Dhaka Bank to focus more on retail banking

The focus of most commercial banks is currently on one area and that is wholesale banking. Their target groups are also almost the same -- the big and medium industries and the corporate houses. Dhaka Bank had also initially started out with its attention on retail or consumer banking 21 years back, later spreading across to wholesale banking as it gained expertise.

Wholesale banking refers to the services provided by the banks to organisations such as large corporate clients, mid-sized companies, real estate firms and investors, international trade finance businesses and institutional customers, such as pension funds and government entities. This type of banking deals with larger clients, whereas retail banking focuses more on individuals or small businesses.

Simultaneously, Dhaka Bank is refocusing on retail banking, building on its brand value. It aims to re-launch the attention on consumer banking and increase efforts on SME banking, said Syed Mahbubur Rahman, managing director and chief executive of the bank.

Wholesale banking now accounts for around 80 percent of the bank's business portfolio, while retail, SME and others account for the rest, he added. “We want to revise the composition by increasing the ratio to 50 percent for retail and SME banking.”

There are some problems with wholesale banking, and one of those is deposits, which is a raw material for bankers. “If I can't get deposits from clients, I can do nothing,” he said in an interview with The Daily Star recently.

A bank can even run its business with a negative capital base if it has a huge deposit, and the state banks are the best examples of it, he said. Too much attention on wholesale banking is also a major reason for non-performing loans (NPL), as sometimes bankers provide credit without proper verification or understanding the basic numbers.

Dhaka Bank has a long way to go in terms of strengthening its position in retail banking. For example, the bank has credit cards, but in limited numbers. “We have to fix some bugs first, and then we can go for aggressive marketing,” he said.

“We want to introduce new products considering the market demand. We want to be more demand-driven,” he said, adding that re-composition of its portfolio will also help the bank diversify its risk profile.

There is a huge opportunity in the consumer banking area, as people's lifestyles are changing, per capita incomes are increasing and GDP is growing, according to Rahman, who previously served as the managing director of Brac Bank.

“With all these initiatives, our effort is to take the banking services to people's doorsteps so that they don't physically need to come to the bank.”

Dhaka Bank is celebrating its 21st founding anniversary on July 5, and will start the next year with a new vision.  Looking back, the bank has left behind many worthy footprints. “This is an awesome feat, we feel, to stay attuned to the changing world and digital age,” said Rahman, who took charge of the bank in November last year.

As a financial competitor, the bank has gathered pace, strengthened its base and remained a flawless chaser of its goal. “Our maturity has enabled us to move safer than ever. All these can be summed up in the triple 3Es -- energy, experience and excellence,” he said. “We are speeding up with more energy, and we're committed to our positive growth with all our experience to secure excellence in everything we do.”

Dhaka Bank operates 87 branches across the country with 1,500 employees; it plans to open ten new branches this year.

“Many banks have a large network of branches. But we did not do that as we believe in quality services first. We are trying to reach customers through digitisation, not by the branch network,” said Rahman.

He said although statistics show growth in credit demand, due mainly to government infrastructure works, capital machinery imports did not increase in that way. Capital machinery imports are important for Bangladesh, as it indicates industrialisation and thus, employment generation, he added.

Private sector credit growth rose 15.59 percent in April compared to a year ago, while LC settlement for capital machinery imports was 12.24 percent higher at the same time, according to central bank data. The growth in the import of capital machinery was led mainly by the garment sector.

The low demand for credit resulted in a reduction in the deposit rate, which came down to almost 5 percent.

The fixed deposit rate in many cases is even lower than the current inflation rate. So, it is hard for people to make real income from interest, he explained.

Inadequate infrastructure, non-availability of suitable lands and crisis in gas and power supplies are the main reasons for slow credit demand, he said.

“We have seen many projects that we have financed cannot start production due to a lack of utilities, and have been waiting for the last two years at least. Their interest payment is increasing. How will they pay the loan unless they start production?”

This is where NPL takes lead; with the overall NPL rate at 10 percent at present, Dhaka Bank stands at around 5 percent.

“We can keep the NPL rate low in line with the prescription of the central bank's rescheduling facility in 2014 and 2015. But the NPL will rise this year, as the central bank's initiative was a temporary measure.”

“If we cannot mange it now, it will create a big problem in the banking industry,” he said, adding that bankers should monitor the issue closely. “We have to evaluate the purpose of the loan, ensure the end use and improve the monitoring and control mechanism.”

Dhaka Bank was listed on the stockmarket in 2000. The bank's net profit for 2015 was Tk 151 crore, while the bank deposits 1 or 2 percent of its net profit to Dhaka Bank Foundation, which works for the development of the society in the areas of health, education and sports.

On the Dhaka Stock Exchange on Thursday, each Dhaka Bank share traded between Tk 14.5 and Tk 15, before closing at Tk 15.

Sponsors hold a 39.08 percent stake in the bank, while institutions 23.19 percent, foreign investors 0.13 percent and general public 37.6 percent, according to the DSE.