Bangladesh Small Industries and Commerce Bank Limited (Basic Bank) is looking to merge with the City Bank PLC, a decision that was made during a meeting held at the Bangladesh Bank (BB) on Monday.
This comes on heels of Padma Bank’s merger with Export Import (Exim) Bank of Bangladesh, as well as ongoing discussions regarding Bangladesh Development Bank PLC merging with Sonali Bank and Rajshahi Krishi Unnayan Bank with Bangladesh Krishi Bank.
The central bank, in a meeting with top officials of City Bank, directed the private bank to prepare to acquire a weak bank, a top official of the central bank said.
In response, City Bank expressed its interest to take over the assets and liabilities of Basic Bank.
The meeting was presided over by central bank Governor Abdur Rouf Talukder, with City Bank Chairman Aziz Al Kaiser and Managing Director (MD) and CEO Mashrur Arefin.
After the meeting, City Bank Managing Director and CEO Mashrur Arefin told the media that merger plans were shared with the central bank.
“The City Bank is still reviewing the health of a few weak banks to be selected for a merger. Then the selection will be presented to the board for approval. Primarily, we will restructure the weak bank for three to four years and then merge it with the City Bank,” he explained.
The government earlier took the decision in principle to merge four state banks -- Bangladesh Development Bank with Sonali Bank and Rajshahi Krishi Unnayan Bank with Bangladesh Krishi Bank.
Top officials of four banks were informed about the decision at a meeting last week.
Last month, Shariah-based Exim Bank agreed to take over the struggling Padma Bank.
Then, another decision of mergers was taken in a meeting between Bangladesh Bank governor Abdur Rouf Talukder and managing directors of Bangladesh Development Bank PLC, Sonali Bank and Rajshahi Krishi Unnayan Bank, as well as senior officials of Bangladesh Krishi Bank at the Bangladesh Bank headquarters on April 3.
Basic Bank's current status
Earlier on March 19, the board of City Bank recommended merging with Basic Bank.
Then the matter was discussed between the boards of both City Bank and Basic Bank. Officials of the two banks discussed this among themselves.
Basic Bank Ltd, a once-trusted and profitable state-owned financial institution, is currently facing a severe financial crisis, struggling to meet its operating expenses.
Following former chairman Sheikh Abdul Hye Bacchu's forced resignation in 2014 due to his alleged involvements in mega scams totalling around Tk4,500 crore, the bank's financial health deteriorated significantly.
The net interest income plunged to Tk139 crore in negative territory, while operating expenses soared to Tk277 crore.
Despite a recapitalization of approximately Tk3,000 crore over the years, Basic Bank's financial condition continued to worsen.
The bank's annual audited report for 2022 revealed alarming figures with operating expenses doubling the operating income of Tk131 crore, a net interest income of Tk246 crore negative, and a loss before provision of Tk127 crore negative.
Earnings per share (EPS) of Basic Bank, which stood at Tk37.7 in 2008, plummeted to over negative Tk37 in 2014.
The bank's financial damage is evident as its EPS remains in negative territory at Tk1.20 in 2022.
