1.
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December 08, 2018
BUYRECOMMENDATION

2.
Existing Deposit & Loan Portfolio of BRAC Bank
20%
32%
48%
SME Corporate Retail
41%
39%
20%
SME Corporate Retail
DEPOSIT PORTFOLIO (2017) LOAN PORTFOLIO (2017)
Retail
F O C U S
Corporate Corporate
F O C U S
SME
Source: Annual Report, 2017

3.
SNAPSHOT OF FUTURE
In Mid-2018 Inaugurated
Agent Banking Service
2018
Launching Agent Banking App
for agents & clients by January &
April respectively
2019
2019
2023
Focusing on agent baking services
aiming to reach 500 agents
Spreading Geographically
Across the Country
Increasing
SME Loan Portfolio to 50% Targeting 5000 Agents
in Agent Banking
Corporate Segment
restructuring Source: Earning Disclosure

4.
35
50
65
80
95
BDT 69.40
Closing Price
18th November, 2018
BUY
RECOMMENDATION 11.03%
UPSIDE
BDT 76.94
Target Price
Outlier in
The Industry
Significant Balance
Sheet Growth
Strong Operating
Performance
Outstanding Growth
Potential in bKash

5.
INVESTMENT THESIS
Outlier in
The Industry
Significant
Balance Sheet
Growth
Strong
Operating
Performance
Outstanding
Growth Potential
in bKash
1 2 3 4

6.
Increase in Deposit Growth even in distressed situation
Deposit Growth
19.53%
21.32%
12.12%
16.22%
11.70%
13.59%
2017 2018H1
Outlier in
The Industry
7Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significance Balance
Sheet Growth
BRAC Bank Average of Peers Industry Average
1.67xGrowth
of Industry Average
In 2017
1.57xGrowth
of Industry Average
In 2018
Still BRAC Bank maintains
25% to
26%
NATIONAL
SAVINGS
CERTIFICATE
Savings flow to NSC creates
pressure on bank deposit growth
SAVINGS
Source: Earning Disclosure, Peer’s Annual Reports, Bangladesh Bank Financial Stability

7.
BRAC Bank Outperforms Industry & Peers in Asset Quality
6.49%
5.90%
3.56%
8.90% 8.80%
9.30%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2013 2014 2015 2016 2017
BRAC Bank Indsutry
NPL: BRAC Bank vs. Industry
3.56%
5.23%
9.30%
2017
NPL in 2017
BRAC Bank Average of Peers Industry Average
R ATION A LES: • CREDIT POLICY • RECOVERY SYSTEM • CORPORATE GOVERNANCE
Outlier in
The Industry
8Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significance Balance
Sheet Growth
Source: BRAC Bank Annual Report, Peer’s Annual Reports, Bangladesh Bank Financial Stability

8.
21.30%
17.56%
13.81% 12.83%
10.40%
9.30%
2017 2018H1
Optimum Loan Portfolio Mix Ensures Superior Profitability
1.77%
1.53%
1.04%
0.89%
0.70%
0.60%
2017 2018H1
ROE ROA NIM
6.65%
6.89%
3.65%
4.09%
2.00%
3.2…
2017 2018H1
Outlier in
The Industry
9Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significance Balance
Sheet Growth
BRAC Bank Average of Peers Industry Average
PEER
Companies
Source: BRAC Bank Annual Report, Peer’s Annual Reports, Bangladesh Bank Financial Stability

9.
THE OUTLIER
BRAC Bank is the Outlier in the Industry
Outlier in
The Industry
10Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significance Balance
Sheet Growth
NON PERFORMING LOAN
RETURNONEQUITY
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
0%5%10%15%20%25%
PEER
INDUSTRY
Source: Team Assessment

10.
Outlier in
The Industry
Significant
Balance Sheet
Growth
Strong
Operating
Performance
Outstanding
Growth Potential
in bKash
Strong Deposit Growth
Low NPL
High Profitability
1 2 3 4
INVESTMENT THESIS

11.
Positive GDP Growth, Financial Inclusion & Remittance will drive Savings
25.00%
26.00%
27.00%
28.00%
29.00%
30.00%
31.00%
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Gross National Savings (As a % Of GDP)
2.6
1.7
-1.7
1.3
0.2
-0.7
0.1
2.1
2.6 2.4
3.1
3.6
2
2.4
2.8
4.1
6
3.4
2.9 2.8
3.5
-3
-2
-1
0
1
2
3
4
5
6
7
Bahrain UAE Kuwait Qatar Oman Saudi Arabia GCC
2017 2018 2019
GCC’s Economic Growth (GDP) outlook
Real GDP Growth Expectation of BD (2018-19E)
ADB
7.5%
7th 5 Year Plan
7.8%
59%of the people are
FINANCIALLY
EXCLUDED
Outlier in
The Industry
12Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Source: Oxford Economics, BBS

