provident fund benefits are given to the permanent employees’ of the Bank in accordance with Bank's service rules. Accordingly a trust of deed and provident fund rules were prepared. The Commissioner of Income Tax, Taxes Zone-04, Dhaka has approved the provident fund as a recognized provident fund within the meaning of section 2(52), read with the provisions of part - 8 of the First Schedule of Income Tax Ordinance 1984, The recognition took effect from 16.01.1992. The fund is operated by a Board of Trustees consisting 05 (five) members. All confirmed employees of the bank are contributing 10% of their basic salary as subscription to the fund. The bank also contributes equal amount of the employees’ contribution. Interest earned from the investments is credited to the members account on yearly basis. b) Gratuity fund “The bank has operated gratuity fund which was approved by National Board of Revenue on 17.09.2009. The fund is operated Board of Trustees. Provision in respect of which is made annually covering all its permanent cligible employees as per IAS-19 "Employee Benefits”. ) Superannuation fund, ‘The bank operates an employees’ Superannuation Fund Trust by a separate Board of Trustees consisting of 05 (Five) members. The death-cum survival benefits are given to the employees as per the eligibility narrated in the Trust Rules, The fund got recognition from the National Board of Revenue (NAR) effect from 01.01.2008 ‘nder the section 3 and 4 of part -A of First Schedule of Income Tax Ordinance 1984. The bank contributes to ‘the fund annually as per Superannuation Fund Rules of the bank. d) Benevolent fund NCCBL employees’ benevolent fund was established in the yeer 2007 for the welfare of the clistressed employees and their dependents. The employees of the bank contribute to the fund at a rate applicable for ‘each grade from their monthly salary.2185 218.6 219 219.4 ‘¢) Workers profit participation fund and welfare fund 'SRO-336-AIN/2010 dated 5-10-2010 issued by the ‘Ministry of Labor and Employment and published in Bangladesh gazette on 7-10-2010 declares the status of business of certain institutions and companies like mobile operating companies, mobile network service providing company, all Govt. and Non-govt. money lending companies, all insurance companies etc. as "Industrial Undertakings" for the purposes of Chapter-XV of the Bangladesh Labour Act, 2006 (as amended up to 2013) which deals with the workers’ participation in company's profit by way of ‘Workers Profit Participation Fund’ and 'Welfare Fund’. The Bangladesh Labour Act, 2006 (as amended up to 2013) requires the "Industrial Undertakings" to maintain provision for workers! profit participation fund @ 5% on net profit. Since this requirement contradicts with the Section 11 of the "Bank Companies Act 1991 (as amended up to date)’, we took opinion from ‘Bangladesh Bank’ on the same. Subsequently, Bangladesh Bank has opined that the provisions of the two statutes shall be subject to challenge and shall vitiate the purpose of such legislation. Therefore, no provision in this regard has been made in the Financial Statements during the year under audit. Provision for liabilities [A provision is recognized in the balance sheet when the bank has a legal or constructive obligation of a result of ' past event and itis probable that an outflow of economic benefit wll be required to settle the obligation in ‘accordance with the IAS-37 "Provisions, Contingent Liabilities and Contingent Assets”. Provision for off-balance sheet items Offtbalance sheet items have been disclosed under contingent liabilities and other commitments as per Bangladesh Bank guidelines. As per BRPD Circular no.10 dated September 18, 2007, BRPD Circular no.14 dated September 23, 2012 & BRPD Circular no.-07 dated 21 June 2018 Banks are advised to maintain provision @ 1% ‘against off-balance sheet exposure in addition to the existing provisioning arrangement. Provision for NOSTRO accounts [As per instructions contained in the circular letter no. FEPD (FEMO)/01/2005-677 dated September 13, 2005 issued by Foreign Exchange Policy Department of Bangladesh Bank, Banks are required to make provision regarding the un-adjusted debit balance of NOSTRO account over more than three months as on the reporting date in these financials. There are 16 no of un-reconciled entries which are outstanding more than three months as on 31 December 2019, The bank has been maintained adequate provision as per above mentioned Circular accordingly. Revenue recognition NCC Bank Utd. has applied IFRS 15 using the cumulative effect method and therefore the comparative information has not been restated and continues to be reported under IAS 18. However due to cumulative cffect method, there was no adjustment required in the opening Retained Earnings. Under IFRS 15, revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected con behalf of third parties. The company recognizes revenue when it satisfies