Bangladesh Banking Sector
— Investor Assessment 2026
A comprehensive analysis of 34 scheduled banks for high-level investors. Sector KPIs, NPL landscape, regulatory reform status, and a bank-by-bank investment ranking — all backed by primary sources.
Sector Overview
Bangladesh's banking sector stands at a pivotal but turbulent juncture — undergoing the most far-reaching regulatory overhaul in its history, even as headline NPL and capital numbers reach historic lows.
Bangladesh operates 61 scheduled commercial banks — 6 state-owned commercial banks (SOCBs), 43 private commercial banks (PCBs), 9 foreign commercial banks (FCBs), and 3 specialised development banks — regulated by Bangladesh Bank (BB) under the Bank Company Act 1991.[1]
The sector entered FY2026 under acute stress. Following the political transition in August 2024, Bangladesh Bank dissolved the boards of 14 banks and launched asset quality reviews (AQRs), which exposed decades of concealed non-performing loans. The true scale of bad loans — hidden through regulatory forbearance and politically-directed rescheduling — was finally laid bare.[2]
Yet the reform architecture now in place is the most credible since independence. The IMF's $5.5 billion programme (of which $3.65 billion has been disbursed), alongside World Bank and ADB support, provides both the financial cushion and the external discipline to sustain reforms. Risk-based supervision rolled out from January 2026. IFRS-9 adoption is mandated by December 2027. The Bank Resolution Ordinance 2025 provides BB with a legal framework to intervene in failing banks without court delays.[3]
Investment thesis in one line: The sector is bifurcated. A small cluster of 4–5 private banks with strong governance are delivering record profits at historically cheap valuations. The rest — particularly state-owned banks and distressed Islamic banks — are effectively insolvent and uninvestable for at least 3–5 years.
Sector Structure (2025)
NPL Trend (%) — Sector-wide
Key Sector Metrics
Critical financial health indicators as of the latest available data (2025–26). All figures sourced from BB publications, World Bank, and leading financial press.
CAR Comparison — by Bank Category
H1 2025 — Profit Leaders vs Loss-Makers
The NPL Crisis — Root Causes & Outlook
Bangladesh's non-performing loan problem is not cyclical — it is structural, rooted in three decades of governance failures, political interference, and regulatory forbearance.
The official NPL ratio jumped from 10.11% in June 2023 to 20.20% by December 2024 — simply by Bangladesh Bank adopting the Basel III loan classification standard (3-month overdue rule vs. the previous 6-month rule). This reclassification didn't create new bad loans; it revealed ones that had been concealed for years through regulatory forbearance and politically-directed rescheduling.[11]
By September 2025, the sector-wide NPL ratio reached 35.73% — nearly 4.5x the South Asian average of 7.9% (World Bank, 2025). Some distressed banks reported default ratios exceeding 50–87%. First Security Islami Bank ended 2024 with the highest bad loan ratio at 87.5%. Union Bank's NPLs reached nearly 90% of outstanding loans by March 2025.[14]
The S Alam Group — a single conglomerate — was identified by BFIU as having borrowed Tk 2.25 lakh crore directly and indirectly from 10 banks and one financial institution. Of this, Islami Bank alone disbursed Tk 1.05 lakh crore to the group — a staggering concentration of connected-party exposure.[15]
Key structural driver: Banks held 67% of all public debt by May 2026. Under Basel III, government securities carry 0% risk weight — banks earn 10–12% risk-free yield with zero capital charge. This has crowded out private lending, with private sector credit growth falling to a 21-year low of 6.29%.[5]
21 Banks — NPL Under Control (2024)
Banks that bucked the rising bad loan trend — Source: Daily Star, July 2025[14]
Worst NPL Cases (2024)
Banks with NPL exceeding 40% — Source: Daily Star, New Age[14,7]
| Bank | NPL / Status |
|---|---|
| First Security Islami Bank | 87.5% |
| Union Bank | ~90% (Mar 2025) |
| Janata Bank (SOCB) | CRAR -34.6% |
| Padma Bank | Capital -Tk4,985Cr |
| AB Bank | H1 2025 loss Tk1,758Cr |
Reform Agenda — What Has Changed
The 2025–26 regulatory overhaul is the most credible in Bangladesh's banking history. Backed by IMF conditions, it addresses structural failures that previous governments tolerated.
