Team barely managing cfa research challenge 2020

BUY
Team Barely Managing
12 Month Target: BDT 56.8
Last Close (14/12/20 ): BDT 46.30
BRAC Bank Ltd. (DSEX: BRACBANK)
Upside 22.70%

Bangladesh - a Nation with Limitless Possibilities

Mr. Azad Rahman
Furniture Manufacturer

6.5 Lac Businesses
The Story of
Empowering millions

BUY
Recommendation
22.70%
UPSIDE
1 year Holding
period
0
10
20
30
40
50
60
70
80
90
80% Upside case scenarios
BDT 56.8
Target
Price
BDT 46.3
Current
Price
BRAC Bank: As Good As It Gets
Recommendation Business Overview Investment Summary Valuation Risks
Industry Overview

Best in Bangladesh
Corporate
Governance
Largest Shareholder
of MFS market leader
bKash
Dominant
presence In SME
Recommendation: BUY
Battling the unprecedent : Brac Bank As Good As It Gets
Recommendation Business Overview Investment Summary Valuation Risks
Industry Overview

Business Overview
99
40
83
113
44
93
125
46
93
20
40
60
80
100
120
140
SME Retail Corporate
Q3 2018 Q32019 Q32020
SME concentrated loan book to meet founding vision
15%
15%
17%
55%
55%
56%
30%
30%
27%
Q3 2018
Q32019
Q32020
Retails segment contributing to lowest COD
Business Overview Industry Overview Investment
Summary
Valuation Risks
Existing
Existing
New
Market
Product
SME
Banking
Product
Development
Market
Development
Diversification
Digital
Banking
Market
Penetration
New
424 ATMs
89 CDMs
456 SME Unit Office
120 Branches
Bank, B., 2019. Brac Bank annual Report 2019, Dhaka: Brac Bank Limited.

Business Overview
33.4%
20.7%
18.9%
14.0%
6.6% 5.7%
2.1%
-1.0%
Brac
Bank
City DBbl Bank
asia
UCB Prime MTB Ebl
Brac Bank’s Deposits soared because of
Strong Brand Reputation
Ba3
B+
Summary
Valuation Risks
Leading
subsidiaries
in
Dynamic
financial
sectors
ICMAB Awards
SME Bank of the Year – Asia
MasterCard Excellence
Award
Recent
Awards

10%
6%
15%
6%
6%
42%
4%
8%
Agriculture
Communications
Construction
Consumer Credit
Environmental Social
12%
Women
Average training
hour per employee
50 hours
Mean employee
age of
34 years
Equal Opportunity & Efficiency
Governance
21
6
21
10
16
11
11
12
21
13
Islami Bank
Dutch Bangla Bank
Prime Bank
Brac Bank
Bank Asia
Eastern Bank
City Bank
National Bank
United Commercial Bank
Mutual Trust Bank
Number of Board of Directors
The NPL coverage ratio of BRAC Bank
has always remained high to maintain
a vigorous loan loss-loss buffer
5 Independent
directors
Competent and
qualified Board of
Directors
Contribution
Risk
Low
Moderate
High
Low Moderate High
Consumer
Credit
Power
Real
Estate
RMG Trade
SME Manufacturing
Communication Agriculture
Summary
Valuation Risks

10%
15%
20%
25%
30%
35%
40%
45%
50%
300
500
700
900
1,100
1,300
1,500
1,700
May-17
Aug-17
Nov-17
Feb-18
May-18
Aug-18
Nov-18
Feb-19
May-19
Aug-19
Nov-19
Feb-20
May-20
Aug-20
Excess liquid asset
excess liquidity as % of total asst
Historical
highest inflow
of remittances
Injection of
stimulus
Packages
Slash in Policy
Rates
Low
Demand for
capital
machinery
High Public
sector
credit
growth
5%
7%
9%
11%
13%
15%
17%
19%
21%
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
Aug-16
Dec-16
Apr-17
Aug-17
Dec-17
Apr-18
Aug-18
Dec-18
Apr-19
Aug-19
Dec-19
Apr-20
Aug-20
Private Sector Credit (BDT bn)
Private Sector Credit Growth (YoY)
Summary
Valuation Risks
Industry Overview
(BBS), B. B. o. S., 2020. Gross domestic product , Dhaka: Bangladesh Bureau of Statistics (BBS).
(BBS), B. B. o. S., 2020. Labour and Employment , Dhaka: Bangladesh Bureau of Statistics (BBS).

