Islami Bank surpasses Sonali Bank to become the largest lender by deposits

 Islami Bank surpasses Sonali Bank to become the largest lender by deposits

Islami Bank Bangladesh PLC has become the largest lender in the country by total deposits for the first time, surpassing Sonali Bank PLC, despite recent loan scams.

In 2023, the Shariah-compliant bank attracted deposits of Tk 153,456 crore, an increase of around 9 percent year-on-year. Sonali Bank, the largest state-run lender, mobilized deposits worth Tk 150,606 crore, up 6 percent, according to financial reports.

s ss

This makes Islami Bank the largest bank in Bangladesh in terms of both deposits and loans (investments). Its lending has outpaced the state-run lender for several years.

"Islami Bank receives higher deposits mainly due to religious factors," said Toufic Ahmad Choudhury, director-general of the Bangladesh Academy for Securities Markets. "Apart from this, people have limited investment opportunities to keep their funds safe. People can buy land and flats, but they are also cheated. Therefore, banks have managed to retain the trust of depositors."

ss s

Established in 1983, Islami Bank was the first Shariah-based bank in Southeast Asia. It has faced a crisis since 2017 when S Alam Group took it over, leading to deteriorating financial health and the withdrawal of many sponsors. Recently, the bank has come under scrutiny due to widespread financial scams, such as allegedly disbursing Tk 7,246 crore in loans to nine companies in 2022 in violation of banking norms.

Choudhury, also a former director-general of the Bangladesh Institute of Bank Management, said many depositors are unaware of the safety of their banks and have little knowledge about how financial institutions use funds to generate income.

ss s

Private banks are expanding their footprint by setting up agent banking outlets and launching mobile financial services and internet banking. They are growing fast on the back of new technologies, while state-run banks are lagging.

In terms of network, Sonali Bank remains the largest lender in Bangladesh, with 1,232 branches at the end of 2023 compared to Islami Bank's 394 branches. State-run Agrani Bank came second with 978 branches, and Janata Bank was third with 928 branches.

Choudhury noted that Sonali Bank has to provide many government services and cannot focus on collecting deposits like its private-sector competitors. However, the bank's financial performance is improving.

Historically, people have had more trust in state-run banks, which expanded their footprint across the country through branches, netting them comparatively higher deposits. Janata Bank collected the third-highest volume of deposits at Tk 110,341 crore last year. It was Tk 98,540 crore for Agrani Bank, Tk 66,731 crore for Rupali Bank, and Tk 60,574 crore for Pubali Bank, according to their financial reports.

Among foreign banks, Standard Chartered Bangladesh raised the highest deposit at Tk 41,940 crore, a year-on-year increase of around 15 percent. Pubali Bank posted a 19 percent growth to Tk 60,574 crore, becoming the top deposit collector among local conventional banks.

A top banker noted that depositors of Shariah-based banks usually do not keep funds with conventional banks, and the number of depositors in Islamic banks is rising steadily. "Besides, financially strong and sound banks get more deposits."

In 2023, Islami Bank lent Tk 141,035 crore, making it the top lender. Sonali Bank came second by extending loans amounting to Tk 102,399 crore. Janata, Agrani, and Pubali Bank were also among the top lenders.

Although Islami Bank topped the chart in attracting deposits and providing loans, it ranked low on the list of top profit-makers. Standard Chartered Bangladesh posted the highest profit among all banks, netting a record Tk 2,335 crore in 2023, followed by HSBC's Tk 999 crore, BRAC Bank's Tk 827 crore, Dutch-Bangla Bank's Tk 801 crore, Sonali Bank's Tk 747 crore, and Pubali Bank's Tk 697 crore.

s ss

Another top banker noted that many people keep their funds with Shariah-based banks even if they offer a lower return or have weak financial strength. "They keep funds to avoid interests in conventional banks. Even some of my close relatives don't keep funds in my banks," he said. "So, this is a pure case of belief."