Bangladesh’s private banking sector continues to face mounting uncertainty as Moody’s Ratings maintains a negative outlook on several major lenders, citing persistent weaknesses in asset quality and elevated credit risks.
The ratings agency has kept BRAC Bank PLC, City Bank PLC and Eastern Bank PLC under negative outlook, pointing to structural vulnerabilities that threaten their medium term performance.
BRAC Bank, while better capitalized than many local peers, faces rising risks due to rapid growth in unsecured retail loans and significant exposure to the country’s 20 largest corporate borrowers. Moody’s warned that these concentrations heighten the potential for asset quality deterioration.
City Bank has recorded improvements in profitability, funding and liquidity, helping offset weaker asset quality and moderate capital strength. Its stronger funding base may position it to better withstand ongoing sector wide stress.
Eastern Bank continues to benefit from stable capital ratios and resilient profitability, supported by a higher quality corporate loan book. However, its exposure to restructured loans in the power sector now backed by long term government bonds remains an area to watch.
Moody’s noted that both BRAC Bank and City Bank may experience a “flight to quality,” as depositors and investors seek out better managed banks amid rising uncertainty in the broader system. This could help shore up liquidity and stabilize their funding positions.
Still, analysts caution that these pockets of resilience exist against the backdrop of deeper structural challenges. Many banks in Bangladesh continue to struggle with high credit risk, governance problems, rising non performing loans and limited capital buffers, all of which are expected to weigh on the sector through 2026.
With Moody’s signalling continued caution, the next one to two years will be critical. Banks that can strengthen balance sheets, tighten risk controls and improve asset quality may be able to navigate the difficult conditions ahead but the overall sector outlook remains fragile.
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