After bleeding Tk 15bn in 2023, National Bank puts merger plan on hold

The four-decade old bank’s losses in the past two years mount to Tk 47.6 billion

The National Bank Limited or NBL initially appeared to agree with the Bangladesh Bank on a possible merger with another bank, but its directors have decided not to set the plan in motion for now.

Riddled with loan scams and irregularities, the four-decade old bank showed some improvements last year by halving its annual losses to Tk 15 billion after suffering Tk 32.61 billion losses in 2022 – meaning total Tk 47.6 billion losses in two years.

bdnews24.com spoke to NBL Chairman Syed Ferhat Anwar on Sunday about the merger plan and the current state of the bank after the latest financial report was published on Dhaka Stock Exchange and Chattogram Stock Exchange websites.

The directors approved the report in a meeting on Saturday, where they also discussed the future of the merger plan.

“No decision on merger now. We’ll take some time to see what happens later,” said Ferhat.

One of the directors talked to bdnews24.com on condition of anonymity because he was not authorised to discuss details with the media.

According to him, all the members of the board agreed that the bank should not go for a merger now.

“Our performance improved in the past few months. Our losses decreased in 2023 compared to the previous year,” the director said.

“We’ve set a target after discussions with the top brass in the management. If we can achieve that target or reach near that, National Bank won’t be merged with another bank.

After Exim Bank and Padma Bank signed an agreement for a merger last month, the boards of Sonali Bank and Bangladesh Development Bank approved their amalgamation in the second week of April.

And City Bank has shown interest in acquiring BASIC Bank in a proposal backed by the central bank.

Amid the merger spree, the central bank reportedly began mediation between National Bank Limited or NBL, the first Bangladeshi private bank founded by a set of entirely local sponsor directors in 1983, and United Commercial Bank Limited or UCB, another bank formed the same year.

Bangladesh Bank Governor Abdur Rauf Taulkder held a meeting with the chairmen, CEOs and directors of the two banks at that time.

When he presented the proposal on a merger amid scams in March, the board of directors was split.

The chairman asked for time to take a final decision as both sides remained adamant, a director said, requesting not to be named. Those opposing a merger also took time to grasp the issue first.

Ferhat had said at that time that discussions for the merger with a “healthy bank” had begun. Talks were held with several banks but the matter had not been finalised, he had said.

But now NBL has made it clear that it has no intention to merge with another bank.

In a notice on its website, NBL said: “The Bangladesh Bank has informed that if a bank does not want a merger, it can do that [stay away from merger].”

According to its financial report, NBL suffered Tk 4.65 loss per share. The bank with Tk 32.2 billion paid-up capital has nearly 3.22 billion shares.

Its net loss per share was Tk 10.13 in 2022.

Because of continuous losses, the board decided not to announce dividends.

Asked what caused huge losses, Ferhat blamed old liabilities. “If the borrowers repay, the problems will be solved. It’s their responsibility to repay.”

He said its spending on interests increased because it had to borrow from other banks and financial institutions to cover a liquidity crisis created by unpaid loans taken by large industrial groups.

“We’ve sent letters to all these organisations for repayment. We’re discussing with the clients who are contacting us. We’ve told them we’ll look into their issues if they stand by the bank ,” Ferhat said.

In nine months of 2023, the bank earned Tk 12.8 billion from interests, but paid more than Tk 22 billion in interest on deposits and loans taken from others.

The amount of loans disbursed by NBL stood at Tk 422.6 billion, including Tk 135.15 billion or 30 percent non-performing credit. Its deposits totalled Tk 412.26 billion.