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Merger, acquisition panacea for badly-performing banks

Study suggests as a number of banks are getting into problems


FE Report | February 26, 2018 00:00:00


An expert opinion suggests forced merger or acquisition is the desperate remedy for the poorly-performing banks, especially where the underlying problem persists permanently.

Such suggestion came up in a study that also recommended punishment of the wrongdoers by the regulatory authority as there remains tendency among directors of weak banks not to go for merger willingly.

In another research paper also presented at a function Sunday it was found that the nine new banks that got approval in 2012 indulged in various irregularities and anomalies from the very beginning.

In case of hiring, these banks failed to establish goodwill on the market, their commitment to serve the unbanked rural people was not fulfilled as they focused more on urban areas, had high non-performing-loan rate after 2014, declining tendency in CRAR, astounding expenditure in CSR despite losses in the previous year.

In the research paper, titled 'Exploring Merger and Acquisition in the Context of the Banking Sector of Bangladesh', which was presented by associate professor of Bangladesh Institute of Bank Management (BIBM) Atul Chandra, it was stated that efficiency of the merged banks got reduced compared with the pre-merger institutions.

Yet 88 per cent of the respondents have opined in favour of merger or acquisition to reduce the number of weak banks.

Most of the respondents have opined against branch mergers while 83 per cent opined that merger between a strong and a weak bank would be appropriate in Bangladesh.

And 72 per cent of the respondents believe that weak banks should not be allowed to fail in Bangladesh as the failure would be costly for the economy.

Another 83 per cent respondents think Bangladesh Bank should not be the sole authority but main authority in case of merger in banking sector.

The paper was presented at the third technical session of the Research Almanac 2018 at BIBM auditorium in the city. BIBM organised the daylong session where 19 papers were presented. Former deputy governor of BB Khondkar Ibrahim Khaled chaired the concluding session.

One of the discussants and former managing director of Prime Bank, Ahmed Kamal Khan, in his remarks said merger and acquisition in Bangladesh is quite difficult due to capital shortfall of every bank.

"Besides," he added, "the rate of non-performing loans is very, very high. The structure of the board is also not in favour of merger."

He suggested that merger of the branches be easier than merger of banks as it requires long time and huge money.

The paper, titled 'An Evaluation of the Performance of New Commercial Banks', was presented by Shohail Mustafa, a BIBM associate professor.

He evaluated performance of three NRB banks and six private commercial banks except for Shimanto Bank which got approval in 2012. He mentioned that in the face of pressure from government high-ups, BB approved new private banks against its will.

"The central bank had faced tremendous pressure from the government high-ups to quickly approve those banks even before it could properly scrutinise the applications," he told the meet.

In his remarks of the chair, Ibrahim Khaled said in the banking sector of Bangladesh, failure of excellence is not the main problem but it is lack of honesty while banking.

"All the parties, including the directors, politicians and executives try to interfere."

The prevailing situation of some new and few old banks created much reason to be concerned, he said. It is the result of absence of social values, he added.

msshova@gmail.com


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KPCL 83.2 91.5 79.5 91.5 9.976%
CENTRALPHL 15.4 16.9 16.4 16.9 9.7403%
SONALIANSH 396.4 431.0 396.0 431.0 8.7286%
FUWANGCER 13.1 14.4 13.2 14.2 8.3969%
FUWANGFOOD 14.8 16.2 15.0 16.0 8.1081%
WMSHIPYARD 18.0 19.7 17.9 19.4 7.7778%
RDFOOD 13.3 14.6 13.3 14.2 6.7669%
LIBRAINFU 1190.6 1265.0 1120.0 1265.0 6.249%
STYLECRAFT 1129.3 1199.8 1199.8 1199.8 6.2428%
NAHEEACP 64.2 68.8 64.1 67.7 5.4517%
COMPANY YCP HIGH LOW CLOSE %CHG
KARNAPHULI 15.3 15.3 14.0 14.0 9.2857%
KPCL 91.5 91.5 79.5 84.0 8.9286%
SONALIANSH 431.0 431.0 396.0 399.4 7.9119%
FUWANGCER 14.3 14.4 13.2 13.3 7.5188%
MEGHNALIFE 55.0 55.5 51.2 51.2 7.4219%
FUWANGFOOD 16.0 16.2 15.0 15.0 6.6667%
WMSHIPYARD 19.3 19.7 17.9 18.1 6.6298%
LIBRAINFU 1265.0 1265.0 1120.0 1188.0 6.4815%
AL-HAJTEX 79.6 82.0 75.1 75.1 5.992%
PF1STMF 5.5 5.5 5.2 5.2 5.7692%
COMPANY YCP HIGH LOW CLOSE %CHG
SAMATALETH 56.4 55.4 50.8 50.8 -9.9291%
FINEFOODS 44.0 42.9 39.9 40.3 -8.4091%
ZEALBANGLA 44.3 44.7 40.0 40.6 -8.3521%
SALVOCHEM 17.0 16.9 15.4 15.6 -8.2353%
DESHBANDHU 15.5 15.2 14.1 14.3 -7.7419%
MEGHNACEM 102.9 105.0 96.0 96.4 -6.3168%
ICB 123.2 120.0 115.0 115.6 -6.1688%
BIFC 5.0 5.3 4.6 4.7 -6%
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ZEALBANGLA 41.9 44.7 40.0 44.7 -6.264%
TUNGHAI 4.5 4.8 4.4 4.8 -6.25%