a performance obligation by transferring control over services to a customer. The company considers the terms of the contract and its customary business practices to determine the transaction price. The transaction price is the amount of ‘consideration to which an entity expects to be entitled in exchange for transferring promised services to a ‘customer, The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. In the comparative period, revenue was measured at the fair value of the consideration received or receivable. Revenue was recognized when services rendered, to the extent it was probable that the ‘economic benefits from the transactions would flow to the company and the revenue could be reliably measured, Interest income In terms of the provision of the IFRS-15 "Revenue from contracts with customers” the interest income is recognized on accrual basis. Interest on loans and advances ceases to be taken in to income when such ‘advances are classified. It is than kept in interest suspense in a memorandum account. Interest on classified loans and advances is accounted for on a cash receipt basis. 34219.2 2193 219.4 2195 219.6 2.20 2201 Investment income Interest income on investments is recognized on accrual basis. Capital gain on investments in shares is also included in investment income. Capital gain is recognized when itis realized. Fees and commission income ‘The Bank recognizes revenue in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for other parties to provide services. The Bank's fee or commission might be the net amount of consideration that it retains after paying the other party the consideration received in exchange for the goods or services to be provided by that party. Commission charged to customer on letters of eredit and letters of guarantee is credited to income at the time of effecting the transactions. Dividend income on shares Dividend income from an investment is recognised when the company's rights to receive payment is established (declared by the Annual General Meeting of the investee or otherwise). Interest paid and other expenses In terms of the provisions of IFRS, interest and other expenses are recognized on accrual basis. Dividend payments Interim dividends are recognized when they are paid to shareholders. Final dividend is recognized when it is ‘approved by the shareholders. Dividend payable to the bank's shareholders are recognized a a liability and deducted from the shareholders equity when it is payable/paid in the period in which the shareholders right to receive the payment is established. Risk management ‘The risk of the Bank may be defined as the possibility of losses, financial or otherwise. The risk management of the Bank covers six core risks ie, Credit Risk, Internal Control & Compliance Risk, Money Laundering Risk, Asset Liability Management Risk (Balance Sheet Risk), Foreign Exchange Risk and Information Technology Risk. As a part of risk management, adequate capital is maintained against Credit Risk, Market Risk and Operational Risk under Baselll accord. Under the second pillar of Basel-il, a Supervisory Review Process (SRP) team has been formed to review, monitor and maintain adequate capital considering all relevant risks. Quarterly Stress Testing is conducted to assess the impact of different risks associated with banking business on asset, lability & Utimately on capital and the report is submitted before the Board of Directors and to Bangladesh Bank regularly. The prime objective of the risk management is that the bank evaluates and takes wel calculative business risks and there by safeguarding the banks capitals, its financial resources and profitability from various business risks through its own measures and through implementing Bangladesh Bank guidelines and following some of the best practices as under: Credit risk It arises mainly from lending, trade finance, and leasing and treasury business. Credit Risk can be described as potential loss arises from the failure of a counter party to perform as per contractual agreement with the bank. The failure may result from unwillingness of the counter party of decline in his or her financial condition there for the banks credit risk management activities have been designed to address all these issues. The Bank has segregated duties of the officers / executives involved in credit related activities, a separate corporate division has been formed at Head office which is entrusted with the duties of maintaining effective relationship with the customers, marketing of eredit products, exploring now business opportunities etc. moreover, credit approval, administration, monitoring and recovery functions have been segregated. For this purpose, three separate units have been formed within the credit division these are a) Credit risk Management Unit b) Credit Administration Unit and c) Credit monitoring and recovery Unit. Credit risk management Unit is entrusted with the duties of maintaining