Published On: Fri, Jan 3rd, 2014

NBP Bangladesh operation faces heavy losses

Corporate News (Pakistan News) NBP

Corporate News (Pakistan News)

The operations of the National bank of Pakistan in Bangladesh, which is one of the biggest banks of Pakistan has endured losses worth Rs12 billion. According to an initial report issued by the Board of Directors, these losses were a result of negligent and careless management at the hands of the officials appointed in Bangladesh.

The State Bank of Pakistan had pushed the Board and the Chairman of the state-owned bank to present an action plan to counter the credit losses in Bangladesh by mid-December, but according to sources the deadline lapsed after the Board of directors decided to submit a comprehensive plan by the end of January, 2014. According to the officials of the NBP the BoD made Rs9.7 billion “general provision” in its balance sheet on account of anticipated Non-Performing loans (NPLs) in Bangladesh. The BoD hoped that at the end of the day the bank may have to book up to Rs3 billion losses. They said the substantial portion will be recovered.

Sources said a senior executive vice president, who is also a group chief, was involved in the losses and concerted efforts were being made to protect him.

The State Bank of Pakistan Illuminated the weak governance and administration of the NBP which lead to a gradual decline in the financial position of the Bank over the past couple of years. These weaknesses included the incompetent surveillance by the BoD and in some cases the breach of NBP by-laws. The SBP had said that there were flaws in credit initiation, appraisal, monitoring and ex-post facto approvals were sought after giving loans. Furthermore the management of NBP failed to address to issue relating to core banking applications.

The State Bank of Pakistan was disappointed in the lack of urgency shown by the officials of the NBP to tackle weaknesses that had been highlighted by the SBP.

It added the NPLs against domestic operations also stand at a very high level and there are no significant recoveries either. According to the report, the NBP’s NPLs rose to Rs95.8 billion by end September, which were 13.2% of the total loans of Rs729.5 billion.

The SBP further warned that “the NBP carried a substantial exposure on public sector enterprises, which if not addressed amicably might impact the bank’s income and liquidity adversely”.

Asif Hasan is the current president of NBP.

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