5.0%
7.8%
2.8%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
J-17
A-17
O-17
D-17
F-18
A-18
J-18
A-18
O-18
D-18
F-19
A-19
J-19
A-19
O-19
D-19
F-20
A-20
J-20
A-20
Bank Weighted Avg. Deposit Rate Bank Weighted Avg. Advance Rate
Bank Spread
Though banks were reluctant to implement Single digit lending rate at 9% Cap, Lending rate shrank due to
excess liquidity.
Bank Industry Spread is at one of the lowest in recent Years
Industry Overview
Summary
Valuation Risks
Alo, J. N., 2020. Excess liquidity to make loans cheaper by January. [Online] Available at: https://tbsnews.net/feature/panorama/excess liquidity make loans cheaper january 170956 [Accessed 13 December
Bangladesh, 2020.Government Domestic Borrowing, Dhaka: Bangaladesh
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Jan-19
Mar-19
May-19
Jul-19
Sep-19
Nov-19
Jan-20
Mar-20
May-20
Jul-20
Sep-20
364-days 5 years 10 years
Bond rates on downward trend

Investment Summary
Corporate Governance SME Focus bkash
Capital Base Recovering Spread
1 2 3 4 5

1. Investment Summary
Strong corporate governance and competent Management
A glance at large loans
Large loan 20%
Funded 52%
Non-funded 48%
3.99%
9.30%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
11.00%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Non performing Loans
Brac bank Industry
10
11
11
12
13
16
21
21
21
Brac Bank
Eastern Bank
City Bank
National Bank
Mutual Trust Bank
Bank Asia
Islami Bank
Prime Bank
United Commercial Bank
Number of Board of Directors
Recovering Spread
Capital Base
Corporate Governance SME Focus bKash
Independent Board Members
Required 20% 50% BRAC Bank
ICMAB Best
Corporate Award-
2017,2018,2019

17,115
19,707
23,534
28,780
33,784
3,260
3,389
3,100
3,157
3,038
2015 2016 2017 2018 2019
Tier 1 Tier 2
Strong Capital Base Will Help To Grow Loan Books
5%
7%
9%
11%
13%
15%
17%
Maintained
higher CAR ratio
historically
Forerunner to
build strong
provision base
High Provision
Coverage Ratio
Strong buffer
against upcoming
surge in NPL
Loan book will grow 12.8%
CAGR without additional
stress on asset quality
Recovering Spread
Capital Base
Bank, B., 2020. Brac Bank 3rd QuaterDiscloure, Dhaka: Brac Bank Limted
Banking Industry CAR Ratio
BRAC Bank Capital Base

0.2%
0.2%
0.1%
0.2%
0.2%
0.3%
0.1%
0.1%
0.3%
-0.1%
0.2%
0.2%
-0.2%
0.0%
0.314%
0.0%
0.2%
0.330%
CITY
BANK
EBL BANK
ASIA
DBBL PRIME
BANK
BRAC
BANK
1Q2020 2Q2020 3Q2020
23.5%
0.3%
11.5%
33.7%
40.1%
23.7%
1Q2019
2Q2019
3Q2019
4Q2019
1Q2020
2Q2020
3Q2020
Provision as % profit before provision
6-years average
Strong Capital Base Will Help To Grow Loan Books
Recovering Spread
Capital Base
Bank, B., 2020. Brac Bank 3rd QuaterDiscloure, Dhaka: Brac Bank Limted
Provision Coverage of Peers Provision as % of Profit

Quickly Recovering Spread riding higher Mix of CASA
40.8%
49.2%
55.9%
1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020
CASA
Increased CASA
proportion in deposit
Composition
3.26%
Surge in low cost
deposit from retail
segment and SME
Lower Cost
of Deposit
Risks
Recovering Spread
Capital Base
Strong Brand
Reputation
Improved Digital
Banking Service

4.1% 4.2%
4.0%
6.5%
3.1%
3.4%
5.52%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Higher Spread Despite In Highest Cost Business Model
(As Of Nov’20)
7.40%
4.00%
5.52%
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
7.00%
7.50%
8.00%
Spread 1-year average
Quickly Recovering Spread riding higher Mix of CASA
Risks
Recovering Spread
Capital Base
Bank, B., 2020.Brac Bank 3rd Quater Discloure , Dhaka: Brac Bank Limted
Bank, B., n.d. Selected Macroeconomic Indicators, s.l. l.: s.n
Brac Bank Historical Spread

SME, A Driver Of Economy : BRAC Bank s Competitive Advantage Will Pay Off
59% 58%
52%
40%
29%
25%
0%
10%
20%
30%
40%
50%
60%
70%
% of SME of total GDP
Strong customer relationship
and business Network-Kept NPL
in check
16
30
54
Micro/Cottage Small Medium
Ability to tap on Parent
company-BRAC’s Resources
SME sector growth backed by
government support
Hard to replicate business
model of Brac Bank
SME sectors contribution to total GDP is low compared to Neighboring and comparable countries
Risks
Recovering Spread
Capital Base
Reference: www.bb.org
Trial and Error based learning

