The Bangladesh Bank has dissolved the board of National Bank Ltd (NBL) – the country’s first generation private sector bank – which has long been mired in allegations of lacking good governance, failure to disburse loans, and inability to preserve deposits.
A new board of directors has already been formed.
Considering the interest of depositors, and recommendations from the Bangladesh Securities and Exchange Commission (BSEC) for several reasons, including approving loans in violation of regulations, abuse of power by the board of directors, and election of directors, the central bank made the move on Thursday.
Central Bank Executive Director and Spokesperson Md Mezbaul Haque confirmed the matter to journalists on Thursday at his Motijheel office in the capital.
Speaking to The Business Post, BSEC Commissioner Shaikh Shamsuddin Ahmed said, “To protect the National Bank, in a meeting held Wednesday, we decided to dissolve the incumbent board and form a new one.
“After that, we wrote to the Bangladesh Bank requesting necessary measures in this regard.”
He continued, “The central bank has taken measures regarding this issue on Thursday. We think this initiative will protect the interests of the bank's investors, as well as depositors.”
Dr Prof Syed Ferhat Anwar will serve as the chairman of the newly formed National Bank board of directors. He is the incumbent Independent Director of Meghna Bank. Professor Ferhat was a former director of the Institute of Business Administration (IBA), University of Dhaka.
Giving his immediate reaction, Dr Anwar said, “I just learned that I was given the responsibility of chairing the NBL board. I will do my duty sincerely. I cannot say more at the moment.”
The other board of directors are – former executive director of Bangladesh Bank Serajul Islam, Southeast Bank's former managing director Md Kamal Hossain, NBL sponsor director Khalilur Rahman, Parveen Haque Sikder - the daughter of NBL founder chairman late Zainul Haque Sikder, representative director on behalf of Sikder Insurance Company Shafiqur Rahman, and directors as entrepreneurial shareholders Moazzem Hossain are on the new board.
Bangladesh Bank spokesperson Mezbaul Haque said, “Three directors of the previous board have been appointed to the new board. The rest of the directors were declared ineligible. The total number of directors in the previous board was eight.
The NBL board of directors was dissolved at a time when one of its directors had gone to court for holding the annual general meeting (AGM).
After a hearing of Parveen Haque Sikder’s writ on Monday, the High Court had suspended the NBL AGM through a virtual medium which would have been held on December 21. Back on October 3, the bank had scheduled to hold its 40th AGM on that date.
Financial Health
According to the central bank, as a result of various irregularities, the amount of defaulted loans of this listed company stood at Tk 13,514 crore at the end of September this year, of which 92.14 per cent or Tk 1,252 crore are bad or loss loans.
It is very difficult to recover bad loans, industry insiders say.
As a result of the high volume of defaulted loans, the bank fell into a capital shortfall. At the end of September this year the deficit stood at Tk 2,024 crore.
Due to the existing floor price in the capital market, the bank’s share price cannot fall below Tk 8 since January this year. However, in May last year it went down to Tk 7.20, according to the Dhaka Stock Exchange (DSE).
Due to poor financial health, the bank is not able to pay cash dividends after 2019. In 2020, it distributed a 5 per cent stock dividend for its shareholders. In the January-September period this year, NBL’s earnings per share (EPS) stood at negative Tk 3.49.
National Bank was once one of the most profitable banks in Bangladesh. The company made its highest profit of Tk 480 crore in 2017, which later fell to Tk 38 crore in 2021.
The bank’s financial health continued to decline as it showed a massive loss of Tk 3,285 crore last year. There are 4,902 people working in the bank, according to its annual report.
