Moody’s downgrades outlook on Bangladesh’s banking system, however, BRAC BD remains strong

Moody’s downgrades outlook on Bangladesh’s banking system from stable to negative citing that macroeconomic challenges will worsen asset risk for banks in Bangladesh.

We find Moody’s view expected given current macroeconomic challenges in Bangladesh. We also view that most of the risk associated with banking sector of Bangladesh is concentrated in state owned banks.

Meanwhile, BRAC BD remains stable as the bank is well capitalized with standalone CAR (Capital Adequacy Ratio) of 13.5%, has low NPL of 3.9% and strong provision coverage of 114.0%. Moreover, BRAC BD’s loan portfolio under payment deferral is only 2.8% as on Sep’22.

If any consolidation happens in the banking sector, we view that BRAC BD will come out as a winner.