A bang in mergers and acquisitionsNow BASIC Bank to merge with City Bank

Ongoing mergers and acquisitions in Bangladesh's banking sector gets in high gear now that City Bank decides on coupling with the weakened state-run BASIC, officials said.

The list of amalgamation in the banking industry is getting longer with the latest decision of merger of the crisis-ridden BASIC Bank with the City Bank PLC, officials and bankers said Monday.

The decision on merger comes after a meeting between the high-ups of the privately operated City Bank and the governor of Bangladesh Bank (BB) at the central bank's headquarters on the day.

And this happens to be the fourth merger event the banking industry is to witness after the central bank, as part of the government's financial-sector reform recipe initiated the amalgamation move to bring discipline in the banking operations.

Sources at the BB said City Bank chairman Aziz Al Kaiser and managing director Mashrur Arefin held a meeting with BB governor Abdur Rouf Talukder where the decision on takeover of the state-owned BASIC was made.

Seeking anonymity, a BB officer said now boards of the two banks will start the merger process following the relevant guidelines issued recently.

The central banker also informed that the issue of merger had already been discussed preliminarily in the board of the City Bank PLC. "If the merger happens, both banks will prepare separate balance sheets over next three years."

Managing Director and chief executive officer of City Bank Mashrur Arefin said the strong bank that will voluntarily take in comparatively weak bank will get additional government policy supports. So, the bank is scrutinising the option whether it is merged with any weak bank here.

"First, we will reconstitute the weak bank, and after a span of three years, the balance sheets of both banks will be amalgamated. This is our intention. I cannot say anything more right at the moment," he added.

Contacted for comment on the rolling bandwagon of bank mergers, deputy managing director of BASIC Bank Abu Md Mufazzal, who stands in as top executive of the public bank, said he knew nothing about the developments on merger.

"I came to know about our bank's possible merger with the City Bank through media reports today. This is what I can say for now," said Mr Mufazzal, who holds additional charge as managing director after the bank's immediate-past MD retired on March 31, 2024.

BASIC Bank has been passing through tough times because of an alarming rise in the volume of NPL or non-performing loan which put the bank in trouble in the form of widening provisioning shortfalls and operating losses.

According to the bank sources, the volume of NPLs in the bank had ballooned to Tk 82.04 billion by the end of 2023, which is 63.76 percent of the total advances of Tk 128.68 billion.

The public bank, having entered into Bangladesh's banking business in 1989, suffered an aggregate operating loss of around Tk 40 billion as of 2023. It has been serving its clients across the country with its 72 branches and 32 sub-branches where around 1000 people are employed.

On the other hand, The City Bank PLC started its banking journey in 1983 and listed with the country's both bourses - Dhaka and Chittagong. The bank has been providing its services with 134 branches, 42 sub-branches and 495 agent- banking outlets.

A total of 4866 people have been working for the bank where the volume of NPLs stood at Tk 13.82 billion till 2023, which was 3.52 percent of total outstanding advances worth Tk 392.61 billion.

EXIM Bank started off the process of mergers and acquisitions with last month's takeover of Padma Bank.

The state-owned Sonali Bank, the country's largest commercial bank, decided to take up small-ranked Bangladesh Development Bank Ltd (BDBL) while Bangladesh Krishi Bank (BKB) preliminarily decided to assimilate Rajshahi Krishi Unnayan Bank (Rakub).