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Crisis in pvt banks yet to hit top boss salaries

EBL CEO highest paid in 2022, NRB Bank CEO salary grew highest YoY
Mehedi Hasan with Shakhawat Hossain Sumon
18 Jul 2023 22:16:43 | Update: 18 Jul 2023 22:16:43
Crisis in pvt banks yet to hit top boss salaries

The country’s banking sector navigated through troubled waters last year due to post-pandemic economic headwinds and volatility in the foreign exchange market, but the crisis had no impact on salaries drawn by senior bank officials, and some banks even raised Chief Executive Officer (CEO) salaries.

Eastern Bank paid its CEO the highest salary among all local private commercial banks, while NRB Bank raised its CEO’s salary by 30 per cent when compared year-on-year.

Industry insiders say the salaries and other facilities of bank managing directors (MDs) and chief executive officers (CEOs) are set in accordance with a bank’s size and profitability. Some CEOs are however getting a lucrative salary depriving shareholders despite losses year after year. 

Following an analysis of 39 listed and non-listed banks’ financial statements for 2022, The Business Post found that eleven banks witnessed a drop in their net profits in 2022, compared year-on-year.

Eastern Bank MD and CEO Ali Reza Iftekhar received over Tk 3 crore in annual benefits package last year, which means he took home an average monthly remuneration of Tk 25.39 lakh during that period.

Iftekhar is getting the highest monthly salary among the banks listed in the capital market.

The second generation bank raised its CEO’s salaries by 7 per cent in 2022 compared to the previous year, but the bank reduced dividend to shareholders by 5 per cent during the same period.

Among the 39 banks, 28 raised their CEO salaries, while NRB Bank raised the highest 30 per cent among the private commercial banks.

Commenting on the matter, NRB Bank Managing Director and CEO Mamoon Mahmood Shah said, “A bank's managing director is appointed by its board of directors, but final approval comes from the central bank.

“There are some parameters to fixing the salary of such officials, mainly the profitability, size and strength of the bank. Usually, a bank’s board of directors proposes a salary for MD and CEO, and then the central bank approves it, or reduces the proposed salary.”

Mamoon claimed that bank performance is not considered such matters.

Echoing the same, a senior official of the central said, “Salaries of MDs and CEOs are initially set by the respective bank’s board. The central bank then approves these salaries after conducting scrutiny.”

It should be noted that the Sonali Bank CEO witnessed the highest salary hike of 45 per cent in 2022, if the country’s whole banking sector is considered.

Providing more details, capital market analyst Abu Ahmed said, “Banks mainly determine the salaries of MDs based on their performance. If any MD or CEO brings good business, then the expenditure incurred by such officials is also considered as investment.

“Hiring good MDs with good salaries is also a survival strategy of banks.”

He, however, pointed out that banks that have increased the salaries of senior executives abnormally despite incurring losses should consider this move.

“Those who have more skills and qualifications will naturally get more opportunities,” said Bangladesh Securities and Exchange Commission (BSEC) Chairman Shibli Rubayat Ul Islam.

ICB Islami Bank, which is listed in the capital market, is paying its MD a monthly salary of Tk 12.53 lakh despite incurring losses every year.

The central bank in 1994 enlisted Oriental Bank as a problematic lender, and appointed an observer to address the worsening corporate governance at the bank, which was later renamed as ICB Islamic Bank.

Despite paying its MD a lucrative salary, the bank is not paying dividends year after year. More than twelve listed banks are paying their CEOs and MDs over Tk 2 crore per year as salaries and perks.

Syed Mahbubur Rahman, managing director and chief executive of Mutual Trust Bank, had received the top salary in 2021, but his perks dropped by one per cent in 2022. Mahbubur received an annual salary of Tk 2.63 crore in 2021, but it came down to Tk 2.61 crore in 2022.

He received a monthly salary of 21.80 lakhs in 2022. It should be noted that the bank's net profit fell by 13 per cent compared to the previous year.

BRAC Bank MD Selim RF Hussain was receiving a monthly salary and honorarium of Tk 20.39 lakh, while MD and CEO of City Bank Mashrur Arefin was getting Tk20.45 lakh per month last year.

HSBC Bangladesh was paying Tk34.33 lakh as a monthly salary to its CEO Md Mahbub-Ur Rahman, which is the highest in the banking sector. However, his salaries are around 5 per cent lower compared to the previous year.

Selim Barkat, the Country Manager of Habib bank, is ranked second on the list, receiving a salary of Tk2.72 crore in 2022, up from Tk2.70 crore last year. He currently receives Tk22.70 lakh from the bank every month, an increase of 0.1 per cent in annual pay.

However, there was no change in the monthly salary of the MD and CEO of Rupali Bank and Standard Bank.

Mohammad Jahangir, MD and CEO of Rupali Bank, was receiving a monthly salary of Tk 4 lakh in 2022, which is the lowest among 39 banks whose data is available.

Standard Bank CEO received a monthly salary of Tk 14.62 lakh last year.

Mohammed Nurul Amin, former chairman of the Association of Bankers, Bangladesh (ABB), said, “There are huge differences among the salaries that bank MDs receive due to the difference in bank sizes and profitability.

“The salaries and other facilities of bank MDs are set considering the size of the bank’s size and profitability. The minimum monthly salaries of 8 lakh to 10 lakh for such positions are becoming a common practice.”

Nurul Amin, also the former MD and CEO of Meghna Bank, added, “The final approval for such salaries comes from the Bangladesh Bank, after the regulator scrutinises a banks’ size and other financial indicators.

“Some banks provide other facilities like medical allowance, and tour facilitates along with cash salary to their MDs and CEOs.”

He pointed out, “The performance of MD and CEO is not considered for salary in private sector banks, but state-run banks’ MDs have to sign a performance agreement with the central bank to improve a bank’s performance annually.”

“It would not be wise to pay high salaries to CEOs when banks are facing losses year after year.”