Before selling Sammilito Islami Bank, the state should retain what’s worth selling
Before selling Sammilito Islami Bank, protect its real value
Bdbusinessdaily.com – Before selling Sammilito Islami Bank, the state must do more than manage withdrawals and provide emergency liquidity. It must preserve the parts of the institution that could still attract a credible strategic investor: its deposit base, nationwide branch network and unique position as Bangladesh’s only state-owned Islamic bank.
The merged bank has begun the difficult task of restoring confidence among depositors from the five institutions brought together under its umbrella. During the first three days of repayments beginning on 7 September, it disbursed Tk319 crore, Tk340 crore and Tk381 crore. Deposits received during the same period were Tk141 crore and Tk195 crore, leaving a significant difference between withdrawals and new inflows.
By 6 September, 74,221 customers had requested withdrawals totalling Tk3,925 crore. Bangladesh Bank had set aside Tk5,000 crore to support repayments. The numbers understandably raise concerns about a possible bank run, although the trend was not entirely one-way: withdrawal applications fell from 18,046 on the first day to 15,476 by the fourth day.
The immediate challenge is to meet depositor obligations. The longer-term challenge is to ensure that the bank still has a viable business worth buying once a strategic investor is sought.
Depositor confidence is part of the bank’s value
Two issues became central after the merger: whether depositors would lose money and whether branch queues reflected growing panic. The question of reduced returns was addressed on 12 September, when the central bank confirmed that profit for 2024 and 2025 would be paid at the bank’s effective rate instead of the previously discussed fixed 4% rate.
Under the 31 August circular, fixed-deposit holders may withdraw their full principal immediately but forfeit profit, or remain within the arrangement and receive the applicable return. This gives customers a practical reason to keep funds in the bank rather than exit at once.
That policy matters because stable deposits are not simply a liability on a balance sheet. They are a core commercial asset. A future buyer will assess whether customers remain willing to bank with the institution, whether deposits are returning and whether the bank can fund future lending without depending indefinitely on exceptional central-bank support.
The government has considered treasury support and investment by a foreign strategic partner as possible ways to meet depositor obligations. Qatar has been approached in the search for an investor. In this context, the eventual sale price is directly connected to the public cost of the resolution.
Bad loans should not define the sale
Before selling Sammilito Islami Bank, policymakers should distinguish between its impaired assets and its operating franchise. The bank has Tk1,92,000 crore in loans, of which 86% are classified, along with a capital shortfall exceeding Tk1,50,000 crore. No strategic investor is likely to pay a meaningful price for a loan book carrying losses of that scale.
Those troubled assets will need to remain with the state or be placed in a separate resolution framework. Leaving them inside the transaction would make the bank far less attractive and could force the state to accept a deeply discounted deal.
Once the distressed loan burden is separated, however, the remaining institution has important strengths. It serves 76 lakh depositors, holds Tk1,42,000 crore in deposits, operates branches across Bangladesh and holds the country’s only state-owned Islamic banking licence. These are tangible commercial advantages for an investor seeking scale, customer relationships and a nationwide distribution network.
In banking transactions, a reliable base of lower-cost deposits can be worth more than the book value of the institution itself. Deposits reduce funding costs and create a platform for future lending. If depositors leave in large numbers and their money is replaced mainly by emergency support, that advantage weakens.
Every repayment day affects the eventual price
Withdrawal behaviour will shape how potential investors value the bank. Advisers will examine whether repayments continue to exceed deposit inflows and whether the gap narrows over time. Early payouts running at roughly twice the level of new inflows send a warning signal. A move towards balance by December would present a much stronger case for the bank’s recovery.
Bangladesh Bank’s decisions on liquidity, repayment terms and deposit returns are therefore not merely administrative measures. They influence whether the institution retains a viable customer base before negotiations with a strategic partner advance.
International experience also shows that rescuing a troubled lender and returning it to private ownership are separate tasks. Greece’s bank recapitalisations in 2014 and Slovenia’s 2018 sale of NLB involved governments restoring lenders before divestment. The lesson is clear: public support should be used to preserve a functioning bank, not to transfer avoidable losses to taxpayers while selling off its remaining strengths cheaply.
FAQ: What should happen before a sale?
Will depositors lose their principal?
Fixed-deposit customers can withdraw their full principal under the current arrangement. Those who withdraw immediately forgo profit, while those who remain are entitled to the applicable profit rate for 2024 and 2025.
Why do stable deposits matter to an investor?
A stable deposit base provides lower-cost funding, supports future lending and indicates that customers still trust the institution. It is one of the most valuable assets a buyer can acquire.
What should the state retain?
The state should retain or separately resolve the deeply impaired loans and capital shortfall, while preserving the deposit franchise, branches, customer relationships and Islamic banking licence that give the operating business its value.
Before selling Sammilito Islami Bank, the state should ensure that a buyer is offered a functioning financial institution rather than a balance sheet dominated by legacy losses. Protecting depositors and preserving the bank’s viable assets are not competing objectives; they are essential parts of the same recovery strategy.