We aim to bring down NPLs below 25% this year: AB Bank CEO

AB Bank is shifting its business model after navigating multiple challenges over its 44-year journey, with a renewed focus on retail and MSME lending to reduce risks from large corporate loans.

In an interview with TBS Staff Correspondent Sakhawat Prince, AB Bank's Acting Managing Director and CEO Reazul Islam discusses current challenges, recovery strategy, and plans for modernisation. The conversation also covered targets to bring down non-performing loans below 25% this year and achieve sustainable growth.

TBS: As the country's first private bank, how do you assess this 44-year journey?

Reazul Islam: AB Bank's journey is closely tied to Bangladesh's broader social and economic evolution. Over the past 44 years, the bank has gone through many ups and downs.

As a first-generation private bank, we had to take significant risks and pursue innovative approaches. Along the way, there were also some wrong decisions.

However, rather than dwelling on past mistakes, we are now focused on learning from those experiences and moving forward. Despite facing repeated challenges, AB Bank has consistently shown the ability to recover and adapt.

TBS: What are the key challenges AB Bank and the banking sector currently facing as a whole?

Reazul Islam: At present, the biggest challenges for the banking sector are recovering non-performing loans (NPLs) and maintaining cash flow.

After August 2024, the overall banking landscape changed significantly, largely reflecting problems that had built up over a long period.

When large loans turn non-performing, it disrupts a bank's liquidity management. Social and political instability also affects overall stability in the sector. Overcoming the liquidity pressure and maintaining customer confidence are now key priorities. We aim to bring down our NPLs below 25% within this year.

We are taking a strict and strategic approach to loan recovery. We have already signed memorandums of understanding with four to five international law firms, which are working to identify assets held abroad.

Through Bangladesh Bank's taskforce, efforts are underway to recover these assets. At the same time, we are maintaining regular communication with our top 20-30 defaulting clients.

In many cases, we are engaging directly with clients to find practical solutions for loan recovery without disrupting their businesses.

TBS: What is your strategy to manage the liquidity crisis? What is your observation on 'panic withdrawals' by customers?

Reazul Islam: Liquidity management is now one of our top priorities. Despite various challenges, no customer has had to return without withdrawing money from any AB Bank branch.

At times, misinformation – particularly in district areas – has led to panic withdrawals among customers.

I would compare this to a "fuel crisis" mindset. When people anticipate a shortage, they tend to withdraw more than necessary.

However, the situation has now stabilised significantly, and deposits have started to increase again. Bangladesh Bank is also providing necessary liquidity support, which is helping ease the pressure.

TBS: What is AB Bank's business strategy and plan for sustainable growth over the next five years? 

Reazul Islam: We have adopted a strategic plan for the next five years, with a primary focus on stabilising deposits and strengthening our capital base.

Until 2025, our focus has been on stability. From 2026 onwards, the goal is to achieve real and sustainable growth.

As part of this shift, we are bringing significant changes to our business model. Instead of relying on large corporate loans, we are now placing greater emphasis on retail and micro, small and medium enterprise (MSME) lending.

The objective is to build a more diversified and secure investment portfolio through smaller, diversified loans, rather than concentrating risk in large exposures.

TBS: What innovations is AB Bank introducing in digitalisation and cashless banking?

Reazul Islam: We are set to launch a fully app-based digital loan service very soon. This process will be fully automated, with no human intervention.

An automated model will analyse a customer's transaction history over the past five to 10 years and determine loan eligibility and amount. This will significantly reduce the risk of default.

We are also working to promote cashless payments through the "Bangla QR" code. Increasing cashless transactions ensures that money circulates within the banking channel, which has a positive impact on liquidity management.

Our artificial intelligence (AI) model analyses customer transaction data to assess loan eligibility automatically. Initially, these will be small loans ranging from Tk20,000 to Tk25,000, which can be approved and disbursed quickly.

By offering a large number of small loans instead of a few large ones, we aim to reduce investment risk while also accelerating financial inclusion.

TBS: Are there any plans to expand AB Bank's operations outside Bangladesh?

Reazul Islam: We already have a fully operational and successful branch in Mumbai, India, which acts as a correspondent for at least 50 banks from Bangladesh.

This branch plays an important role in facilitating bilateral trade between the two countries.

We are now working to open a new branch in Kolkata soon, and there are plans to establish five more branches in India in the future.

In addition, alongside our existing operations in Hong Kong, we are also considering expanding into mainland China in the coming years.

TBS: What is the current state of the bank's board and professionalism in governance?

Reazul Islam: The current board is highly professional and supportive. After its reconstitution in August 2024, several former managing directors and experienced officials from Bangladesh Bank were included.

As a result, the management is now receiving clear policy guidance from the board, without any unnecessary interference in day-to-day operations.

This professional environment is helping boost the morale of our officials and strengthening overall governance within the bank.

TBS: What is your message to customers and employees on the bank's 44th anniversary?

Reazul Islam: I would like to express my gratitude to our customers. We believe the bank has already passed its most difficult period, and there is no reason for customers to lose confidence.

To our employees, I would say that although certain benefits could not be provided over the past three years due to challenging circumstances, we have ensured regular promotions.

Our employees' dedication remains our greatest strength.

I also wish good health to our founder, M Morshed Khan, and express my respect to him as the key architect behind this long journey.