Bangladesh’s Dutch-Bangla Bank to face tough operating conditions in 2024: S&P

The bank should be able to maintain its satisfactory franchise, however.

Bangladesh’s Dutch-Bangla Bank will continue to face tough operating conditions in 2024, says S&P Global Ratings.

Whilst economic growth in Bangladesh is likely to remain high due to momentum in its labor markets and expert industries, commodity inflation and external sector volatility present significant risks, the ratings agency noted.

“Although Bangladesh has healthy growth prospects (due to poverty alleviation measures and the development of the manufacturing and service sectors), credit risk in the country remains extremely high,” S&P noted. This is reportedly underscored by weak foreclosure laws and underwriting standards, weak governance at some banks, and client concentration that leads to sizable, stressed assets in the banking industry.

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Competition is a key issue that the bank will face. Dutch-Bangla competes with more than 60 other banks in the country.

On the other hand, it has the advantage of being a “first-mover” and is introducing innovative technology-based solutions in Bangladesh. These include ATMs, internat banking, mobile banking, point of sale (POS) terminals, amongst others.

The bank also holds a sizable market share in e-commerce transactions, remittances, and debit and credit card issuance, S&P noted.

“We expect Dutch-Bangla's capitalization to benefit from an improvement in profitability and high earnings retention,” S&P said, adding that Dutch-Bangla is likely to maintain its satisfactory franchise.