19,523
2,595
21,397
92.0%
81.7%
94.1%
74.0%
76.0%
78.0%
80.0%
82.0%
84.0%
86.0%
88.0%
90.0%
92.0%
94.0%
96.0%
-
5,000
10,000
15,000
20,000
25,000
1Q2020 2Q2020 3Q2020
Small loan as % of total SME loan
Small-ticket loans are financed collateral-free with an NPL ratio of 2%, which is less than the NPL 3% of total SME portfolio
Hard To Replicate Business Model
SME, A Driver Of Economy : BRAC Bank s Competitive Advantage Will Pay Off
Recovering Spread
Capital Base
50
8.5
Loan ticket Size (in Lakhs)
Brac Bank
Industry Average
Market Leader in providing
small non funded loan
lakh
lakh
NPL 2.40%
CASA 62%
IDLC, 2019. IDLC monthly business review, Dhaka : IDLC limited.
Bank, B., 2020. Bank Parikrama, Dhaka: Bangladesh .

bKash Is Yet To Reach Its Prime
Send Money(P2P)
Mobile Recharge
Cash Out
Multi Purpose
Payment
Bank Transfers
Bill Payment
Remittance
Donation
Risks
Recovering Spread
Capital Base

Modifying Business Model to Reduce Cost
Increased Payment service
options/merchant
accounts, Recent addition
of Uber Payments
Building a complete One-
stop financial ecosystem
e.g. bill payments, bank
transfers etc.
Cash out Based model to
Transaction based model
Gross Margin to
improve
Significantly in
coming years
Build up float
money to
generate
investment
income
Merchant Accounts
11xIncreased
within 5 years
Risks
Recovering Spread
Capital Base
YOY Gross
Margin Growth
3%
Bank, B., n.d.Selected Macroeconomic Indicators, s.l. l.: s.n
BD, D. R., 2020. MFS sector Review, Dhaka: Data Resouce BD .

15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
Cash out based transactions
Cash out based transactions are on declining trend
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
P2P No. (Million)

2,768
2,938
2,882
3,133
3,265
3,590
4,989
4,526
76%
80%
81%
74%
75%
76%
77%
78%
79%
80%
81%
82%
-
1,000
2,000
3,000
4,000
5,000
6,000
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Bkash Market share
Bkash has been dominating market share of float money
20.7 26.2 28.8 31 38.1
44% 43%
50%
60%
59%
35%
40%
45%
50%
55%
60%
65%
0
5
10
15
20
25
30
35
40
45
2015 2016 2017 2018 2019
Number of customer Active ratio %
Diversified service offering increasing active customer
Risks
Recovering Spread
Capital Base
Bank, B., n.d.Selected Macroeconomic Indicators, s.l. l.: s.n
BD, D. R., 2020. MFS sector Review, Dhaka: Data Resouce BD .

10.63x
14.36x
0.00x
5.00x
10.00x
15.00x
20.00x
25.00x
1.16x
2.00x
0.00x
0.50x
1.00x
1.50x
2.00x
2.50x
3.00x
3.50x
4.00x
Trailing Price to Book value (PB)
Trailing Price to Earnings (PE)
Valuation
Brac Bank has been significantly trading at lower Multiple in recent years
Business Overview Industry Overview
Investment
Summary Valuation Risks

Share Price Performance of peer companies in last 1-year (Rebased)
Brac bank faced one of the highest Price correction due to interest rate Cap
0.45
0.65
0.85
1.05
1.25
1.45
1.65
1.85
15-Jan-20 15-Feb-20 15-Mar-20 15-Apr-20 15-May-20 15-Jun-20 15-Jul-20 15-Aug-20 15-Sep-20 15-Oct-20 15-Nov-20 15-Dec-20 15-Jan-21
Brac Bank City Bank EBL Prime DBBL
Investment

52.50
43.70
48.38
55.20
27.20 27.60
24.32
37.35
15.00
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
60.00
52-weeks Price
range
Residual
Income
Valuations
Price to Book
value
Price to
earnings
Valuation Summary
BRAC Bank valuation Fair value Weight Total
Residual income based 31.80 97%
30.8
Price to book value 41.7 2%
0.8
Price to earnings 49 1%
0.5
Total
32.2
Valuation
Cost of Equity 14%
Investment
Terminal Growth 5%
Cost of
Equity
Relative
Valuation
97% 3% BDT
56.8
Target
Price
Build Up Method

