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AB Bank Dragged down by directors

The burden of a dead mobile operator, widespread loan fraudulence, mismanagement and influence of a sponsor director were what dragged the once sound AB Bank into the reds.

It was the first private bank in the country making good profits. In fact, AB Bank topped the listed banks in the stock market in terms of earning in 2009.

But the bank suffered a free-fall in 2017 when its profits dried up to an extent that it failed to announce dividend for its shareholders and crash-landed from category A to Z — a category for poorly performing companies.

Its share price dropped 56 percent in the last two years, coming down close to face value at Tk 10.The year 2018 was no different, as the bank could not close its account even in January this year. All the financial indicators such as liquidity, loan deposit-ratio and non-performing loan were blinking red.

At the core of its trouble stood two things — Tk 350 crore loan guarantee given to a telecom company, Citycell, and around Tk 500 crore illegally siphoned abroad by two directors of the bank between 2008 and 2014.

Faced with liquidity crisis and rise in non-performing loan that stood at 7.2 percent in December last year from 4.47 in December 2016, AB Bank management seemed to have learned nothing from their past mistakes.

In December last year, the bank offered special privileges to Citycell, the country’s first mobile operator, that damaged the health of the bank as much as the illegal money laundered abroad did.

In both scams, M Morshed Khan, owner of Pacific Bangladesh Telecom Limited (PBTL) which used the brand name Citycell and also founder chairman of AB Bank, was involved, according to Anti-Corruption Commission investigation.

Citycell had taken Tk 350 crore from eight banks and financial institutions with guarantee from AB Bank in 2011. And as Citycell failed to pay back the loan, the liability fell on AB Bank.

Citycell’s outstanding loan with AB stood at Tk 705 crore as of October last year.Finally, in December last year, the bank’s board decided to waive interest of around Tk 229 crore on the loan and rescheduled the telecom’s Tk 476.39 crore loan for 10 years.

Citycell made only 0.21 percent of the down payment instead of the Bangladesh Bank rule for 5 percent. It got a three-year grace period on the next repayment.Incidentally, Morshed Khan, former foreign minister and BNP vice-chairman, has two nominated directors on the bank’s board that made the decision.

When the proposal for loan rescheduling was sent to the BB, the central bank also took a lenient view, allowing a 3 percent down payment, deviating from its own rule for 10 percent. The company was also allowed interest waiver.

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