Leading by example: EBL

Bangladesh has an excess number of banks at present, which has given rise to unhealthy competition, said Ali Reza Iftekhar, managing director of Eastern Bank Limited.

"Time has come to merge the banks as the financial health of many of them is very weak," he told The Daily Star in an interview recently.

Some banks are making losses year after year, he said.

"They have no right to do it, putting public money at risk.  If any international rating agency rated the banks neutrally, many banks will have to be merged."

Eastern Bank, which marks 25 years of operation tomorrow, though is seeing all its financial indicators improve consistently.

In 2016, the bank registered the lowest default loan rate among banks: 2.69 percent against the industry average of more than 9 percent. Its net profit in 2016 was Tk 265 crore, up 19.37 percent from a year earlier.

For the second straight year, EBL was awarded the 'Best Bank of Bangladesh' by Euromoney, a London-based monthly magazine focused on business and finance, in a ceremony held in Hong Kong on July 13.

Since 2013, the bank has been winning the 'Best Retail Bank in Bangladesh' award of The Asian Banker, a Singapore-based financial publication.

It is the first bank in the country to be rated by Moody's Investors Service this year.

But EBL's path to success did not come so easily.

Its success was full of struggle since its inception in 1992 from the ashes of the then-collapsed BCCI (Bank of Credit and Commerce International).

The bank was restructured as per the guidelines of the central bank and some depositors of the BCCI got shares in the new bank and became directors.

And thus began the journey of EBL -- with Tk 365 crore in negative capital. The directors did not take any dividends and fees until it made profits, which happened six years later.

Iftekhar, who joined the bank in 2004 as a deputy managing director and assumed the office of the managing director and CEO in 2007, credits the performance to the bank's 1,584 employees, garnered through a thoughtful human resource policy.

"We started our journey from negative balance and went on to become one of the most profitable banks in the country and it is down to efficient management of human resource."

EBL has adopted an international standard policy for human resource department to give the bank an institutional shape.

No high official, even the managing director, can influence recruitment. As a result, any changes in the top management cannot interrupt the banking activities, he said.

"We reward the good performers with huge financial benefits and are strict against the non-performers, sometimes saying goodbye to them," he said, adding that the bank also invests substantially on skill development.

He also spoke at length about the bank's "Speak up" policy, which saved EBL from probable reputation damage and financial loss in different times.

The policy means if employees find any activity of their colleagues that can cause financial harm for the bank or damage the reputation, they will inform it to the appropriate authority.

For instance, a female employee of EBL's old Dhaka branch once found a teller's activities to be suspicious and promptly informed the office authority under the 'speak up' policy.

Following the information, the bank discovered that the teller was taking money from the till regularly. The teller was removed and the female employee rewarded for protecting the bank from probable financial loss, Iftekhar said.

EBL also invests substantially for skill development of its employees as well.

Iftekhar also touched upon the state of the banking industry.

He identified three causes behind the rising default loans, the bane of the industry: weakness in project analysis, lack of skilled manpower and monitoring.

Project analysis is of the essence in granting loans but banks still give priority to mortgaged property instead of looking at project viability.

If the project becomes viable and have adequate cash flow, the loan will be out of default risk, even if there is no adequate collateral. 

"The loan recovery from mortgaged property is very insignificant, so banks should give loans analysing project viability."

EBl is also expanding its footprint beyond the four corners of Bangladesh.

In 2013, it set up EBL Finance (HK) Limited in Hong Kong to support the garment sector. It has an outpost in Myanmar and is also planning to open a full-fledged subsidiary in India and a representative office in China.