MTBL to focus on deposit mobilisation for better liquidity management in 2025

Mutual Trust Bank PLC (MTB) plans to focus on deposit mobilisation this year for better liquidity management as staying liquid is of utmost importance amid the ongoing economic challenges.

The bank mobilised more than Tk5,000 crore last year — its highest in a single year — which helped it stay liquid and keep operations regular even amid a crisis in the banking sector after the regime change on 5 August, said Syed Mahbubur Rahman, managing director of MTB, in a recent interview with The Business Standard.

Sharing his future plans, Rahman said that the bank has been rebranded with a new logo after 25 long years. 

In his interview, he also addressed economic challenges, including low investor confidence, sluggish private sector credit growth, rising default loans and the challenge of keeping the dollar market stable.

How is MTB performing amid the ongoing economic crisis? 

The bank had a moderate financial performance last year. Operating profit increased to above Tk1,100 crore in the year 2024 from more than Tk700 crore the previous year. However, the bank is formulating aggressive provisions to clean up its previous bad loans which caused moderate profit growth. 

We maintained sustainable business growth in the last five years with low default loans from 1% to 1.5%, which is good considering the business scenario during the period. 

The bank was an early adopter of digital platforms and the entire achievement was made in-house. Our mobile app, which is one of the best in the market in terms of features, was developed by our own digital development team when other big banks spent huge amounts for outsourcing the development of their apps. 

The bank mobilised the highest deposits of Tk5,200 crore last year. The yearly mobilisation was Tk2,500 crore in 2023. 

Since I joined the bank, I have always emphasised liquidity management as at the end of the day, liquidity matters. The banks which are now in trouble are only because of liquidity. Among the troubled banks, Islami Bank is now coming out from the crisis because they also mobilised enough deposits. So the lifeline of a bank is liquidity for day-to-day operations. 

Some troubled banks which were able to mobilise enough deposits are now making a comeback to normal operations and the central bank is also hopeful about two troubled Islamic banks to come out from the crisis. It is because good liquidity will help them build up assets again. 

So, MTB kept its focus on liquidity, which helped it to stay liquid during the crisis in the entire sector. For instance, we were regular in foreign payments even amid the dollar crisis in the last two years thanks to enough dollar liquidity mobilised during the year 2022.

We did the same for managing local liquidity through various campaigns and by building trust. 

Last year, we also mobilised the highest Tk1,800 crore in a single month. This was possible because of brand value as the bank has earned the trust of customers. As a result, many customers diverted their deposits to our bank when other banks fell in trouble. 

So the bank will stay focused on deposit collection this year too for better liquidity management.

What is your observation on the private sector business scenario?

Sluggish private sector credit growth, which dipped to 7.66% in November, is more concerning. However, MTB performed better than the industry average as its growth was above 10%. 

The low credit growth was because of low business confidence, which will be worse in the coming days amid uncertainty over the election. 

The business community is still not confident about the law and order scenario. If investors do not feel protected, then how will they invest? They are still in fear of labour unrest. In this situation, both banks and investors are cautious, causing a fall in private sector credit growth. Both lenders and borrowers are uncertain about election also as they need to address this issue before going for investment. 

This government is focusing on stability instead of growth, which is also very correct.

However, we see opportunity in China Plus One policy as many investors are now coming to Bangladesh. 

China Plus One, also known simply as Plus One or C+1, is the business strategy to avoid investing only in China and diversify business into other countries, or to channel investments into manufacturing in other promising developing economies such as India, Thailand, Turkey or Vietnam.

Recently, one Chinese investor purchased a weak company which has a distressed account with MTB. It is a good sign, but Bangladesh should be prepared to grab the opportunity like how Vietnam did.  

What challenges do you see in the forex market?

Implementation of the new dollar rate mechanism will be difficult as the central bank has instructed to charge buying and selling rates on the same day. Banks have to charge the same rate on both small and big volumes of dollar selling. There are also dollar holding costs as banks cannot sell dollars until it becomes a sizable amount to sell. 

Banks have raised this issue to the central bank but it was not accepted. Applying the same rate will be difficult for customer management as regular customers deserve a better rate from the respective banks. There are some aggregators in the market who are trying to control the rate, which creates pressure on it. As a result, remittance inflow slowed slightly in January. 

The central bank is not going to open the market very soon until it can build a good dollar fund. In this situation, the controlled dollar rate will likely create stress on the forex market, which may cause further devaluation of the taka. Debt management will be very difficult both for the government and banks.  

Moreover, we need to increase monthly imports at least above $6 billion to support growth, which is difficult considering the capacity. 

What improvements do you see in the banking sector after the change in government?

We see significant improvement in the external sector as steps that the government has taken are in the right direction. Bankers now can raise their voices. The reconstitution of boards of troubled banks has also helped restore confidence and stopped the bleeding. Syphoning money from banks by some influential people has also stopped. 

It helped boost remittance as a significant amount of it would be syphoned out to Dubai, Canada before. This is a big positive development in the banking sector. However, people want to see more visible outcomes and strong actions like the punishment of murderers. 

Customer confidence has been getting restored gradually, which is reflected in the reduction of currency outside the banking channels and growing deposits. Some good banks are experiencing high cash flow through good deposit growth. 

What challenges do you see in default loan management?

Default loans will worsen in coming years even if we exclude Beximco and S Alam group. Now, default loans stand at 17% but it will go to 35%, as the Bangladesh Bank governor said. 

The implementation of a new default loan policy that will come into effect from March will increase default loans, but it is time to implement the policy to bring in good governance to the sector. If the implementation of the policy is delayed, still the banking sector will see no improvement, so it is better to implement it now. 

According to the new default loan policy, loans will be considered defaulted from the month after which payment expires, which will be implemented from March.