City Bank likely to take over BASIC Bank

Troubled state-owned BASIC Bank is likely to be acquired by private sector lender City Bank as the central bank is forging full steam ahead with its plan to engineer the takeover of weak banks with stronger ones.

The development comes after the Bangladesh Bank in a meeting yesterday with the top brass of City Bank directed the private bank to make preparations to acquire a weak bank, The Daily Star has learnt from central bank officials informed with the proceedings.

Once a well-run state bank, BASIC descended into a hotbed of irregularities after Sheikh Abdul Hye Bacchu was made its chairman in 2009 on political considerations.

A central bank investigation in 2014 found Bacchu's involvement in embezzlement of Tk 4,500 crore from the bank. This ultimately diminished the bank's financial health from which it is yet to recover.

Its losses between 2012 and 2022 totalled Tk 4,230 crore. It gave loans amounting to Tk 13,459 crore -- 57 percent of which has turned bad.

City, on the other hand, is one of the leading private banks. In 2023, it logged in profit of Tk 638 crore, up 33 percent percent year-on-year.

Its total loan portfolio stands at Tk 39,607 crore, 3 percent of which has turned bad.

City Bank Managing Director Mashrur Arefin acknowledged that the issue of taking over a weak bank was discussed at the meeting, which was presided over by BB Governor Abdur Rouf Talukder and attended by City Bank Chairman Aziz Al Kaiser.

"If a strong bank acquires a weak bank willingly, then the government will give policy support. So, we are analysing whether we can acquire a weak bank."

He, however, did not name any prospective bank for takeover.

"Primarily, we will restructure the weak bank for three years and then merge it with the City Bank. If all processes go in the right direction, the central bank may allow some more years to merge," Arefin added.

Abu Md Mofazzal, managing director in charge of BASIC Bank, is unaware of any probable acquisition by City.

"We have come to know from news reports today," he told The Daily Star yesterday.

Mofazzal is yet to be informed by the finance ministry or the central bank on the plan.

The acquisition though is unlikely to be well-received by BASIC Bank employees, who enjoy pensions and other benefits like government staff for being a state-owned bank.

Those add-ons to salary might cease to exist if the bank is taken over by a private bank.

"If the bank is merged, it should be with a state bank," said a senior official of BASIC Bank on the condition of anonymity for fear of reprisal.

Last week, the government decided in principle to merge four state banks -- Bangladesh Development Bank with Sonali Bank and Rajshahi Krishi Unnayan Bank with Bangladesh Krishi Bank.

Earlier on March 18, Shariah-based Exim Bank and the struggling Padma Bank signed the letter of intent to merge.

The flurry of merger and acquisition announcements comes as part of the central bank roadmap announced on February 4 for reining in the runaway defaulted loans to a reasonable level and bringing in good governance to the banking sector.

Last week, the BB unveiled its guidelines for mergers and amalgamation of financial institutions. In the case of voluntary mergers, the strong bank will enjoy policy support from the government and regulatory relaxations from the BB.