DOT Desk: State-owned Sonali Bank PLC and Bangladesh Development Bank PLC (BDBL) on Sunday advanced their merger talks by signing a memorandum of understanding (MoU) to become a stronger financial institution, reports Dhaka tribune.
Managing Director and Chief Executive Officer of Sonali Bank Md Afzal Karim and BDBL’s top executive Md Habibur Rahman Gazi signed the document on behalf of their respective banks. During the MoU signing on Sunday, Bangladesh Bank Governor Abdur Rouf Talukder was present. Last month, the lenders’ boards approved the merger plan. The MoU paves the way for Bangladesh Bank to appoint an independent auditor to assess crisis-ridden BDBL’s liabilities and assets. BDBL employees have expressed concerns about job security following the merger.
According to the central bank policy, the acquiring bank will make decisions about staff retention after three years, based on the performance of employees from the weaker bank. However, Sonali CEO Afzal Karim assured reporters after the signing that the merger would not lead to layoffs. “I am confident that this merger will further strengthen the financial health of both banks,” he said. Karim said the merger would not negatively impact customer interests.”There is no need to panic. In fact, we expect the merger to improve several key indicators, such as the banks’ credit-providing capacity,” he added.

Sonali Bank’s Chairman Ziaul Hasan Siddiqui said they have carefully reviewed the agreement before signing.

BDBL Chairman Shamima Nargis said the bank performed well on most key indicators, except for non-performing loans (NPLs). However, various measures implemented by the bank have helped reduce the burden of bad loans.

She said the bank cannot single-handedly reduce NPLs to the desired level in a short time frame unless borrowers come forward. Legal complications arise if the bank resorts to selling collateral.

She said the boards of both banks made the merger decision to improve the institutions’ performance.

Bangladesh Bank Policy Advisor Abu Farah Md Nasser, Deputy Governor Nurun Nahar and Spokesperson Md Mezbaul Haque were present at the MoU signing ceremony.

In 2009, Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha merged to form BDBL.

Despite the change in the name, the merger, however, has not yet yielded the expected improvements.

BDBL’s NPLs stood at Tk982 crore up to December 2023 — around 42.46% of its outstanding loans totaled Tk2,314 crore.

On the other hand, Sonali Bank had outstanding loans of around Tk93,100 crore as of December 2023.

Of these loans, Tk13,150 crore were classified as non-performing, representing 14.13% of the total credit disbursed, according to Bangladesh Bank data.