Foreign Banks Stay Financially Strong Despite Declining Credit, Market Share

Foreign commercial banks (FCBs) operating in Bangladesh continue to maintain strong financial health, supported by robust capital reserves, ample liquidity, low non-performing loan (NPL) ratios, and stable profitability, despite a decline in overall lending and market share.

The financial performance and contribution of these institutions were highlighted in a report titled "Activities of Foreign Banks in Bangladesh: Trends and Operational Observations (July�"December 2025)," jointly published by the Statistics Department and the Special Studies & Projects Department of Bangladesh Bank.

According to the report, nine foreign commercial banks currently operate in Bangladesh through 70 branches and five sub-branches. Since the country's independence, these institutions have played a significant role in international trade financing, foreign exchange transactions, financial product innovation, and integrating Bangladesh's economy with global financial markets. Although their physical presence in terms of branches, deposits, and loan portfolios remains relatively limited compared with domestic banks, their strategic contribution to the financial sector continues to be significant.

As of December 2025, total deposits held by FCBs stood at Tk 87,567.90 crore, compared with Tk 87,477.50 crore a year earlier. However, their share of the country's total banking deposits declined from 4.6 percent to 4.2 percent over the same period.

The composition of FCB deposits showed that Current and Savings Accounts (CASA) accounted for the largest share at 39 percent, followed by resident foreign currency deposits at 17 percent, fixed deposits at 16 percent, special notice deposits (SND) at 5 percent, and other deposits at 23 percent.

The report also showed that total loans and advances extended by FCBs fell by 11.3 percent to Tk 46,122.50 crore at the end of December 2025 from Tk 51,970.00 crore a year earlier. As a result, their share of total banking sector credit declined from 3.1 percent to 2.6 percent.

Industry remained the largest recipient of FCB credit, accounting for 52 percent of total lending. The trade and commerce sector received 16 percent, services accounted for 8 percent, while miscellaneous sectors represented the remaining 4 percent.

Although lending to the industrial sector increased to Tk 24,264.80 crore, financing for trade and commerce dropped sharply from Tk 15,689.70 crore to Tk 9,110.50 crore. In contrast, credit to the agriculture, fisheries and forestry sector more than doubled, rising from Tk 726.50 crore to Tk 1,668.50 crore. Bangladesh Bank said the increase reflects growing interest among foreign banks in financing productive sectors of the economy.

Foreign banks also maintained sound asset quality. Their NPL ratio increased from 4.9 percent in December 2024 to 6.1 percent in June 2025 before easing slightly to 5.9 percent by December 2025. Despite the increase, the ratio remained significantly lower than that of most domestic commercial banks.

During the July�"December 2025 period, FCBs earned a pre-tax profit of Tk 4,390.00 crore and a net profit after tax of Tk 3,738.70 crore. During the period, reinvested earnings declined, while profit repatriation abroad increased to Tk 1,314.60 crore. Dividend transfers also rose to Tk 562.70 crore.

By the end of December 2025, the total assets of foreign banks stood at Tk 3,00,219 crore, backed by capital and reserves of Tk 15,617.60 crore. More than 56 percent of total assets and over 62 percent of liabilities were classified under "Others," mainly representing contra entries for off-balance-sheet transactions, reflecting FCBs' strategy of maintaining strong liquidity buffers.

Foreign banks continued to play an important role in facilitating Bangladesh's external trade during the second half of 2025. They processed export proceeds worth US$4.12 billion, accounting for 18.8 percent of the country's total export earnings, primarily from the readymade garment (RMG), leather and export processing zone (EPZ) sectors.

During the same period, FCBs settled import bills amounting to US$4.29 billion, representing 13.1 percent of Bangladesh's total imports. The payments mainly covered textiles, raw materials, chemicals, capital machinery and other industrial inputs.

Remittance inflows through foreign banks amounted to US$47.42 million, representing only 0.3 percent of the country's total remittance receipts.

The report also highlighted the strong capital position of foreign banks. As of December 2025, they maintained a Capital Adequacy Ratio (CAR) of 41.50 percent and a Common Equity Tier-1 (CET-1) ratio of 39.28 percent, indicating a high level of financial resilience.

Commenting on the report, Dr. Abdul Bayes, former Vice-Chancellor and former Professor of Economics at Jahangirnagar University, said persistent political and economic uncertainty continues to discourage private investment.

"High policy interest rates, coupled with prolonged macroeconomic uncertainty, have made both borrowers and banks reluctant to undertake new investment projects or expand credit," he said.

Dr. Bayes noted that while many domestic banks continue to struggle with liquidity shortages caused by mounting non-performing loans and weak loan recovery, foreign banks remain well-capitalised and highly liquid.

He said foreign banks could make a greater contribution to Bangladesh's economic growth by expanding financing to promising and productive sectors. However, he stressed that sustainable progress would depend on the successful implementation of broader economic reforms.