Valuation as on Dec 2020
Company Valuation weightage To BRAC Bank
BRAC Bank 32 100% 32
bKash 50 43.6% 21
Saajan 0.5 75% 0.5
Brac EPL brokerage 1.0 90% 1.0
Brac EPL Investment 1.0 99.9% 1.0
Dividend Yield 1
Total 56.8
Current price 46.30
Total Upside 23%
31.80 4.5% 5.0% 5.5% 6.0%
12% 43.10 43.73 44.45 45.29
13% 39.76 40.17 40.62 41.15
13% 36.81 37.04 37.30 37.59
14% 34.18 34.27 34.38 34.49
14% 31.81 31.80 31.79 31.77
15% 29.68 29.58 29.48 29.36
Valuation
Investment
Sensitivity Analysis
Sum Parts of Valuation

85%
130%
30%
50%
70%
90%
110%
130%
150%
Before
lending
Cap
After
lending
Cap
Operating
cost
before
and
after
lending
cap
12.0%
13% 13% 13%
6.6% 7% 7% 7%
0.0%
2.0%
4.0%
6.0%
8.0%
0.0%
5.0%
10.0%
15.0%
1-Mar 1-Jun 1-Sep 1-Dec
Minor Moderate
High
Impact
of
NPL
on
CRAR
1. Investment Risk
Investment
Summary
Valuation Risks
Higher Formation
Of NPL Than
Expectation
Regulatory Risks
Attributed To Banks
Once Loans Are
Classified
Mitigation:
Strong Provisioning for
NPLs
Prolongation of
Interest Cap for Banks
Mitigation:
Focus on Investment
Income

2. Investment Risk
Lower Than Expected
Private Sector Credit
Growth
Maintaining Low
Cost Of Deposits
Price Pressure
From Nagad On
bKash
Investment
Summary
Valuation Risks
2nd Wave Outbreak
Vaccine program
and fast economic
recovery
Strategic shift from cash-
out based business model
Strong reputation and
improved digital services
Reduction in Cash-out Charge
Post Covid-19
pressure
Mitigations

• Dividend Yields
• Stock Dividend
• ROE
• Industry Peers
• Industry Spread
• Asset Composition
• Increasing Concentration on SME Portfolio
• Valuation of Brac Bank
• Valuation of bKash
• Liabilities Composition
• Deposit Mix
• NPL
• Macroeconomic assumption
• Asset Quality
• Profitability Matrix of Brac Bank
• PE and PB
• Discount Factor
• bKash Market Multiples
• Kenya Story
• Cost to Income Ratio
• Quarterly Bank Industry
• bKash
Appendix Index
• Macroeconomic assumption
• Asset Quality
• Profitability Matrix of Brac Bank
• PE and PB
• Discount Factor
• bKash Market Multiples
• Kenya Story
• Cost to Income Ratio
• Quarterly Bank Industry
• bKash
• Dividend Yields
• Stock Dividend
• ROE
• Industry Peers
• Industry Spread
• Asset Composition
• Increasing Concentration on SME Portfolio
• Valuation of Brac Bank
• Valuation of bKash
• Liabilities Composition
• Deposit Mix
• NPL

Dividend yields
0%
2%
4%
6%
8%
10%
12%
14%
2015 2016 2017 2018 2019
EBL DBBL UCB
PRIME BANK MTB BANK ASIA
IBBL BRAC CITY BANK
Companies 2015 2016 2017 2018 2019
EBL 20% 20% 20% 20% 15%
DBBL 40% 30% 30% 0% 15%
CITY BANK 22% 24% 19% 6% 15%
PRIME BANK 15% 16% 7% 13% 14%
BANK ASIA 15% 0% 0% 5% 10%
IBBL 20% 10% 10% 10% 10%
BRAC 25% 10% 0% 0% 8%
UCB 20% 15% 10% 0% 5%
MTB 0% 0% 0% 0% 5%
Companies 2015 2016 2017 2018 2019
PRIME BANK 8% 9% 4% 7% 8%
CITY BANK 8% 9% 7% 2% 6%
UCB 12% 9% 6% 0% 3%
EBL 5% 5% 5% 5% 4%
IBBL 7% 4% 4% 4% 4%
DBBL 6% 4% 4% 0% 2%
BANK ASIA 8% 0% 0% 3% 5%
BRAC 5% 2% 0% 0% 2%
MTB 0% 0% 0% 0% 2%
Cash dividend in last five years
Dividend yield in last five years
Conservative dividend policy has helped retain higher capital compared to peers

