AB Bank sets sights on restoring lost glory

AB Bank Ltd has stepped up efforts to cut non-performing loans and improve corporate governance as the country's first private commercial bank desperately seeks to become one of the top lenders again.

"We were number one in many areas. We want to regain the leading position," said Tarique Afzal, president and managing director of AB Bank.

AB Bank has been a pioneer in private sector banking in Bangladesh since its inception in 1982. It was the first private commercial bank to start banking operation, introduce teller systems in branches and give out syndication finance to Biman Bangladesh Airlines.

In a first, it also offered first financing in shipbuilding, used international payments network SWIFT and opened merchant banking wings.

AB Bank was the first lender to have a financial house abroad, open an overseas branch in Mumbai, have a representative office in Myanmar and first to invest in Sri Lanka.

But the burden of a dead mobile operator, Citycell, widespread loan fraudulence, mismanagement and influence of a sponsor director have pulled the once sound AB Bank down in recent years.

However, since taking over the helm in July this year, Afzal set his priority to make AB Bank compliant, protect public money, recover bad loans and increase deposits and profitability.

"We have made it a priority to recover NPLs. We have made significant improvements since December 2018," he said.

Since then, the lender has reduced its NPL by at least 30 percent: from Tk 7,900 crore at the end of December 2018 to below Tk 5,000 crore now. It plans to bring it down further to Tk 4,000 crore by this year.

"We will completely get away from it by 2020."

The bank's deposits rose to Tk 28,000 crore in September this year from Tk 24,000 crore in December last year.

He said the bank has carried out aggressive recovery and parted ways with some bad clients. The bank is mainly following the Negotiable Instruments Act to recover bad loans as fast as possible, since having cases settled at money loan courts takes time.

"I think the door for talks has been shut for clients who have not been repaying their loans for two to three years. I don't see any other way other than litigation to recover the loans."

Arrest warrant has been issued against a large group and a legal notice has been served against another group. Similar steps are underway against some more borrowers, he said.

The tough stance is bearing fruit.

"We are seeing significant results in recovery. People who have not paid us in the last two years are coming back and paying us. I think there has been a great impact among purposeful defaulters."

"Our stance on purposeful defaulters is very clear: we think that they are the criminals of the society and they are irresponsible. They have taken banks' money and have not paid back."

"If we can maintain this aggressive attitude, we will be able to establish that money has to be repaid to banks."

Afzal credited the new board and the management for the new-found confidence.

"Under the board's guidance and supervision, we want to regain our lost glory," he told The Daily Star in an interview recently.

Afzal says he does not think that all businesses are the same. There may be unintentional defaulters.

"But our position is very tough against the borrowers who are not paying back purposefully or using the money for unintended purposes."

Afzal joined AB Bank in 2018 as deputy managing director and head of corporate, legal and regulatory affairs.

Prior to joining the bank, he was the CEO of Sonali Polaris Financial Technology, a joint venture of Sonali Bank and Polaris, India. He was the CEO of Dun & Bradstreet Rating Agency in Bangladesh.

Previously, he worked for Credit Union in Canada and ANZ Grindlays Bank, Standard Chartered, Bank Alfalah, and Brac Bank in Bangladesh.

AB Bank has reduced its focus on large loans and diversified loan portfolios, increasing attention on relatively less risky segments such as SMEs and retail.

However, large loans still dominate the bank's portfolio, standing at about 60 percent and the bank is working to bring it down to 30 percent to 35 percent.

"We are not giving out fresh large loans. We are focusing on SME and retail lending because in SME and retail banking, the risk is less and the premium is high."

It introduced some new products that have been able to attract depositors and small borrowers.

The bank is also setting up new banking booths. The AB Direct is allowing customers to carry out banking online.

"We are repositioning ourselves with ATM locations as well. There are locations where we don't have presence. We are going to increase and reallocate ATM booths."

It is focusing on agent banking. Currently, it has more than 50 agents under the platform and plans to go past 200 by this year and grow it 10 times by next year.

"We are also increasing our customer service focus. It used to be a weak area of the bank and also in the banking sector.

The bank has 104 branches – a number that may not seem large, but Afzal said it is adequate if used efficiently and they can help lending grow by at least 30 percent.

Its full-fledged branch in Mumbai and the representative office in Hong Kong are both profitable, he said.

According to Afzal, every bank has its ups and downs and AB Bank is no exception.

He said the bank's condition is not that bad: It pays employee salary on the 20th day of a month.

"Our clients, whether state-run agencies or individuals, can withdraw any amount of money any time. We have no history of cheque dishonour. We have not caused delays even for an hour in case of correspondence banking."

Speaking about the banking sector, he thinks that the government has taken the right step for the financial sector.

"We are gradually moving towards 9 percent lending rate and 6 percent deposit rate. I think the banking sector is heading towards stability."

An unhealthy competition exists among banks on attracting deposits and it should be brought to an end. Otherwise, the sector would not be able to achieve the targets on the lending rate and deposit rates.

Banks should explore ways to strengthen the economy further and stand by entrepreneurs in a bigger way, he said.

Afzal insists that AB Bank does not face any liquidity crisis. The bank's advance to deposit ratio is within the central bank's limit. In September, the ADR ratio was 84.5 percent, below the central bank ceiling of 85 percent and its peak of 98 percent.

The bank is not lagging behind other banks when it comes to efficient branch and workforce and its interest rate is at par with the market. The bank is far ahead of many banks in case of SME lending and women entrepreneur lending.

"We still keep government deposit. We can give Tk 100 crore to Tk 200 crore in a one-hour notice."

AB Bank is the top collector of bills on behalf of state-run Bangladesh Rural Electrification Board. 

AB Bank has higher NPL compared to other banks largely because some loans were given in the absence of good corporate governance and proper reporting in the past, Afzal admitted.   

"We had weakness in governance issues and we have put in place good governance practices. However, the NPL is not hampering our banking operations."