Political Transition — Board Dissolutions
Interim government assumes power. Bangladesh Bank dissolves boards of 14 banks controlled by politically-connected groups (S Alam, Salman F Rahman, Saifuzzaman). AQRs commissioned.
New Loan Classification Rules
BB Master Circular amends NPL classification — 3-month overdue standard (from 6 months), aligned with Basel III. Provisioning tightened. True scale of bad loans begins to emerge.
3-Year Banking Reform Roadmap Released
Government commits to NPL reduction targets (SOCBs to 10%, PCBs to below 5% — both by June 2026), AQR completion, new bankruptcy and distressed asset laws, IFRS-9 by December 2027.
Bank Resolution Ordinance 2025 Enacted
Grants BB full legal authority to intervene in failing banks immediately, without waiting for courts. Creates Bridge Bank mechanism. Five distressed Islamic banks merged into Sammilito Islami Bank PLC.
Risk-Based Supervision — Full Rollout
BB transitions from checklist-based inspections to continuous risk-based monitoring. Pilot inspections completed for 20 banks covering ~50% of system assets. New dividend policy restricts payouts for 25+ banks.
NPL Deadline — Target Date
Binding deadline for SOCBs to reduce NPL to 10% and PCBs to below 5%. IFRS-9 Expected Credit Loss model adoption underway. Results of this deadline will be a key investment signal.
IFRS-9 Full Compliance Deadline
All banks must adopt Expected Credit Loss (ECL) model. Forward-looking provisioning will initially spike NPL numbers but create genuinely honest balance sheets for the first time.
Bank-wise Investment Ranking — All 34 Banks
Ranked using seven internationally-recognised indicators: ROA, ROE, NPL ratio, Net Profit, NAVPS, Capital Adequacy Ratio (CAR), and Operating Profit per Branch. Primary source: Bonik Barta Top Banks 2024 Annual Ranking (October 2025), supplemented by BB FSR, New Age, Daily Star, and TBS.
Verdict Key: STRONG BUY BUY HOLD CAUTION AVOID — Based on NPL, CAR, profitability, governance, dividend eligibility and reform trajectory. Not a solicitation to trade.
| # | Bank Name | Type | BB Score /70 pts |
NPL Status | CAR | 2025 Dividend | Verdict |
|---|---|---|---|---|---|---|---|
| ◆ TIER 1 — STRONG BUY | Sector-leading fundamentals. Core portfolio allocation. | |||||||
| 1 | BRAC Bank PLCDSE: BRACBANK | Founded 2001 | PCB | Very Low (<3%) | Strong (>12%) | 30% (15%C+15%S) ↑ from 25% in 2024 |
STRONG BUY | |
| ◆ TIER 2 — BUY | Strong governance, record profits, dividend-paying. Medium-to-long term. | |||||||
| 2 | City Bank PLCDSE: CITYBANK | Founded 1983 | PCB | Low (<5%) | Strong | 25%+ (2024) | BUY | |
| 3 | Prime Bank PLCDSE: PRIMEBANK | Founded 1995 | PCB | Controlled | 2nd Best | 17.5% (2024) | BUY | |
| 4 | Eastern Bank Ltd (EBL)DSE: EBL | Founded 1992 | PCB | Very Low (<3%) | Adequate | 20%+ (2024) | BUY | |
| ◆ TIER 3 — HOLD | Adequate fundamentals. Weakness in 1–2 metrics. Active monitoring required. | |||||||
| 5 | Pubali Bank PLCDSE: PUBALIBANK | PCB | Moderate | 14th among ranked | Record 2024 | HOLD | |
| 6 | Dutch-Bangla Bank (DBBL)DSE: DUTCHBANGL | PCB | <10% | 12th | Regular | HOLD | |
| 7 | Uttara Bank PLCDSE: UTTARABANK | PCB | Moderate | Adequate | Regular | HOLD | |
| 8 | Trust Bank PLCDSE: TRUSTBANK | PCB | <10% | Below avg | Regular | HOLD | |