12.
SME, Retail & Agent Banking will drive both deposit & CASA Ratio
40.80%
41.80%
42.80%
43.80%
44.80%
45.80%
2018 F 2019 F 2020 F 2021 F 2022 F 2023 F
CASA Ratio Projection 500 Agents 2019E
5000 Agents 2023E
AGENT BANKING
300
SME Office
Agent banking
transfer
20mn
BDT Portfolio
each
Real time digitalized solution
Agent’s APP Customer’s APP
28%
SME
36%
Retail
-4%
Corporate
Deposit Growth in 2016 Q3 - 18 Q3
50.86%
In Agent
Banking
40.15%
In Overall
Banking Industry
10.71%
Higher in
Agent Banking
Comparison of CASA Ratio
Lender Banker
SME Division
Rationale
Outlier in
The Industry
13Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Source: Earning Disclosure, Bangladesh Bank

13.
SME will be at the core of Loan Portfolio
20.00%
30.00%
50.00%
Retail Loan Corporate Loan SME Loan
Loan Portfolio Mix (2023E)
31
76
87
2015
2016
2017
New Corporate Customers
Geographic
Expansion
Cross-selling Loan
Products
More focus on trade
transaction & Non-
funded income
Customer
centric Product
Relationship Based
Banking Approach
Small ticket
corporate clients
SME 1
2
3
Retail
Corporate
Outlier in
The Industry
14Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Source: Earning Disclosure, Team Assessment

14.
Outlier in
The Industry
Significant
Balance Sheet
Growth
Strong
Operating
Performance
Outstanding
Growth Potential
in bKash
Positive Macro Outlook
CASA Ratio Growth
Outstanding Loan portfolio mix
1 2 3 4
INVESTMENT THESIS

15.
Growing CASA ratio & SME-Retail Loan will increase NII
13,130
15,919
18,988
22,554
27,161
32,554
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2018E 2019E 2020E 2021E 2022E 2023E
BDTinMillion
Projected NII
2019E 2020E 2021E 2022E 2023E
Spread 6.24% 6.44% 6.46% 6.61% 6.72%
NII Growth 21.24% 19.28% 18.78% 20.43% 19.86%
Spread & NII Growth Rate
19.91%
CAGRCost of
Fund
CASA
Ratio
Cost of fund is approximately 400 basis points
lower in CASA than the fixed deposits
Interest
Rate
Income
SME &
Retail
Loan
Interest yield can be 400-500 basis point
higher in SME loans
Net Interest Income Drivers:
Outlier in
The Industry
16Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Source: Team Assessment

16.
Transaction & Trade Based Customer will increase Non-funded Income
3,294
3,561
3,908
4,317
4,795
2019 F 2020 F 2021 F 2022 F 2023 F
BDTinMillion
Projected Commission, Exchanges & Brokerage
13.82%
CAGR
Vanilla
Lending
Strategy
Transaction
& Trade
Based
Customer
Export-Import
Growth
Credit Card
Growth
518
725
915
1200
261
436
586
658
779
1161
1501
1858
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2014 2015 2016 2017
USDMillion
Import Export Total
Trade Business of BRAC Bank
25%
347 mn
32%
265 mn
15%
81 mn
Growth
Rate
Outlier in
The Industry
17Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Source: Earning Disclosure, Team Assessment

17.
Digitalization & decrease in salaries growth will reduce Cost to Income Ratio
Projected Cost to Income Ratio
50.74%
49.74%
48.45%
46.64%
45.01%
42.00%
43.00%
44.00%
45.00%
46.00%
47.00%
48.00%
49.00%
50.00%
51.00%
52.00%
2019E 2020E 2021E 2022E 2023E
11.85%
31.22%
13.40%
11.24%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2016 2017 2018 2019 E 2020 E 2021 E 2022 E 2023 E
Salaries Growth Rate
Will reduced to
45% from 50%
Decrease in Salaries Growth rate
DIGITALI
ZATION
INTRODUCING APPS
Core Banking App
Agent Banking App
System Automation
Loan Origination
Cash & Document Management
Universal Banking System
Outlier in
The Industry
18Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Source: Team Assessment

