Citizens Bank aims to become a top lender

Banks are systemically important institutions and corporate governance is vital for them to navigate difficult times and convince depositors to keep money with them.

Citizens Bank PLC, which launched its commercial operation in July 2022 as the 61st bank in Bangladesh, is aware of this.

Accordingly, the private commercial lender has attached importance to ensure corporate governance and compliance with a view to becoming one of the top banks in the country.

"Our board has directed us not to compromise with corporate governance and compliance from day one. This is our strength," said Mohammad Masoom, managing director and chief executive officer of Citizens Bank.

"I think Citizens Bank will be one of the finest banks in Bangladesh and play an important role in building public confidence."

During an interview with The Daily Star recently, Masoom said corporate governance at Citizens Bank is very strong as it believes that it will be able to overcome any situation if it ingrains the value of good governance and creates a compliance culture.

"So, from that perspective, we will be the safest custody of your deposits. We don't want to say this for the sake of saying. We don't want to keep it as rhetoric. We want to execute this. We want to make it a reality."

The bank obtained the licence in December 2020, so it had to prepare itself to launch operations amid various challenges.

The initial days had been tough owing to the Covid-19 pandemic. Problems in some new banks resulting from loan irregularities also eroded the confidence among people.

"We started our journey amid challenges. We faced problems in almost every step because of the pandemic," Masoom said.

"Some incidents had already rattled the confidence of depositors. The interest rate cap on loans affected the flow of deposits as well."

Against this backdrop, Citizens Bank began commercial operations with Tk 335 crore in deposits and nearly 1,600 accounts.

"I think it was a landmark for us," said Masoom, who was appointed in January 2021 as the first managing director and CEO of the bank.

He said they were able to collect deposits by giving assurance to savers.

"Confidence by itself is a non-monetary capital for banks. It matters most for organisations like banks to navigate difficult times. We have used our long-term relationship with people, shared with them our mission and vision, and the way we will operate."

In order to attract savers in the challenging environment, Citizens Bank had to offer a maximum of 8 per cent interest for term deposits. It, however, managed to keep the overall cost of deposits within 6 per cent.

"This is a big achievement for a new bank," he said.

According to the CEO, the banking sector has been able to regain confidence.

"The amount of money being put under the mattresses has reduced. We are getting positive results in terms of confidence and we have valid reasons to be optimistic."

Citizens Bank reached a break even in the first year of its operation.

"Our balance sheet is also clean. We don't have any non-performing loan."

Masoom, who has been working in the banking sector for more than three decades, also talked about the interest rate cap on loans imposed by the central bank in April 2020 to lower the cost of funds for businesses.

He thinks the introduction of the Six-Month Moving Average Rate of Treasury bills (SMART) as the reference rate for banks to fix interest rates with a margin of 3 per cent is a good initiative and a step toward making the interest rate market-based.

"Still, it is a cap. But we will gradually move toward market-based interest rates."

He said owing to the interest rate cap at 9 per cent, a number of banks have become over-stressed.

Besides, the flow of loans to micro, small and medium enterprises (MSMEs) was affected as banks could not impose risk premiums while pricing loans.

"MSMEs are the driving force for the economy of any country. If we want to ensure sustainable growth of the economy, we need to give importance to MSMEs," said Masoom, adding that MSMEs will get priority at Citizens Bank.

The private commercial bank has started lending to MSMEs by offering up to Tk 15 lakh as unsecured loans. "This is just to encourage MSMEs," Masoom said. 

Going forward, he wants to make the private bank a highly rated lender in terms of CAMELS rating, which measures the performance of a financial institution based on six criteria: capital adequacy, asset quality, management efficiency, earnings, liquidity and sensitivity to market risk.

"We will create a noise in the market in the next one year in terms of performance, rating status and CAMELS rating. We strongly believe that you will be able attain desired results if you ensure good governance and manage the balance sheet professionally."

Masoom thinks as Bangladesh is on course to be a developing country in 2026 and aspires to become a higher middle-income country in a decade, it is vital for banks to be on a solid footing.

He said Citizens Bank is learning from the mistakes committed by other lenders.

"We are careful so that the events that took place at other banks don't happen here. We want to work in one area and it is good governance. It has to be practised and ingrained in each employee."