| 9 | Mutual Trust Bank (MTB)DSE: MTB | PCB | <10% | 17th (legacy) | Regular | HOLD | |
| 10 | Bank Asia PLCDSE: BANKASIA | PCB | <10% | Adequate | Regular | HOLD | |
| 11 | Jamuna Bank PLCDSE: JAMUNABANK | PCB | <10% | 4th best | Regular | HOLD | |
| 12 | NCC Bank PLCDSE: NCCBANK | PCB | <10% | Moderate | Limited | HOLD | |
| ◆ TIER 4 — CAUTION | Elevated NPL / weak CAR. Speculative. Long-term distressed-value only. | |||||||
| 13 | Dhaka Bank PLCDSE: DHAKABANK | PCB | 7th best | Lower tier | Limited | CAUTION | |
| 14 | Midland Bank PLCDSE: MIDLANDBNK | PCB | 4th best | 3rd best | Very limited | CAUTION | |
| 15 | Shahjalal Islami BankDSE: SHAHJABANK | PCB-I | Moderate | 13th | Limited | CAUTION | |
| 16 | Southeast Bank PLCDSE: SEBL | PCB | Elevated | Lower | Very limited | CAUTION | |
| 17 | Mercantile Bank PLCDSE: MERCANBANK | PCB | Elevated | Lower | Ineligible 2025 | CAUTION | |
| ◆ TIER 5 — AVOID | Insolvent / near-insolvent. Capital shortfall. Dividend ineligible. No near-term investment case. | |||||||
| 18 | One Bank PLCDSE: ONEBANK | PCB | High | Low | Ineligible 2025 | AVOID | |
| 19 | UCB (United Commercial Bank)DSE: UCB | PCB | Very High | Very Low | Ineligible 2025 | AVOID | |
| 20 | Islami Bank Bangladesh (IBBL)DSE: ISLAMIBANK | PCB-I | Tk47,618Cr (Mar25) | Under stress | None — first in 40 yrs | AVOID | |
| 21 | Al-Arafah Islami BankDSE: ALARABANK | PCB-I | Very High | Deficit Tk254Cr | Ineligible 2025 | AVOID | |
| 22 | Standard Bank PLCDSE: STANDBANKL | PCB | Very High | Deficit Tk1,862Cr | Ineligible 2025 | AVOID | |
| 23 | IFIC Bank PLCDSE: IFICBANK | PCB | Tk17,182Cr | Deficit Tk9,029Cr | Ineligible 2025 | AVOID | |
| 24 | AB Bank PLCDSE: ABBANK | PCB | Very High | Deficit Tk518Cr | Loss Tk1,758Cr H1'25 | AVOID | |
| 25 | National Bank LtdDSE: NBL | PCB | Very High | Deficit Tk7,799Cr | Ineligible 2025 | AVOID | |
| 26 | NRB Bank PLCDSE: NRBBANK | PCB | High | Weak | Ineligible 2025 | AVOID | |
| 27 | Premier Bank PLCDSE: PREMBANKL | PCB | Very High | Very Low | Ineligible 2025 | AVOID | |
| 28 | Padma Bank PLCDSE: PADMABANK | PCB | Catastrophic | Deficit Tk4,985Cr | Ineligible 2025 | AVOID | |
| 29 | Bangladesh Commerce BankDSE: BDCOMBANK | PCB | Catastrophic >60% | Deficit Tk1,656Cr | Ineligible 2025 | AVOID | |
| 30 | ICB Islami BankDSE: ICBIBANK | PCB-I | Catastrophic | Deficit Tk1,909Cr | Ineligible 2025 | AVOID | |
| 31 | Sonali Bank PLCState-owned | Founded 1972 | SOCB | Not ranked | 32%+ (SOCB avg) | Far below min | None/Minimal | AVOID |
| 32 | Janata Bank PLCState-owned | Founded 1972 | SOCB | Not ranked | Catastrophic | CRAR −34.6% | None | AVOID |
| 33 | Agrani Bank PLCState-owned | Founded 1972 | SOCB | Not ranked | High | Well below min | None | AVOID |
| 34 | Rupali Bank PLCState-owned | Founded 1972 | SOCB | Not ranked | High | Below min | None/Minimal | AVOID |
PCB = Private Commercial Bank | PCB-I = Private Commercial Bank (Islamic) | SOCB = State-Owned Commercial Bank. Score based on 7 indicators: ROA, ROE, NPL, Net Profit, NAVPS, CAR, OPB — maximum 70 pts. Source: Bonik Barta Top Banks 2024 Annual Ranking, October 2025.[9] Note: EXIM Bank, First Security Islami Bank, Global Islami Bank, Social Islami Bank, and Union Bank excluded from Bonik Barta ranking as they are undergoing merger processes.
