Says EBL MD and CEO Ali Reza Iftekhar
The observation comes from Ali Reza Iftekhar, managing director and chief executive officer of Eastern Bank Ltd.
"The challenges will surface gradually," he said during an interview with The Daily Star.
Bad loans are an old trouble for lenders in Bangladesh. And since the relaxed facility regarding the classification of loans ended in 2022, the ratio of default loans is expected to pick up.
Default loans jumped 17 per cent year-on-year to Tk 120,656 crore last year owing to a lack of corporate governance and the ongoing business slowdown.
During the interview, Iftekhar, who has been leading EBL since 2007, also talked about the economy and performance of the private bank during and after the Covid-19 pandemic and its future.
EBL, which began its journey in 1992, managed to ride out the pandemic-induced economic slowdown, largely unscathed. The bank continued to provide support to its customers digitally and posted growth in deposits, loans and profit.
"Our digital transactions grew 300 per cent at that time," Iftekhar said. "It was a success for us that we could overcome the challenging time well."
EBL also retained growth in the subsequent years. And the noted banker was recognised as a result.
Last month, Singapore-based business magazine World Business Outlook honoured Iftekhar as the Best Banking CEO of the Year Bangladesh 2022, calling him "an avid promoter of sustainable development in the Bangladesh economy".
The magazine lauded his all-around performance in 2020-21. In the financial year, EBL clocked more than 13 per cent growth in earnings per share to Tk 4.88 from Tk 4.30 a year earlier.
The private bank's total assets grew 15 per cent year-on-year to Tk 38,881 crore. It attracted higher deposits and made significant investments compared to the previous financial year, according to its annual report for 2020-21.
In another major progress, EBL brought down NPLs to 2.74 per cent from 3.70 per cent.
This was way lower than the industry average of 8.16 per cent in 2022. It was 7.93 per cent in 2021, data from the Bangladesh Bank showed.
In 2022, EBL kept registering higher growth.
"We saw higher growth in deposits last year," said Iftekhar, adding EBL recorded 25-30 per cent higher collection in deposits and witnessed improvements in other major indicators.
"This is because people have trust in us."
EBL looks to retain its steady growth. "We don't want to proceed aggressively."
The bank plans to provide more services digitally apart from physical branches. So, it is investing in technologies to offer efficient services.
"We are focused on giving digital solutions to customers," said Iftekhar.
EBL and the Federation of Bangladesh Chambers of Commerce and Industry are going to unveil a co-branded Visa Platinum credit card, marking the 50 years of the apex trade on March 13, with a view to serving customers better.
Apart from investments in financial technologies, investments in human resource development are a must for banks to create good bankers, according to Iftekhar.
He has been working in the banking sector for 37 years ago. He spent half of his time at EBL, transforming the private commercial bank into one of the most successful financial institutions in the country.
"It is not right to switch jobs frequently in order to just gain some benefits."
"There is a tendency among young bankers to switch jobs. But it should not be. Rather, they should focus on building careers. It is also not right for the managing directors to change banks frequently either."
Iftekhar stressed ensuring professionalism in the banking sector.
In Bangladesh, allegations are rife that the boards of directors of many banks intervene in the day-to-day running of the lenders.
"Nothing is done by coercion in our bank," said Iftekhar.
He, however, highlighted the importance of having a good understanding between the management and the board. "The moment a gap in understanding surfaces, the problem occurs."
"Corporate governance is vital. All decisions taken by a bank should be guided by written policies."
Iftekhar led the Association of Bankers, Bangladesh, a forum of managing directors of the banks, for two terms.
He also talked about Moody's recent outlook downgrade regarding Bangladesh's banking industry.
The global rating agency early this month lowered its outlook of the banking system from stable to negative.
"It was a very harsh decision. Almost every country is facing the challenge and Bangladesh is not an exception," Iftekhar said.
The downgrade would increase the cost of business as transaction costs for foreign trade financing are expected to go up.
"Ultimately, importers will pass the increased cost onto the shoulder of consumers," Iftekhar said.
He suggested steps to increase remittance inflows in a bid to overcome the current challenges confronting Bangladesh, including the pressure on foreign exchange reserves.
The reserves have slipped to a six-year low of $31.15 billion, meaning it has fallen by about 30 per cent from the $44.14 billion recorded in March last year.
"We have to increase remittances inflow at any cost. At the same time, exports will have to be increased," Iftekhar said.
He said Bangladesh has immense potential and it is going to be the 25th biggest economy in the world by 2035.
Going forward, Iftekhar said, "We have to proceed very carefully until June.
"From then, an improvement is likely."