Depositors won't lose out and staff members will retain their jobs as the crisis-stricken Padma Bank merges with Exim Bank through a deal signed Monday, the host assures.
But the directors of the defunct bank all get their marching orders from the board, said the Exim Bank chairman after the deal signing at the central bank headquarters.
Thus the originally founded Farmers Bank which changed its nomenclature into Padma Bank finally finishes up.
The amalgamated lender will operate under the name of the host bank -- Exim Bank -- as per terms of agreement brokered by the Bangladesh Bank under a donor-driven reform recipe expedited into execution in the wake of some crises in the banking sector.
A number of other weak banks are in the line of mergers and acquisitions, as marked up by the regulator in a sequence of colours matching their strengths and weaknesses, officials have said.
They have been given a timeline until this yearend to choose their partners and go for the coupling voluntarily.
"Thereafter, they will be made to merge. Merge they must," says a BB high official.
The Exim Bank and Padma Bank authorities signed the MoU under which the former will 'take over' the troubled Padma Bank.
The deal signing of the two private commercial banks happened three days after boards of the respective banks approved the decision on their amalgamation.
Emerging from the MoU-signing ceremony, witnessed by Bangladesh Bank Governor Abdur Rouf Talukdar, Exim Bank chairman Nazrul Islam Mazumder told newsmen that his bank is taking all responsibilities of Padma Bank from now on and that the 'takeover' will not anyway affect interests of the depositors and shareholders of both banks.
With the deal-making, he said, Padma Bank now "completely merged with Exim Bank and the name of Padma Bank will no longer exist".
Regarding pressure from the government side on the banks about merger, Nazrul Islam Mazumder said there was no pressure from the government-it was their advice.
"We did it in greatest interest of the economy." Mr Mazumder, also chairman of the bank owners' apex body styled Bangladesh Association of Banks (BAB), also assured that no one in the Padma Bank would lose their jobs, and there would be no job cut in the Exim Bank, too.
The interests of the shareholders will also be protected.
Responding to a question, he said the board members of the Padma Bank will not be members of the Exim Bank. But they will stay on as shareholders. Four state-owned banks -- Sonali, Janata, Agrani and Rupali and public sector investment entity, Investment Corporation of Bangladesh, jointly have nearly 67 per cent stake in Padma Bank.
About the practical modus operandi of the coupling said independent auditors will be appointed to assess the financial state of both banks in detail and take decisions accordingly.
The signboard of Padma Bank from now on will be replaced with that of Exim Bank, he said.
"We will emerge as a very strong bank within next year," says Mr. Islam on an upbeat note on the starter of banking overhaul.
He makes it clear over again that this was not a forced merger rather there was a proposal from the central bank as the Exim Bank is a strong bank.
Padma Bank Chairman Md Afzal Karim said they weren't acquisitioned rather merged between a strong bank and a relatively weak bank. There are about 1,200 employees of Padma Bank and they will not lose jobs-they will be working for the Exim Bank.
"It (the merger) will not affect the interests of our depositors and shareholders. The operations will continue as before," he added.
Spokesperson for the BB Md Mezbaul Haque said the merger process now started with the signing of the MoU between the two banks. Now the banks will officially seek permission of the central bank for merger move. Thereafter, the fundamentals of the banks will be assessed by certified audited firms to know the liabilities of the banks.
"A complete set of guidelines regarding the mergers will be prepared by the BB soon," he said.
The spokesperson also said the central bank will make an announcement after the merger process is completed. After that, the two banks will operate as one entity and depositors will be able to withdraw money from Exim Bank.
Exim Bank is listed on the country's stock market, but Padma Bank isn't.
The fourth-generation conventional lender, Padma Bank, born as Farmers' Bank, came into banking operations in 2013 but faced umpteen challenges mainly because of growing NPL buildups within three years of its existence.
To rescue the struggling bank from a complete financial collapse, the government came to intervene with a fresh financial lifeline following its renaming as Padma Bank in 2019.
But the rebranding move helped little as the total volume of non-performing loans (NPLs) of the bank rose to Tk 35.52 billion, which is 61.86 per cent of the outstanding loans amounting to Tk 57.41billion, at the end of February 2024.
And the percentage of the bad loans overshot BB's NPL-controlling target of 5.0 per cent for private commercial banks by June 2026.
Padma Bank has provided its banking services to 150,000 clients across the country through its 60 branches and 14 sub-branches and its deposit portfolio stood at Tk 61.86 billion by end of February last.
Exim Bank started functioning on 3rd August 1999 with its name as Bengal Export Import Bank Ltd. On 16th November 1999, it was renamed Export Import (Exim) Bank of Bangladesh Ltd. The bank's all conventional banking operations migrated into Shariah-based Islami Banking from July 2004.
The shariah-based bank was listed on the capital market in 2004. The figure of market capitalisation of the bank is Tk 14.330 billion while authorised capital is Tk 20 billion.
The bank's paid-up capital is shown Tk 14.48 billion. In the calendar year 2022, it earned profit worth Tk 3.72 billion and gave 10-percent dividend to its shareholders in 2022, according to the DSE records on the bank's financial health.
Exim Bank sources have said the unconventional bank serves their around 2.2 million clients with its 151 branches and 70 sub-branches spread across the country.
As of December 2023, according to the BB, the total volume of bad loans was Tk 16.29 billion, which is 3.47 per cent of the entire outstanding of Tk 469.37 billion.
The country total of nonperforming loans some Tk 1.46 trillion as per official figures collated after rescheduling and write-offs in what some economists term 'window dressing'.
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