More than four-fifths of the bad loans in Bangladesh’s private commercial banking sector are concentrated in just 10 lenders, underscoring how a relatively small group of troubled banks continues to weigh heavily on the entire sector.
At the centre of that concentration is Islami Bank Bangladesh, which carried the largest burden among private lenders, with nearly Tk99,000 crore in classified loans, almost a quarter of the entire private banking sector’s bad loans. More than 52 per cent of the bank’s total loan portfolio was classified at the end of June.
At the end of June, private commercial banks held Tk433,704 crore in classified loans. Of that, Tk357,642 crore, or more than 82 per cent, was concentrated in just 10 banks, according to an analysis of Bangladesh Bank’s latest classified loan data.
An even sharper concentration emerges from the ownership history of those lenders. Five of the top 10 banks- Islami Bank Bangladesh, First Security Islami Bank, Social Islami Bank, Union Bank and Global Islami Bank- had been under the control of controversial businessman Saiful Alam Masud, widely known as S Alam.
Together, the five banks accounted for Tk230,687 crore in classified loans. That was around 64.5 per cent of the bad loans held by the top 10 private banks and more than 53 per cent of the entire private commercial banking sector’s classified loans.
Several other banks on the list had also long been associated with politically influential business groups.
EXIM Bank was controlled by Nassa Group Chairman Nazrul Islam Mazumder, IFIC Bank by Beximco Group’s Salman F Rahman, National Bank by the family of late Sikder Group Chairman Zainul Haque Sikder and Premier Bank by Premier Group Chairman HBM Iqbal. All had close ties with the former Awami League establishment, while some were directly involved in politics.
AB Bank, by contrast, has long been associated with former BNP foreign minister M Morshed Khan.
Islami Bank Bangladesh carried the largest burden among private lenders, with nearly Tk99,000 crore in classified loans- almost a quarter of the entire private banking sector’s bad loans. More than 52 per cent of the bank’s total loan portfolio was classified at the end of June.
First Security Islami Bank ranked second, with Tk60,645 crore in classified loans. More than 97 per cent of its loan portfolio was classified, leaving almost the entire book impaired.
EXIM Bank followed with about Tk38,000 crore in bad loans, while Social Islami Bank had nearly Tk30,000 crore and Union Bank more than Tk27,000 crore.
The top-10 list also includes IFIC Bank, National Bank, AB Bank, Global Islami Bank and Premier Bank. IFIC and National Bank each had close to Tk28,000 crore in classified loans, while AB Bank had more than Tk20,000 crore. Global Islami Bank’s classified loan ratio exceeded 97 per cent.
Five of the 10 banks have since been merged into Sammilito Islami Bank: First Security Islami Bank, EXIM Bank, Global Islami Bank, Union Bank and Social Islami Bank.
The concentration of bad loans is only one part of the problem. A second vulnerability is emerging from severe provisioning shortfalls.
Banks are required to set aside provisions against expected losses from classified loans. But several of the weakest private banks have failed to maintain the required buffer.
At the end of June, private commercial banks were required to hold Tk365,204 crore in provisions. Actual provisions stood at Tk216,855 crore, leaving a net shortfall of about Tk148,349 crore.
The largest gap was at Islami Bank, where the provision shortfall reached Tk82,334 crore. National Bank followed with a shortfall of Tk23,326 crore, IFIC Bank Tk21,894 crore and Premier Bank nearly Tk11,971 crore.
