'The bank has failed to maintain the requirements of the central bank'
One Bank has come under the microscope of the Bangladesh Bank after a recent inspection team found the management of the 21-year-old institution was failing to maintain its financial health.
The BB inspection team has recommended the appointment of an observer at One Bank, Dhaka Tribune has learnt after speaking with a host of central bank officials.
Subsequently, on Sunday, the BB appointed Sajjad Hossain, general manager of the department of banking inspection-1, as the observer at the bank.
“The bank has failed to maintain the requirements of the central bank. So we deem that it is necessary to appoint an observer to the bank,” said Md. Serajul Islam, spokesperson of the BB.
Generally, the BB appoints observers to banks and non-bank financial institutions when they face a crisis.
Until August this year, the central bank has appointed observers in ten banks, including seven state-run banks --Sonali, Janata, Agrani, Rupali, Bangladesh Krishi Bank, Bangladesh Development Bank and BASIC -- and three private banks -- National, Padma and ICB Islami.
One Bank has been suffering from various problems at the director-level, according to BB officials.
Earlier in July, the central bank removed One Bank Chairman Sayeed Hossain Chowdhury for violating rules.
According to the Banking Companies Act, defaulters cannot hold the posts of director and chairman of any bank, Chowdhury’s company HRC Group has defaulted on its loan payments. Since he is the chairman of the group, he has been made liable for the loan delinquency.
For instance, HRC Shipping Lines, a concern of HRC Group that Chowdhury founded in 1991, had liabilities amounting to Tk 121.4 crore with Standard Bank.
The One Bank board elected his successor ASM Shahidullah Khan for a year’s term on October 15.
The central bank appointed the observer to improve the corporate governance and reduce default loans of at the bank, M. Fakhrul Alam, managing director of One Bank, told Dhaka Tribune on Monday.
“The bank is doing well on several indicators even amid the pandemic. We are trying to improve the bank’s financial health and bring down our default loans,” he added.
At the end of June, the bank’s default loans stood at Tk 1,954.6 crore, which was 9.4 per cent of its total outstanding loans then, slightly higher than the sector’s, according to data from the BB.
The sector’s default loans accounted for 9.2 per cent of total outstanding loans in the first half of 2020.
It was Tk1,854.1 crore at the end of 2019, which is 9.3 per cent of the total outstanding loans.
In the first nine months of 2019, the bank’s net profit stood at Tk 107.4 crore, up 87.5 per cent year-on-year.
Its outstanding loans increased about 4 per cent in the nine months to Tk 22,383.1 crore.
The bank’s total provisioning stood at Tk 42.2 crore in the January-September period, down 68.4 per cent from the end of 2019.
Shares of One Bank, which was listed in 2013, closed at Tk 10.5 on Monday, which is the same as the previous day.
The bank declared 5 per cent cash and 5 per cent stock dividend for the 2019 financial year, which saw it log in about Tk 161 crore in profit, up 14.2 per cent year-on-year.