Is City Bank acquiring trouble-ridden BASIC?

City Bank, one of the largest private commercial banks in the country, is likely to acquire BASIC Bank, a trouble-ridden state-owned lender, a Bangladesh Bank official said today.

Although the official said a decision to this effect was made in a meeting at Bangladesh Bank today, TBS could not verify the information either from the central bank spokesperson or City Bank's senior executives.

Bangladesh Bank Governor Abdur Rouf Talukder and top officials from City Bank, including Chairman Aziz Al Kaiser and Managing Director and CEO Mashrur Arefin, attended the meeting, he added.

"Earlier on 19 March, the board of directors of City Bank was advised to merge with Basic Bank. Subsequently, discussions were held between the boards of City Bank and BASIC Bank regarding the matter. Representatives of both banks discussed this among themselves. Although the two banks will merge, they will prepare separate financial reports for the next three years." 

Decisions have so far been made to merge a total of eight banks, including five state banks and three private banks, the official further said.

Contacted, Bangladesh Bank Spokesperson Mezbaul Haque told TBS, "Discussions about the merger are ongoing. We will announce any final decision."

Speaking to this newspaper, City Bank MD Mashrur Arefin said, "We did not finalise any weak bank for a merger yet."

He also said, "The City Bank is still reviewing the health of a few weak banks to be selected for a merger. Then the selection will be presented to the board for approval."

The merger model will be different for the City Bank, he added. "The selected bank will be reconstructed first. Then the balance-sheet merger will come after three to five years." 

In March, two private banks — Padma Bank and Exim Bank — reached an agreement to merge, initiating the merger process of banks. Besides, decisions were also made to merge four state banks under which Rajshahi Krishi Unnayan Bank will merge with Krishi Bank, and Bangladesh Development Bank Limited will merge with Sonali Bank.

According to Bangladesh Bank data, as of the end of 2023, City Bank had a total loan of Tk39,261 crore. Among them, Tk1,383 crore was non-performing, representing 3.52% of its total loans.

According to Dhaka Stock Exchange data, the last trading price of City Bank was Tk22.90 today. According to the bank's annual report, as of the end of 2022, the total deposits of the bank were Tk33,200 crore.

On the other hand, at the end of 2023, BASIC Bank's total loan was Tk12,868 crore, of which Tk8,204 crore was non-performing, accounting for 63.76% of the total loans. At the time, the bank's capital shortfall was Tk5,195 crore. According to its annual report, as of the end of 2022, the total deposits of the bank were Tk14,896 crore.

Before Sheikh Abdul Hye Bacchu assumed the chairmanship of the board of directors of BASIC Bank in September 2009, it was widely regarded as the top-performing state-owned lender.

Following Bacchu's appointment as chairman, BASIC Bank began disbursing loans based on forged documents and to fictitious companies. Subsequently, a Bangladesh Bank inspection uncovered numerous irregularities in its four branches — Motijheel, Shantinagar, Dilkusha, and Gulshan — involving loans amounting to nearly Tk4,500 crore between December 2009 and November 2012.

Clarification: The Business Standard earlier used an illustration for this article, which has since been removed. We apologies for any offense the image may have inadvertently caused.