Investor Strategy & Key Monitorables
For high-level investors navigating Bangladesh's bifurcated banking landscape in 2026.
Portfolio Allocation Framework
Key Monitorables
Valuation opportunity: BRAC Bank's P/E of ~9.6x vs. the Bangladesh market average of 19.3x reflects a sector-wide discount applied to all bank stocks. If the bank delivers even moderate earnings growth over 3 years and the sector de-risks through reform, a re-rating to 13–15x P/E implies 35–55% upside. The bank's payout ratio is only 14–16%, leaving significant room to grow dividends as CAR headroom expands. Source: Simply Wall St, TBS[20]
References & Sources
- [1]Bangladesh Bank. (2025). Scheduled Banks in Bangladesh. Bangladesh Bank Official Website. www.bb.org.bd
- [2]BBF Digital. (March 9, 2026). Why 2025 Marked a Turning Point for Bangladesh's Banks. bbf.digital
- [3]The Financial Express. (November 23, 2025). Banking on Change: Key Reforms Transforming Bangladesh's Financial Sector. thefinancialexpress.com.bd
- [4]World Bank. (2025). Bangladesh Development Update. Washington D.C. / The Daily Star. (December 2025). Bangladesh Economy in 2025 and Expectations for 2026. thedailystar.net
- [5]The Business Standard. (May 2026). Banks Are Quietly Abandoning Private Sector. tbsnews.net
- [6]The Daily Star. (December 2025). Bangladesh Economy in 2025 and Expectations for 2026. thedailystar.net
- [7]New Age. (2025). 19 Banks Suffer Record Capital Shortfall of Tk1.71 Lakh Crore. newagebd.net
- [8]New Age. (April 17, 2026). 17 Banks Fail to Generate Net Profit in 2024: BB. newagebd.net
- [9]Bonik Barta. (October 26, 2025). BRAC, City, and Prime Lead the Ranking — Top Banks 2024 Annual Ranking. With LankaBangla Asset Management Co. Ltd. en.bonikbarta.com
- [10]LightCastle Partners. (February 2026). Bangladesh Macroeconomic and Growth Outlook 2026. lightcastlepartners.com
- [11]BBF Digital. (March 2026). Why 2025 Marked a Turning Point for Bangladesh's Banks — Record NPLs, Landmark Mergers, Sweeping Reforms. bbf.digital
- [12]Asian Development Bank. (2025). Stabilizing and Reforming the Banking Sector Program — Supporting Document. adb.org
- [13]The Daily Star. (2025). Six Banks Shine, Five Hit Record Losses — H1 2025 Banking Results. thedailystar.net
- [14]The Daily Star. (July 4, 2025). 21 Banks Bucked Rising Bad Loan Trend in 2024. thedailystar.net
- [15]The Business Standard. (March 2025). NPLs in S Alam-Controlled Banks Under Hasina Jumps by Tk86,000 Crore. tbsnews.net
- [16]The Business Standard. (January 11, 2025). Banks Brace for Stricter NPL Rules, Fear Loss, Eroding Capital Base. tbsnews.net
- [17]The Daily Star. (July 6, 2025). Inside the 3-Year Plan to Fix Banks. thedailystar.net
- [18]Chambers & Partners. (December 2025). Banking Regulation 2026 — Bangladesh. Global Practice Guides. practiceguides.chambers.com
- [19]The Financial Express. (November 2025). Banking on Change: Key Reforms Transforming Bangladesh's Financial Sector. thefinancialexpress.com.bd
- [20]The Business Standard. (April 26, 2026). BRAC Bank Posts 57% Growth, Records Tk2,251 Crore Profit in 2025. Simply Wall St — BRACBANK Analysis. tbsnews.net / simplywall.st
- [21]World Bank Blog. (December 21, 2025). Towards a Stable and Inclusive Financial Sector in Bangladesh. blogs.worldbank.org
- [22]Centre for Policy Dialogue (CPD). (January 10, 2026). State of the Bangladesh Economy in FY2025-26: First Reading. Dhaka. cpd.org.bd
- [23]Bangladesh Bank. (July 17, 2025). Sustainability Finance Report 2024 — Recognised Sustainable Banks. BSS / Daily Star. bb.org.bd