Stock Dividend
Highest Market capitalization in the banking industry
Stock dividend 2015 2016 2017 2018 2019
DBBL 0% 0% 0% 150% 10%
BRAC 0% 20% 25% 15% 8%
MTB 20% 15% 13% 11% 5%
EBL 15% 5% 0% 10% 0%
BANK ASIA 5% 12% 5% 5% 0%
UCB 5% 0% 0% 10% 5%
PRIME BANK 0% 0% 10% 0% 0%
CITY BANK 0% 0% 5% 5% 0%
IBBL 0% 0% 0% 0% 0%

Return on Equity
14%
13%
22% 22%
19%
16%
12.7% 13.1% 12.9% 12.9% 13.0%
ROE Slump Reasons
• Interest rate cap eroded Brac Bank competitive
advantage from Small ticket lending of SME
sector
Going forward we expect ROE to rise driven by
• Operating expenses management
• Managing spread
• Better Asset quality in SME segment
• Increasing participation in SME segment
• Strong control over NPL

ROE and ROA- Banking industry Peers
11.8%
18.3%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
ROE
Peers average
0.9%
1.7%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1 2 3 4 5 6 7 8 9 10 11 12
ROA
Peers average BRACBANK

0% 0%
19%
40%
35% 35% 35% 35%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2017 2018 2019 2020 2021 2022 2023 2024
Dividend payot ratio
0% 0%
2%
3%
3%
3%
4%
4%
0%
1%
1%
2%
2%
3%
3%
4%
4%
5%
2017 2018 2019 2020 2021 2022 2023 2024
Dividen Yeild

0.3%
1.1%1.1%
1.9%
2.0%
1.8%
1.7%
1.3%
1.3%
1.4%1.4%1.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
1 2 3 4 5 6 7 8 9 10 11 12
ROA
14%
13%
22% 22%
19%
16%
12.7%
13.1% 12.9% 12.9% 13.0%
0%
5%
10%
15%
20%
25%
1 2 3 4 5 6 7 8 9 10 11 12
ROE

Brac Bank VS DSEX
Brac Bank has been able to historically out perform DSEX broad Index
0
20
40
60
80
100
120
140
160
180
200
Brac DSEX

Trading Multiple- Price to book value
Brac bank has been trading between PB multiples of 0.77x to 3.64x in last 3 years
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00 PB 0.77X PB 1.49X PB 2.21X PB 2.92X PB 3.64X Price

Industry spread
Brac bank Has been able to maintain higher spread Compared to industry
5.5%
3.4%
6.3%
5.0%
Average Deposit
BRAC Bank Limited Private Banks
7.5%
5.3%
4.2%
3.0%
Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20
Average Spread
12.7%
8.6%
10.5%
8.0%
Average Lending
Slump in business activities due to pandemic

Asset Composition
Investment rise to Offset Low Loan Growth
238 264 269 310 371 412 476
17.5%
11.0%
1.8%
15.2%
19.7%
11.1%
15.5%
0%
5%
10%
15%
20%
25%
0
50
100
150
200
250
300
350
400
450
500
2018 2019 2020E 2021E 2022E 2023E 2024E
7% 6% 6% 5% 5% 4% 2%
5% 4% 7% 6% 6% 6%
6%
8% 12%
22%
18%
13% 14%
13%
75% 72%
60%
66%
72% 72% 74%
5% 5% 5% 5% 5% 5% 5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2018 2019 2020 2021 2022 2023 2024
Cash Balance with others Investments
Loand and advances Fixed and other assets
The asset composition dynamics changed because of
1) Interest rate cap at 9%
2) Low demand for ‘loan and advances’
3) Excess liquidity
Loan and advances is expected to grow at 12.8% CAGR
in next 5 years

Increasing concentration on SME portfolio
Strong Network and customer relationship lead to build up cleaner loan portfolio
67,838
34,215
71,559
83,472
40,741
78,346
80,422
42,313
115,273
114,909
47,564
101,619
2016 2017 2018 2019

Valuation of Brac Bank
Residual income
Approach
FY2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Net Income 541 1,398 2,091 2,436 4,461 5,251 5,521 5,646 5,109 5,993 6,742 7,634 8,801
Book Value 10,155 11,587 17,755 18,815 21,441 25,991 31,638 37,658 42,767 48,760 55,503 63,137 71,938
ROE 5% 12% 12% 13% 21% 20% 17% 15% 12% 12% 12% 12% 12%
ROAE 5% 13% 14% 13% 22% 22% 19% 16% 13% 13% 13% 13% 13%
Equity Charge 1,422 1,622 2,486 2,634 3,002 3,639 4,429 5,272 5,987 6,826 7,770 8,839
Residual Income (24) 469 (50) 1,827 2,249 1,883 1,217 (163) 6 (84) (136) (38)
Terminal value of RI (448)
Present value factor 1.00 0.88 0.77 0.67 0.59
PV of RI (163) 5 (65) (92) (23)
PV of TV (265)
Value of the firm 42,165
No of shares 1,326
Current price 45.9
Value of brac bank conso 42,165
Value per share 31.8

