National Bank asked to improve financial health

National Bank Ltd has been instructed by the central bank to mend its financial health by this year after its major indicators deteriorated alarmingly in the first nine months of 2017.

The instruction came at a meeting with the first-generation private bank's top brass on the New Year's Eve.

“We have not arranged such a meeting with a single bank in recent years,” said a Bangladesh Bank official who attended the meeting. 

At the end of September last year, the bank's classified loans stood at Tk 3,027 crore, up from Tk 1,343 crore in December 2016, according to data from the BB.

During the period, its Special Mention Accounts (SMAs) swelled 2.5 times to Tk 2,724 crore.

SMAs are those accounts that show symptoms of becoming non-performing loans. Typically, loan accounts that miss instalment payments for two consecutive months are marked under the SMA category.

NBL's capital base shrank to Tk 675 crore in the first nine months last year from Tk 1,011 crore in December 2016.

It had a provisioning shortfall of Tk 861 crore at the end of September in contrast to Tk 123 crore at the end of December 2016. During the period its loss-making branches went up to 36 from 33.

“NBL is one of the largest banks in the banking industry considering the volume of its assets and liabilities. So, the bank's sound health is highly important for the entire banking industry,” the BB official said.

At the meeting, which was presided over by BB Deputy Governor SM Moniruzzaman, NBL was categorically asked to contain its default loans and SMAs and exercise due diligence while sanctioning fresh loans.

It was also asked to ensure corporate governance. NBL's Managing Director Choudhury Russel Ahmed, Additional Managing Director MA Wadud and Deputy Managing Director ASM Bulbul attended the meeting.

They responded positively to the central bank's instructions and agreed to prop up the bank's financial indicators by this year, according to the BB official.

“We have already started the process to improve our financial indicators in line with the central bank's suggestions,” said a top official of NBL on condition of anonymity.

The central bank had called the meeting considering the indictors as of September, but NBL's financial health has rebounded remarkably towards the year-end, he said.

He went on to cite the bank's SMAs at the end of December 2017 as a case in point. It was less than Tk 250 crore, according to the NBL official.