Md Afzal Karim Bangladesh's largest commercial bank Sonali Bank PLC sets sights on solidifying its financial footing by bringing down non-performing loans (NPLs) to single digits and completely eliminating capital and provisional shortfalls by the end of 2026.
This ambitious target rests on the success of the bank's four-tier supervision model, implemented in recent months.
The model has demonstrably yielded positive results, including a significant increase in net interest income (NII) alongside a reduction in classified loans.
In an exclusive interview with The Financial Express (FE), Md Afzal Karim, the bank's CEO and managing director, elaborated on recent performance improvements and outlined future plans to further bolster Sonali Bank's presence in the banking industry.
Joining the bank in late August 2022, Mr Karim said he inherited a challenging situation -- key indicators like classified loans, cash recovery and capital shortfall were unfavourable, while the net interest income was negative.
Undeterred, he swiftly launched a 100-day special programme anchored by the four-tier supervision model, in a bid to reclaim the bank's past glory as the premier state-owned commercial lender.
"And we started getting benefits of the programme. As major indicators of the banking operations keep improving, we remain confident in the model and continue accordingly," he said.
Referring to recent performance data, the bank's top executive said that NII, once consistently negative, had climbed steadily. In 2021, it stood at a negative Tk 9.79 billion, turning positive at Tk 2.09 billion in 2022. By the end of 2023, NII reached a healthy Tk 8.26 billion.
The capital shortfall, another critical metric, mirrored this positive trend. From Tk 6.76 billion in 2021, it narrowed to Tk 5.98 billion in 2022 and further down to Tk 3.80 billion in 2023.
Despite forex and liquidity challenges faced by the broader banking industry, Sonali Bank managed to reduce its classified loan. From 17.32 per cent in 2021, it dropped to 14.83 per cent in 2022 and further down to 13.13 per cent in 2023.
Besides, operating profit soared by 56 per cent year-on-year to reach Tk 37.27 billion in 2023, compared to Tk 23.82 billion in the previous year. Cash recovery from classified loans also saw more than 28 per cent growth.
CEO Afzal Karim credited teamwork for these achievements even amid the forex dearth and liquidity crunch. He also greatly thanked the implementation of the strong four-tier supervision model.
This model entails consistent monitoring of branch recovery and disbursement targets by regional head offices, with subsequent oversight by general manager offices and the head office's GM and deputy managing director, he said.
"And I keep holding monthly and fortnightly virtual meetings with the GMs and DMDs. This four-tier system ensures accountability for performance shortfalls and allows for timely corrective action," he said.
About the success in cash recovery, the Sonali Bank managing director said under the supervision mechanism, each branch manager directly supervises the top 25 defaulters under their jurisdictions.
And, each principal officer, GM and DMD directly looks after the top 25 loan defaulters of their jurisdictions. "And it is working well. Now, we plan to reduce the percentage of NPL to single digits while the volume of capital and provisional shortfall to zero by 2026," the CEO said.
As the capital base of the bank is getting stronger, the CEO said its business volume continues expanding as the loan portfolio enhanced to Tk 1.08 trillion in 2023 from Tk 846.43 billion and Tk 690.60 trillion in 2022 and 2021, respectively.
Regarding automated banking operations, he said the bank, as part of its broader objective to become a smart lender in Bangladesh, continues investing in launching innovative products to ensure easy and client-friendly banking.
As part of the initiative, he said, they introduced a new digital product through which the bank's valued customers do not need to bring a cheque to get money from the counters.
He also informed that presently all account holders of the bank can operate their bank accounts round the clock (24/7) from anywhere in the world by using the 'Sonali e-wallet app'.
He mentioned that in November 2023, Sonali Bank launched a mobile app namely the 'Sonali Exchange Mobile app' for expatriates in the USA so that they can send remittances instantly by using that app to beneficiary bank accounts or MFS free of cost.
He explained that customers need to download their e-wallet app from the Play Store and get registered by giving basic account-related info before scanning the QR Code available in each branch to get the instant cash-out facility instead of using bank cheques.
"We're the only state-owned commercial bank delivering the service. We also installed a call centre through which our clients will get all kinds of services by dialling 16639," he added.
Sonali Bank's deposit portfolio saw continuous growth, exceeding Tk 1.50 trillion in 2023. The advance-to-deposit ratio rose to 67 per cent in 2023. The number of loss-making branches decreased from 17 in 2022 to just 9 in 2023.
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