Valuation of Bkash
DCF 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
EBIT*(1-t) 652 830 588(634) (1,066)(124) 433 1,507 3,003 3,565
(+) Depreciation and
amortization 262 214 345 708 767 891 1039 1192 1371 1579
(-)Capex 252 609 858224 472 565 584 680 794
% of revenue
(-) Investments in
working capital (188) (221) (591) 492 186 155 371 1,059(435)
Unleveraged FCF 980 544(193) (1,015) 108 753 1,745 2,635 4,7855,359 6,002 6,722 7,529 8,432 9,191 10,018 10,920 11,903 12,974 14,142
FCF Growth Rate -44% -135% 427% -111% 598% 132% 51% 82% 12% 12% 12% 12% 12% 9% 9% 9% 9% 9% 9%
DCF (1,015) 95 584 1,193 1,588 2,5402,507 2,474 2,441 2,409 2,377 2,283 2,192 2,105 2,022 1,942 1,865
Growth stage-1 12%
Growth stage-2 9%
Termaninal growth rate 8%
Cost of equity 13.5%
Risk free rate 8.04%
Equity risk premium 5.50%
DCF 29,599.66
Terminal value 277,693.69
PV of Terminal Value 36,612.74
Total Value of the firm 66,212.39
Per share value 49.94

Liabilities Composition – CASA on the Rise
13% 12% 9% 10% 9% 9% 8%
68% 68% 74% 73%
72% 72% 72%
11% 11% 6% 7% 10% 9% 9%
9% 9% 10% 10% 9% 10% 11%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2018 2019 2020 2021 2022 2023 2024
shareholders equity Other liabilities
Deposit Borrowings
CASA
234
268
325
339
375
418
468
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
50
100
150
200
250
300
350
400
450
500
2018 2019 2020E 2021E 2022E 2023E 2024E
Deposits Growth (YoY)

Deposit Mix
Low-Cost Retail Driven Deposits
15%
15%
17%
55%
55%
56%
30%
30%
27%
Q3 2018
Q32019
Q32020
3.80%
4.80%
5.28%
5.15%
4.26%
3.90%
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
2017 2018 2019 Q1 2020 Q2 2020 Q32020
COD average

5.99%
3.40%
3.56%
3.10%
3.98%
5.0%
4.5%
4.3%
4.0%
3.5% 3.5%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
5.50%
6.00%
6.50%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
NPL Ratio
NPL Ratio 5 years average
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
Loan provision as of total loan
Provision as % of total loan average
111%
103%
97%
105%
110%
100%
95%
90%
80%
85%
90%
95%
100%
105%
110%
115%
2017 2018 2019 2020 2021 2022 2023 2024
NPL coverage
NPL Coverage average
1.8%
1.7%
1.3%
1.4%
0.9%
0.4%
0.2%
0.4% 0.4%
0.5%
0.4% 0.4% 0.4%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
Provision as % of total asset
provision as % of total asset average
Non Performing loan

13.3%13.1%
13.8%
10.7%
9.4%
12.0%
14%
12%
10%
13%
12%
0.%
2.%
4.%
6.%
8.%
10.%
12.%
14.%
16.%
-
5,000
10,000
15,000
20,000
25,000
2013 2014 2015 2016 2017 2018 2019 2020E2021E2022E2023E2024E
Broad Money (M2) Growth (YoY)
13.5%
14.2%
15.6%
18.1%
13.2%
9.8% 9.6%
14.2%
12.5%
11.6%
15.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
5000
10000
15000
20000
25000
2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Private Sector Credit Growth (YoY)
1.9%
2.0%
1.7%
1.8%
1.9%
2.0% 2.1%
2.2%
2.1% 2.1% 2.0% 2.0%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
-
50
100
150
200
250
300
350
400
450
500
FY2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Deposits of BRAC Deposit as a % of Broad Money
2.1%
2.2%
2.4%
2.4%
2.4%
2.5%
2.51%
2.33%
2.35%
2.50% 2.49% 2.49%
1.9%
2.0%
2.1%
2.2%
2.3%
2.4%
2.5%
2.6%
-
50
100
150
200
250
300
350
400
450
500
FY2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Loan of Brac Loan to Private Sector Credit
Macro economic assumptions

