Depositors leave troubled banks for stronger rivals

Depositors, in times of financial uncertainty, usually move their money away from troubled banks to institutions with stronger balance sheets. That is exactly what unfolded in 2024, when 11 banks collectively lost Tk 23,700 crore in deposits.

So, where did all that money go? Higher-than-usual deposit growth, in some cases up to 32 percent, at several well-performing market peers offers a clear answer.

• Part 1 - Bond boom contributes half of bank income
• Part 2 - Few banks thrived, others bled in 2024

For example, take the case of Jakir Hossain, a mid-level employee at a pharmaceutical company.

Following sweeping banking reforms after the political changeover in August last year, he withdrew his savings of several lakh taka from a scam-hit Shariah-based bank and moved it to what he perceived to be a more stable one.

Hossain was not alone. Thousands of savers followed suit, shifting their funds to banks they trusted more.

Some, however, were unable to do so, as some troubled banks failed to repay their customers. The situation improved later as the central bank stepped in with emergency liquidity support.

Among the worst affected was Social Islami Bank, which saw its deposits fall by 15 percent, from Tk 35,685 crore in 2023 to Tk 30,921 crore last year.

National Bank's deposits shrank by the same margin, dropping from Tk 42,610 crore to Tk 36,998 crore. Bangladesh Commerce Bank reported a 10 percent decline, with deposits falling to Tk 4,264 crore.

Shafiuzzaman, managing director of Social Islami Bank, attributed the sharp outflows to panic among both corporate and retail clients, especially after the bank's links to controversial conglomerate S Alam Group came to the spotlight after the July uprising.

"There was a massive wave of withdrawals after 5 August," he told The Daily Star. "But the good news is that the decline has been contained. Deposits fell by about Tk 6,000 crore by December last year but have since stabilised at around Tk 29,000 crore as of June 2025."

He added that the bank now has a new board and management team.

"Savers should regain confidence. No bank can survive if all its customers show up to withdraw funds. We are focused on timely repayments to rebuild trust. Our asset classification is not severe, and most loans are recoverable. I believe we can return to a sound position within the next one to two years," said the MD.

Even Standard Chartered Bangladesh, the country's most profitable foreign bank, saw a 9.97 percent decline in deposits, falling to Tk 38,136 crore in 2024.

In response to a query from The Daily Star, the bank said the decline was due to "a few exceptional, non-recurring factors."

"Despite a challenging foreign currency liquidity environment, we supported our clients by facilitating repatriation of $600 million for the airline industry alone," the bank said in an emailed statement. "These and other one-off client remittances temporarily impacted deposit balances. However, after adjusting for these effects, we estimate underlying deposit growth of around 4 percent."

In 2024, AB Bank saw its deposits fall by 9.87 percent year-on-year to Tk 32,253 crore, while deposits at Basic Bank dropped by 8 percent.

First Security Islami Bank, Exim Bank, and Janata Bank also saw declines and struggled to post profits, weighed down by high levels of non-performing loans (NPLs).

By contrast, banks with bright balance sheets attracted new deposits.

BRAC Bank led the pack, with deposits rising 32 percent to Tk 77,705 crore. City Bank followed with 31 percent growth, reaching Tk 51,436 crore. Jamuna Bank posted a 27 percent rise, closing the year with Tk 31,040 crore in deposits.

Among banks with deposits of more than Tk 20,000 crore, Mutual Trust Bank, Eastern Bank, Pubali Bank, and Trust Bank also made it to the list of top performers, each having growth above 20 percent. Prime Bank, NCC Bank, and Bank Asia saw increases above 15 percent.

Several newer banks also reported strong performances. Midland Bank, Bengal Commercial Bank, Meghna Bank, Citizen Bank, and Shimanto Bank all saw deposit growth of more than 20 percent last year.

Z M Babar Khan, managing director and CEO (CC) of AB Bank, said that the bank in 2023 registered deposit growth of Tk 3,800 crore. However, it experienced outflows in 2024 due to "widespread rumours" about being placed in the so-called red zone and speculation about a potential merger.

"As a result, total deposits declined by Tk 3,185 crore," he said. "Later, Bangladesh Bank clarified its position over the red zone, and that helped restore depositor confidence."

"As one of the country's oldest private banks, we have a strong customer base and value their support. We have received a very positive response, booking fresh deposits of Tk 6,500 crore up to June this year," Khan added.

Industry experts said the outflows from troubled banks and inflows to well-performing ones show a broader shift in depositor behaviour.

Regarding banks reporting higher growth last year, Prof Shah Md Ahsan Habib of the Bangladesh Institute of Bank Management said, "That was not normal organic growth. It is largely the result of clients moving away from weak banks."

"After the political changeover, the true health of many banks was exposed. Clients moved their money to stronger banks, regardless of interest rates."

"Some banks gained heavily, others lost, and those in the middle saw moderate growth. It is a clear reflection of how trust and governance now matter more than ever," Prof Habib added.