Syed Mahbubur Rahman, managing director and CEO of Mutual Trust Bank (MTB), stated that merging financially weak banks with other institutions will not solve the ongoing crisis in the banking sector. He emphasized that the full extent of financial distress—including non-performing loans, capital shortages, provisioning requirements, liquidity pressures, and governance issues—must be addressed concurrently.
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At a discussion titled "Financial Condition of the Banking Sector," organized by the Capital Market Journalists Forum and CFA Society Bangladesh on September 19, Rahman noted that non-performing loans (NPLs) have risen dramatically, from around Tk28,000 crore in 2008 to over Tk600,000 crore today, which represents more than 32% of total loans.
He cautioned that many rescheduled loans could revert to classified status in the future. An analysis by CFA Society Bangladesh, using data from Bangladesh Bank, revealed that the NPL ratio stood at 32.8% in June 2026, with the top five banks accounting for 51.87% of total NPLs and the top ten for 73.63%.
Rahman argued that measures such as implementing International Financial Reporting Standard (IFRS) 9 could more accurately depict credit risks and provisioning requirements, potentially putting further strain on some banks' capital positions. He remarked, "There is no such thing as giving Tk50,000 crore today and fixing a bank tomorrow."
On the government's initiative to merge five weak banks, he explained that mergers between a robust bank and a weak or specialized bank could yield operational synergies, but merging two weak banks may fail to produce the desired benefits. Effective mergers would require reducing overlapping branches and management structures to cut operating costs, rather than merely changing ownership or names.
According to the CFA Society's analysis, deposits grew by 10.74% in June 2026, while private-sector credit rose by only 4.47%. However, banks' investments increased by 30.3%, with investments in government securities amounting to 14.1% of total banking sector assets in 2025. Rahman indicated that while this rise could provide short-term income, it could not substitute for the core banking function of lending and accepting deposits. A decline in net interest income, he noted, is detrimental to both individual banks and the sector overall.
Although the sector's net operating profit surged 116% to Tk32,108 crore in 2025, provisioning against bad loans climbed to Tk249,600 crore. Additionally, the capital adequacy ratio fell to negative 2.64% at the end of 2025, below the required minimum of 10%, although 42 banks met this standard, covering 60.51% of total sector assets.
Rahman advocated for increasing low-cost deposits, especially CASA, and leveraging technology to enhance productivity and efficiency, rather than resorting to widespread layoffs. He stressed the importance of stronger governance, precise assessment of financial situations, adequate provisioning, and adherence to international accounting standards to restore stability. He concluded that achieving long-term sustainability in the banking sector requires more than just mergers; it necessitates tailored restructuring and comprehensive sector reforms.