18.
7.1%
4.8%
5.6%
4.0%
2.7%
3.2%
2.8%
2.0%
5.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
SME Retail Corporate
2015 2016 2017
Strong Recovery System & Lowering Large Customer Concentration will keep NPL low
Expected NPL 3.5%
Segment wise NPL
Corporate
Asset Quality – KPI for SME
Relationship Officers
Collection team works with
the recovery team & the business
team
Lower large
customer concentration
Retail
SME
Recovery team & Legal team
working together
15 years of experience
Outlier in
The Industry
19Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Source: Earning Disclosure, Team Assessment

19.
Outlier in
The Industry
Significant
Balance Sheet
Growth
Strong
Operating
Performance
Outstanding
Growth Potential
in bKash
NII & Non-funded income Growth
Cost to Income Ratio Decrease
Net Profit Increase
1 2 3 4
INVESTMENT THESIS

20.
NFIS will ensure MFS Subscriber Growth
59%Of the people are
FINANCIALLY
EXCLUDED
17%Have Bank
Accounts
MALE
52%
Have MFS
Accounts
FEMALE
7%
Have Bank
Accounts
27%Have MFS
Accounts
Outlier in
The Industry
21Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
NATIONAL FINANCIAL
INCLUSION STRATEGY
High MFS
Penetration
Source: NFIS

21.
Need for digitalization & Service Improvement in MFS
0
10
20
30
40
50
60
70
80
0
1
2
3
4
5
6
7
8
2014 2015 2016 2017 2018 (sept.)
No. of Daily Average transaction (mn)
No. of registered clients (mn)
Registered
Clients
Total No. of
Transactions
66.7
Millions
6.87
Millions
MFS Growth
0 50 100 150 200
2014
2015
2016
2017
2018
Internet (mn) Mobile (mn)
Mobile Phone & Internet Subscriber Growth
Outlier in
The Industry
22Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Mobile Phone
Subscriber
Internet
Subscriber
155
Millions
91
Millions
106
Age:
15 – 64 Years
mn people
Source: BTRC, Bangladesh Bank

22.
High Market Share, ALIPAY Partnership & Technical capabilities will drive growth
Outlier in
The Industry
23Outstanding Growth
Potential in bKash
Strong Operating
Performance
Significant Balance
Sheet Growth
Strategic
Partnership
Large Retail
Network
Market
Share
Capturing Value from
future MFS growth
Best Financial Service Technology
Hidden Value from Additional
New Services
80%
16%
4%
bKash
Rocket
Others
1
2
3500+ Outlets
350+ Brands
Competitive advantage will help maintain
footprint in payment system
Source: Bangladesh Bank, bKash, Team Assessment

23.
Outlier in
The Industry
Significant
Balance Sheet
Growth
Strong
Operating
Performance
Outstanding
Growth Potential
in bKash
MFS Growth
ALIPAY Partnership
Future Hidden Value
1 2 3 4
INVESTMENT THESIS

24.
BRAC Bank has a high Upside Potential
RELATIVE
VALUATION
10%
SUM OF PARTS
VALUATION
90%
BDT
76.94
BUY
Blended
Target Price
11.03%
Upside
Potential
Source: Team Assessment

25.
BRAC Bank is the biggest value driver with Intrinsic Value of 63.11
Risk Free Rate (20 Year T-Bond) 7.94%
Liquidity Risk 1.00%
Business Risk 2.00%
Technological Risk 1.00%
Regulatory & Political Risk 2.00%
COST OF EQUITY 13.94%
Cost of Equity (Build up Method)
Bangladesh: 5% till 2050
Developed Country: 2-3%
Average GDP Growth Rate
13.94%
Cost of
Equity
BDT
63.11
Value of BRAC
Bank (Solo)
3%
Terminal
Growth
Cost of equity derived from CAPM is
lower than that of 10 Year T-Bond
RESIDUAL INCOME VALUATION
Source: Team Assessment

26.
bKash bearing a value of BDT 13.09 per share
Peer Multiples
14.24%
Cost of
Equity
Residual
Income
14.55
Relative
Valuation
50% 50%
11.63 13.09
Determination of Value
4.00%
Terminal
Growth
RESIDUAL INCOME Relative Valuation
Source: Team Assessment

27.
Profitability of BESL and BRAC Saajan reflected in their valuation
BDT
2.65
Free Cash Flow
to Equity
BDT
0.38
Book Value
to Equity
BDT
1.78
Free Cash Flow
to Equity
Source: Team Assessment

28.
Sum of Parts Valuation
BDT 63.11
BDT 13.09
BDT 2.64
BDT 1.78BDT 0.38
BDT
81.00
INTRINSIC
VALUE
Source: Team Assessment

