Before selling Sammilito Islami Bank, the state should retain what’s worth selling

On 7 September, Sammilito Islami Bank began repaying the depositors of the five banks folded into it last year. In its first three days, it paid out Tk319 crore, Tk340 crore and Tk381 crore against inflows of Tk141 crore and Tk195 crore. Roughly two taka left for every one that came in. By 6 September, 74,221 customers had applied to take out Tk3,925 crore, and Bangladesh Bank had set aside Tk5,000 crore to fund them.

The debate in Dhaka has run on two tracks since the merger: whether depositors would take a haircut, and whether the queue outside the branches amounts to a run. Both questions now have answers. 

The haircut is gone; on 12 September the central bank confirmed that profit for 2024 and 2025 will be paid at the bank's effective rate rather than a fixed 4%. And the queue is shortening: daily applications fell from 18,046 on the first day to 15,476 on the fourth. Neither decides the outcome.

That question was posed by the Prime Minister's Adviser on Finance and Planning on 31 August. There are two ways to repay depositors, he told this newspaper: money from the treasury, or a foreign strategic partner taking a stake in the bank. 

Qatar has been approached. The state has said out loud what it is doing. It is selling a bank, and the proceeds are the depositor repayment plan. The operative variable was never the haircut or the queue. It is the price.

What a buyer actually pays for

Start with what the buyer will not pay for. Sammilito carries loans of Tk1,92,000 crore, 86% of them classified, against a capital shortfall above Tk1,50,000 crore. No strategic investor is writing a cheque for that book; it will sit with the state or a resolution vehicle whatever the deal looks like. 

Strip it out and what remains is what an acquirer always pays for in a retail bank: 76 lakh depositors, Tk1,42,000 crore of deposits, a national branch network and the country's only state-owned Islamic banking licence. 

In bank acquisitions, the premium over book value is largely a premium on low-cost, sticky deposits. Lose the deposits and the premium goes with them. Replace them with central bank liquidity and the buyer prices that liquidity as a liability.

The withdrawal scheme, then, doubles as the state's retention pricing, and it is setting the sale value in real time. The 31 August circular gives fixed-deposit holders a choice: take the full principal now and forgo profit, or stay under the resolution scheme and receive it. Read as a banker reads it, that is an exit charge and a loyalty payment. 

The 12 September decision to pay profit at the effective rate raised the reward for staying. Bangladesh Bank has been managing the franchise all along. It has simply not described it that way.

The state is discussing a price with a prospective partner in Doha in the same weeks that it is deciding, circular by circular, how much of the deposit base will still be there when that partner's advisers arrive. Every payout day is a line in their due diligence. A two-to-one ratio of payouts to inflows in the first week is one data point; a ratio that closes toward parity by December describes a different bank with a different price. The seller controls that ratio more than it seems to realise.

I worked on the Greek bank recapitalisations in 2014 and on the sale of Slovenia's NLB in 2018, both cases of a state handing a rescued bank back to private owners. In NLB's case the European Commission's approval of state aid came with a divestment commitment, and when the shares were finally sold in November 2018 they priced at the bottom of the range, at roughly two-thirds of book value. Every buyer could read the calendar. 

A seller who must sell by a date, with a deposit base the market can measure, receives the price the market decides. The analogy has limits: NLB was clean and profitable by 2018, and Sammilito is years from that. But the logic runs the same way, and Bangladesh can see it now rather than at the roadshow.

The cautionary case is Vietnam. Its central bank took three failed banks for zero dong in 2015 as temporary custodian. No sale followed, and in 2024 and 2025 they were transferred by mandate to stronger banks for nothing. Temporary custody lasts a decade when nobody protects the thing being held.

Some will object that with 86% of loans classified the equity is worth nothing, so the sale price is a rounding error against the Tk20,000 crore of taxpayer capital already injected. The recapitalisation cost is sunk. The marginal recovery is not. 

Whether the state gets back a meaningful fraction of what it put in, or nothing at all, depends almost entirely on the franchise it hands over. Mamun Rashid has made the case for why consolidation was the right instrument. The question that follows is how to exit it well.

Selling well, not just selling

Four steps, none of which needs new law.

First, Bangladesh Bank and the bank's board could publish the retention terms as a single schedule rather than a sequence of circulars: what a depositor who stays earns, referenced to the effective profit rate and to inflation, which ran at 8.26% in August. The test is whether retail deposit outflow stops within two quarters.

Second, the Financial Institutions Division could disclose, quarterly, the amount and instrument of central bank support, so that when a partner's offer arrives, the public can measure recovery against cost. Greece's Hellenic Financial Stability Fund published exactly this. A first one-page statement by 31 December would do.

Third, the Ministry of Finance is well placed to state the valuation basis and the sale window before negotiations harden: tangible book plus a deposit premium, with an independent adviser appointed. A seller who names the basis avoids being told it. An adviser mandated and basis published by mid-2027 is the test.

Fourth, the bank could report semi-annually on what a buyer prices: deposit trends and recovery on the roughly 10,000 cases it has filed against defaulters.

Bangladesh has rescued a bank. The harder job is protecting what it is worth on the way out, because that value, by the government's own account, is what pays the depositors back.

Fahim Chowdhury is an investment banker and managing director at RetailBook. Sketch: TBS

Fahim Chowdhury is an investment banker and managing director at RetailBook.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.