AB Bank plans strategic investments, deposit growth to strengthen capital

AB Bank PLC, as part of its turnaround strategy amid current liquidity challenges, plans to bring in strategic investors by 2026 to strengthen the lender's capital base.

Apart from seeking capital injection, the country's oldest first-generation commercial bank has intensified its deposit mobilisation efforts and rebalanced its investment portfolio, reducing dependency on corporate banking while focusing on CMSMEs (cottage, micro, small, and medium enterprises) and retail banking.

The commercial lender, which began operations on April 12, 1982, has sought policy support from the Bangladesh Bank (BB) to achieve this turnaround within three to four years.

Managing Director and CEO Syed Mizanur Rahman shared the bank's current and future plans in an exclusive interview with The Financial Express.

He said the bank is currently grappling with three major challenges: capital shortfall, liquidity, and non-performing loans (NPLs). Various measures have already been undertaken to address these issues.

"Our plan is to bring in strategic partners by 2026 to strengthen the capital base, and our sponsor directors have already started the capital injection process," he said.

On the asset front, Mr Rahman noted that some of the bank's assets were acquired by the pre-uprising government, but compensation has not yet been received.

"We expect to receive Tk 20 billion. If the government lacks sufficient funds, it could issue special bonds that would count as capital."

Regarding liquidity, he said the bank has boosted deposit mobilisation while reducing administrative costs, particularly through digital transformation initiatives. Over the past eight months, AB Bank collected fresh deposits exceeding Tk 84 billion-a significant improvement.

"In 2024, the bank experienced deposit erosion, but this year we are seeing a reversal," he added.

On the ongoing Asset Quality Review (AQR) by an overseas audit firm, Mr Rahman said it has caused concern among clients, as some have linked it to a possible merger-an association he called unfortunate.

"The AQR will highlight many possible solutions, not just merger options. I urge the central bank, particularly the governor, to clarify that it is not solely for mergers, because many banks could face challenges during this process," he added.

He also called for Bangladesh Bank's intervention to ease liquidity constraints, noting that such support could be repaid through returns generated from the funds.

"We need policy support from the regulator. This is an emergency situation requiring diversification and out-of-the-box solutions," he also said.

Highlighting the bank's strengths, Mr Rahman noted its overseas branch in Mumbai, which provides trade finance support to 47 local banks.

He added that $25 million in paid-up capital is required to operate a bank branch in India, which AB Bank has already maintained.

Plans are underway to open four more overseas branches, including a proposal to open an outlet in Kolkata, currently awaiting Bangladesh Bank approval. The bank trades under the B category due to its inability to pay dividends, while "A" category banks are eligible for overseas banking permissions.

"We request the BB to consider this. Policy support of this kind is essential," he said.

Due to high NPLs, the bank has been unable to access Bangladesh Bank's refinancing facilities. "Policy support from the central bank could provide access to these funds," he added.

On the recovery front, Mr Rahman expressed optimism. Some defaulting borrowers, previously uncooperative, are now coming forward ahead of the parliamentary election to clear their Credit Information Bureau (CIB) records.

"We expect more recovery in the coming months," he said, noting that the bank recovered Tk 14 billion in the last 10 months of FY25.

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