29.
Relative Valuation
1.03
1.15
1.35
1.75
1.13
P/BV
Multiple
0.15
0.15
0.40
0.15
0.15
WEIGHT
Weighted
Average
P/BV Multiple
BRAC Bank
BV
31.1
BDT
40.40
RELATIVE
PRICE
1.299
Source: Peer’ s Annual Reports, DSE Team Assessment

30.
Impressive Growth Metrics & Different Business Model Results in High Premium
1.13
1.75
1.15
1.35
1.03
2.79
0
0.5
1
1.5
2
2.5
3
City Bank MTB EBL DBBL Bank Asia BRAC
Bank
18.35%
13.20%
11.41%
15.90%
10.21%
21.30%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
City Bank MTB EBL DBBL Bank
Asia
BRAC
Bank
-1.89%
20.39%
3.14%
-9.84% -8.99%
53.28%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
City Bank MTB EBL DBBL Bank Asia BRAC Bank
Premium Behavior
on P/BV multiple
ROE Net Profit Growth CAGR (Last 2 Years)
P/BV Multiple
Cannot Capture
bKash’s Value
Source: Peer’ s Annual Reports, DSE Team Assessment

31.
BRAC Bank has a high Upside Potential
RELATIVE
VALUATION
10%
SUM OF PARTS
VALUATION
90%
BDT
76.94
BUY
Blended
Target Price
11.03%
Upside
Potential
Source: Team Assessment

32.
Less Downside Risk Related to Changes in Cost of Equity & Terminal Growth Rate
12.94% 13.44% 13.94% 14.44% 14.94% 15.44%
4.00% 88.27 83.48 79.14 75.19 71.57 68.24
3.50% 86.60 82.09 77.99 74.23 70.78 67.58
3.00% 85.10 80.84 76.94 73.36 70.04 66.97
2.50% 83.75 79.70 75.99 72.55 69.37 66.41
2.00% 82.52 78.67 75.11 71.82 68.75 65.89
1.50% 81.40 77.72 74.31 71.14 68.18 65.40
Cost of Equity
Terminal
Growth Rate
SENSITIVITY ANALYSIS
Source: Team Assessment

33.
Favorable Growth Variables & Efficiency can further increase the value of BRAC Bank
BDT 92.49
[+ 20.21%]
BDT 66.97
[- 12.96%]
BDT 76.94
BLUE SKY
GREY SKY
growing at a 1.5% rate per yearCASA Ratio
consisting 55% of the portfolioSME Business
growing at 7% per yearSalary Per Employee
is 12.94%Cost of Equity
growing at a 0.5% rate per yearCASA Ratio
consisting 45% of the portfolioSME Business
growing at 9% per yearSalary Per Employee
is 14.94%Cost of Equity
TARGET PRICE
Source: Team Assessment

34.
Major Risks For BRAC Bank
PROBABILITY
IMPACT
Low Moderate High
LowModerateHigh
Losing Key
Staffs
Credit Risk:
Regulatory Risk
Exchange
Rate Risk
Liquidity Risk
High NPL rate in SME
Loan
Increasing
Competition In MFS
Political Risk
Failure to execute
future growth plans
Increase in
Corporate Tax
Regulatory
Risk2
Increasing
Competition In
MFS
3
High NPL rate
in SME Loan1
Source: Team Assessment

35.
High NPL may affect Asset Size & Profitability
RISK MITIGATION
Rate of NPL in SME Loan
For
Commercial Banks40%
up to
For
Specialized Banks35%
up to
15 Years of Experience
Strong Loan Disbursement
& Recovery System
High NPL in SME Loan Portfolio
Source: Financial Express

36.
Regulatory risk may affect the profitability
RISK MITIGATION
Pressure to cut
down the SPREAD to Lack of enforceable
Mechanism
Post election, pressure on
lending will decrease
Regulatory Risk
LESS
THAN
5%
Source: Daily Star

37.
Increasing competition may hinder growth
RISK MITIGATION
18 MFSs increase competition
Strong Network Effect
Technological superiority due
to ALIPAY partnership
Increasing Competition in MFS
Growing Marketing Expenses

38.
35
50
65
80
95
BDT 69.40
Closing Price
18th November, 2018
BUY
RECOMMENDATION 11.03%
UPSIDE
BDT 76.94
Target Price
Outlier in
The Industry
Significant Balance
Sheet Growth
Strong Operating
Performance
Outstanding Growth
Potential in bKash

39.
DISCLAIMER
This presentation is created solely for the purpose of participating in the CFA Institute
Research Challenge 2018 Bangladesh Round. We analyzed the industry and company
for that purpose only. We won’t be held liable for any investment decision made based
on the recommendation in this presentation.

40.
`
December 08, 2018
BUYRECOMMENDATION