Asset Quality- Sufficient Enough To Contain Risk
2.5%
4.0%
2.8%
3.1%
2.9%
1.5%
2.7%
2.0%
2.3% 2.1%
3.2% 3.2%
5.2%
3.4%
6.1%
1.1%
2.1%
3.1%
4.1%
5.1%
6.1%
7.1%
2015 2016 2017 2018 2019
4.8%
3.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Peers NPL
Peers average BRACBANK
53%
63%
46%
56%
23%
43%
14%
0%
10%
20%
30%
40%
50%
60%
70%
2013 2014 2015 2016 2017 2018 2019
Write off of loans as a % of previous bad loans
11.33%
14.72%
12.23%
12.26%
12.72%
13.67%
15.07%
10%
11%
12%
13%
14%
15%
16%
2013 2014 2015 2016 2017 2018 2019
CAR

Quarterly Brac bank VS Industry
19.9%
2.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
2Q2019 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020
Deposit growth
Brac Bank Peers average
0.330%
0.1%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
1Q2019 2Q2019 3Q2019 4Q2019 1Q2020 2Q2020 3Q2020
Provision for loan loss% of total loan
23.8%
26.3%
11.5%
13.5%
15.5%
17.5%
19.5%
21.5%
23.5%
25.5%
27.5%
1 2 3 4 5 6 7
Investment % of deposit

Profitability Metrics-Brac bank
6%
13%
14%
9%
2%
12%
0%
13%
9%
13%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Operating income Growth (YoY)
6%
20%
-2%
-23%
-10%
22%
-47%
9% 8%
18%
14%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
FY2012 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Non funder Income (NFI) Growth (YoY)
1%
10% 9%
21%
7%
11%
7% 7%
11%
13%
15%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
FY2012 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Operating Expenses Growth (YoY)
54.0%
53.5%
57.0%
54.0%
54.6%
54.8%
55.1%
51.0%
52.0%
53.0%
54.0%
55.0%
56.0%
57.0%
58.0%
2018 2019 2020E 2021E 2022E 2023E 2024E
Cost to income ratio

Banking industry PE and PB
1.52x
1.13x
1.18x
0.99x
0.74x
0.87x
0.00x
0.20x
0.40x
0.60x
0.80x
1.00x
1.20x
1.40x
1.60x
PB Peer PB
10.82x
7.11x 7.34x
9.65x
11.84x
11.13x
0.00x
2.00x
4.00x
6.00x
8.00x
10.00x
12.00x
14.00x
BRACBANK EBL DUTCHBANGL CITYBANK PRIMEBANK BANKASIA
PE Peer PE

Discount factor validation
8.98%
5.84%
4.87%
7.78%
3.96%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
10.00%
10 year T-Bond Rate 5 year T-Bond Rate 2 year T-Bond Rate
6.05%
5.48%
5.96%
5.35%
6.02%
6.44%
5.52%
5.00%
5.20%
5.40%
5.60%
5.80%
6.00%
6.20%
6.40%
6.60%
P2P Inflation Rate
DSEX Return 15.1 %

NIM and Spread
5.5%
6.0%
5.9%
5.7%
5.6%
4.0%
3.9%
4.3%
4.5%
4.6%
5.9%
6.2%
6.1%
5.9%
6.0%
4.5%
4.4%
4.6%
4.6%
4.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
NIM Spread
2.0%
3.6%
3.3% 3.3%
3.1% 3.2%
3.0%
5.8% 5.7%
5.5%
6.0% 5.9%
5.7% 5.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2013 2014 2015 2016 2017 2018 2019
Banking industry NIM Trend
Bank industry Brac

Bkash-market multiples
Market is yet to realize full Potential of Bkash
Price to actives customer Multiples
Active customer of Bkash'2018 18.7
Valuation of Ant financials'2018 750
Implied price to active customer ratio 40.1x
Active customer of Paytm '2020 140
recent valuation of Paytm '2020 16000
Current active customer’2020 22.7
Valuation of Ant financials ‘2018 750
Source: https://www.businesstoday.in/current/corporate/paytm-oyo-byjus-most-valued-unicorns-check-out-others-in-top-10/story/417353.html
40.0x
120.0x
Bkash
PayTm
Revenue to active customer multiples

Impact of Interest Rate Cap
Kenyan real credit growth to private sector dried up due to interest rate cap
8.8%
12.3%
-3.4%
7.4%
21.0%
4.8%
-4.3%
-10.5%
-4.8%
-15.9%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Introduction of interest
cap at 4% in September
2016
• On 2016, Kenyan government imposed
interest rate cap of 4% on lending rate.
• Banks backed off from providing sufficient
loans as lending was unprofitable. SME
sector was the most venerable of all
sectors.
• As they are of highest risk categories,
Banks have to impose higher lending rate
to maintain SME business and operation
cost.
Credit growth to private sector
dried up
Source: https://thefinancialexpress.com.bd/public/views/interest-rate-cap-a-critique-from-global-perspective-1579273936