assets quality, assessing risk in lending to @ particular customer, sanctioning credit, formulating policy / strategy for lending operation, etc. Adequate provision has been made Con classified loans is shown in Note 14.5 (a. 32,2.20.2 2.203 2.204 ‘A thorough assessment is done before sanction of any credit facility at Credit Risk Management Unit. The risk assessment includes borrower risk analysis, financial analysis, industry analysis, historical performance of the customer, security of the proposed credit facility, etc. The assessment process starts at Corporate Credit Division by the Relationship Manager / Officer and ends at Credit Risk Management Unit when itis approved / declined by the competent authority. Credit approval authority has been delegated to the individual at ‘executives. Proposals beyond thelr delegation are approved / declined by the Executives Committee and / or the Management of the Bank. In determining Single borrower / large loan limit, the instructions of Bangladesh Bank are strictly followed. Internal audit is conducted at periodical intervals to ensure compliance of Banks and Regulatory policies. Loans are classified as per Bangladesh Bank’s guidelines. Concentration of single beorrower/larae loan limit is shown in Annexure-C. Foreign exchange risk Foreign exchange risk is defined as the potential change in earning due to change in exchange rate. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underiving L/C commitments and other remittance requirements, Treasury Department independently conducts the transactions and the back office of treasury is responsible for verification of the deals and passing of their entries in the books of account. All foreign exchange transactions are revalued at Mark-to-Market rate as determined by Bangladesh Bank at the month-end. All NOSTRO ‘accounts are reconciled on a monthly basis and the management for its settlement reviews outstanding entry beyond 30 days. The position maintained by the bank at the end of day within the stipulated limit prescribed by the Bangladesh Bank. Liquidity risk Responsibility of managing and controlling liquidity of the bank lies with Asset Liability Committee (ALCO) that meets at least once in a month, Asset Liability Management (ALM) desk being primarily responsible for management of liquidity risk closely monitors and controls liquidity requirements on a daily basis by appropriate coordination of funding activities. A monthly projection of fund flows is reviewed in ALCO meeting regularly. On monthly basis, ALCO monitors liquidity management by examining key ratios, maximum cumulative outflow, upcoming funding requirement from all business units, asset-liabilty mismatch etc. ALCO ‘also monitors concentration of deposits on large situational depositors which is volatile in nature. ALCO reviews liquidity requirement of the Bank, the maturity of assets and liabilities, deposit and lending, pricing strategy and the liquidity contingence plan. The primary objective of the ALCO is to monitor and avert significant volatility in Net interest income (Nil), investment value and exchange earnings. Money Laundering Risk Money Laundering Risk arises from non-compliance of money laundering related instructions of the regulatory body. It's consequence are dire & far reaching and may be In the form of financial penalty, reputation loss, legal hharassment and even the risk of sustainability. Weakness in money laundering prevention and combating terrorist financing may lower the image of the Bank in local & global environment. It may also reduce the confidence of the stakeholders. For involvement in money laundering & terrorist financing, the regulatory bodies may impose restrictions in expansion of business and Bank may lose the market share. Banks around the globe may be unwilling to establish correspondent banking relationship If money laundering prevention and ‘combating financing of terrorism status are not up to the mark, The following initiatives have been taken by our Bank to comply with the requirements of Bangladesh Financial Intelligence Unit (BFIU}, Bangladesh Bank. Central Compliance Unit (CCU) at Head Office and Branch Compliance Unit (BCU) at branch level have been formed headed by Chief Anti-Money Laundering Compliance Officer (CAMLCO) and Branch Anti-Money Laundering Compliance Officer (BAMLCO) respectively. Policy Guideline on Anti Money Laundering (AML) and Combating Financing of Terrorism (CFT) has been revised & updated complying with Bangladesh Bank's instruction & circulars/circular letters. Uniform Account Opening Form was introduced where KYC is @ must. As per Money Laundering Prevention Act 2012, Bangladesh Bank's instruction and BFIU Master Circular no. 19, dated September 17, 2017; branches have been instructed to obtain complete & accurate information of the clients while establishing banking relationship. Our HO, IT Business Division are maintaining “Complete Customer Database” centrally. 33