Trading Multiple- Price to Earnings
Brac bank has been trading between PE multiples of 7.03x to 19.23x in last 3 years
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
PER 7.03x PER 10.08x PER 13.13X PER 16.18 PER 19.23 Price

1.Discount factor validation
Impact of Interest Rate Cap
-30%
-20%
-10%
0%
10%
20%
30%
40%
0
5000
10000
15000
20000
25000
2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Net interest income Growth (YoY)
0.9
1.3
1.4
1.5
1.4
0.5
0.7
0.9
1.1
1.3
1.5
1.7
2015 2016 2017 2018 2019
In
MN
Operating cost per employee

54.0%
53.5%
57.0%
54.0%
54.6%
54.8%
55.1%
51.0%
52.0%
53.0%
54.0%
55.0%
56.0%
57.0%
58.0%
2018 2019 2020E 2021E 2022E 2023E 2024E
0.9
1.3
1.4
1.5
1.4
0.5
0.7
0.9
1.1
1.3
1.5
1.7
2015 2016 2017 2018 2019
In
MN
Operating cost per employee

Loan and advances- percentages
39%
19%
41%
41%
20%
38%
34%
18%
48%
43%
18%
38%
0%
10%
20%
30%
40%
50%
60%
Loan and advances
2016 2017 2018 2019

Dividend yields
73%
50%
47%
38%
34% 31%
34% 32% 33% 33% 33% 33%
0%
10%
20%
30%
40%
50%
60%
70%
80%
FY2012 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Effectiv tax Rate

Bkash
49%
34%
20%
15%
18%
21.0% 20.0% 19% 18.0% 18.0%
0%
10%
20%
30%
40%
50%
60%
0
2000
4000
6000
8000
10000
12000
14000
1 2 3 4 5 6 7 8 9 10
Transation growth
Annual Transaction in BDT BN Growth
64%
66%
68%
70%
72%
74%
76%
78%
80%
82%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
1 2 3 4 5 6 7 8 9 10
Float Money
Wallet balance Market share
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
10,000
20,000
30,000
40,000
50,000
60,000
1 2 3 4 5 6 7 8 9 10
Net revenue
Net revenue Growth (YoY)
0%
5%
10%
15%
20%
25%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1 2 3 4 5 6 7 8 9 10
Opex
Opex as % of revenue

0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
-
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
4,000.00
4,500.00
1 2 3 4 5 6 7 8 9 10
Marketing
Marketing expenses as % of revenue
16.8%
18.1%
24.0%
19.3%
22.0%
22.9%
23.8%
24.7%
25.5%
26.4%
2.8% 3.0%
0.9%
-2.6% -2.7%
-0.3%
0.7%
2.2%
4.0% 4.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2025E
GM and NPAT of bKash
Gross margin NPAT Margin

Dividend yields
Loan 9M-2019 9M-2020 Change
investmen
t 9M-2019 9M-2020 Change Deposit 9M-2019 9M-2020 Change
City 248 297 20.1% DBbl 45 112 148.0% Brac Bank 245 327 33.4%
UCB 325 353 8.5% Brac bank 42 97 133.1% City 246 297 20.7%
DBbl 246 263 7.1% bank asia 56 87 56.7% DBbl 294 350 18.9%
MTB 190 202 6.6% Ebl 42 63 51.0% Bank asia 254 290 14.0%
Brac bank 251 266 6.04% Prime 49 72 46.3% UCB 331 352 6.6%
bank asia 230 235 2.3% UCB 59 75 26.9% Prime 216 229 5.7%
Ebl 239 238 -0.3% MTB 34 35 3.5% MTB 191 195 2.1%
Prime 216 215 -0.5% City 44 44 0.9% Ebl 240 238 -1.0%

83.00%
83.20%
83.70%
81.20%
81.00%
75.40%
75.90%
74.40%
82.00%
80.20%
80.40%
82.20%
71.00%
73.00%
75.00%
77.00%
79.00%
81.00%
83.00%
85.00%
20-Jan
27-Jan
3-Feb
10-Feb
17-Feb
24-Feb
2-Mar
9-Mar
16-Mar
23-Mar
30-Mar
6-Apr
13-Apr
20-Apr
27-Apr
4-May
11-May
18-May
25-May
1-Jun
8-Jun
15-Jun
22-Jun
29-Jun
6-Jul
13-Jul
20-Jul
27-Jul
3-Aug
10-Aug
17-Aug
24-Aug
31-Aug
7-Sep
14-Sep
21-Sep
28-Sep
5-Oct
12-Oct
19-Oct
26-Oct
2-Nov
9-Nov
16-Nov
23-Nov
30-Nov
7-Dec
14-Dec
loan to deposit ratio of BBL

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