Midland Bank financial analysis: negative NII, treasury-led profit, 3.1% NPL and a 66% gap to the Tk2,000 crore rule (Oct 2026)

Investment considerations: clean loans and solid capital, but a negative interest margin and a dividend rule the bank is far from meeting

Midland Bank PLC (MDB) is one of the nine fourth-generation private commercial banks licensed in 2013 [1 p.86]. At the end of 2025 it had 42 branches, 23 sub-branches, 142 agent-banking centres, 74 ATMs and 893 staff including contract staff [1 p.14]. On 30 June 2026 its standalone balance sheet was BDT 140.7bn: deposits BDT 93.8bn, loans BDT 72.8bn, government securities BDT 45.7bn and equity BDT 10.5bn [2 p.5]. It listed on the DSE in March 2023 after a Tk70 crore IPO that the public took up only 0.74 times [6 p.2].

The bank looks clean on asset quality and capital: gross NPL of 3.08% when management cites an industry average above 15%, and CRAR of 15.92% [1 p.67]. The investor's question is about earnings. Since 2024 the bank has earned almost nothing, and in 2025 less than nothing, on the gap between loan interest and deposit interest; its profit now comes from government bills and bonds. Three other facts frame the shareholder case: the BB rule that bars cash dividends below Tk2,000 crore of paid-up capital, a sponsor group holding 76.6% of the shares, and a thin dividend record.

Business: a Dhaka trade-finance bank that has shifted from lending to holding government securities since 2024

MDB earns money in four ways: interest on corporate, trade, SME and retail loans; income from government bills, bonds and shares; commission and exchange on import, export and remittance business; and small other income [1 p.289]. It also runs an Islamic window, 'MDB Saalam', with BDT 5.9bn of deposits and BDT 2.8bn of investments at Dec-2025, an offshore banking unit that earned BDT 22.6m of operating profit, and an asset-management subsidiary licensed by BSEC in August 2024 with BDT 12 crore of capital [1 p.67] [2 p.10].

The loan book is a Dhaka book: BDT 61.4bn of BDT 69.4bn of domestic loans at Dec-2025 sat in Dhaka division and BDT 7.5bn in Chattogram [1 p.320]. Trade drives it. Imports handled grew from BDT 8.4bn (2017) to 45.9bn (2025) and exports from BDT 5.0bn to 41.6bn; inward remittance from BDT 0.6bn to 12.8bn [3 p.15] [1 p.13]. Import plus export volume was 123% of the loan book in 2025 against 49% in 2017 [20], and bills purchased and discounted rose from BDT 3.2bn to 8.4bn in 2025 [1 p.287].

What changed in the decade. From 2017 to 2022 MDB was a lender: loans grew faster than deposits and reached 91.4% of deposits in 2022 [20]. Interest income fell 26% in 2020 [3 p.15]. From 2023 deposit costs rose faster than loan yields [20]. From 2024 the bank changed shape: government securities rose from BDT 21.1bn (Dec-2024) to 45.7bn (Jun-2026), loans grew only 2.5% in H1 2026, and the loan-to-deposit ratio fell to 77.6% [2 p.5] [20]. In June 2026 the bank announced a digital “MDB e-Loan” of up to Tk50,000, repayable over up to 12 months through its Midland Online App, according to its press release carried by The Daily Star and The Business Standard [16] [17].

Line items: deposit costs pushed NII below zero in 2025; treasury income, cost control and lower tax kept profit at BDT 826m

Net interest income. NII was BDT 1,213m in 2018 and BDT -905m in 2025 [3 p.15] [1 p.289]. Interest income grew 19% in 2025 to BDT 7,160m; interest expense grew 35% to BDT 8,065m. The driver is the price and mix of funding, not loan yields: interest income over average loans rose from 7.41% (2022) to 10.66% (2025), but interest expense over average deposits rose from 5.90% to 9.98%, so the spread proxy narrowed from 1.51% to 0.68% [20]. Part of the gap is an accounting split: the bank pays for all its deposits and borrowings through interest expense, but books the coupon on BDT 32.7bn of government securities under 'income from investments' [1 p.287]. The bank's own NIM, which includes that income, was 2.45% in 2025 against 4.11% in 2021 [1 p.14].

Management's explanation for H1 2026 is 'low advance-deposit ratio and growth rate of interest expenses is higher compare to growth rate of interest income' [2 p.11]. History-based sensitivity: in 2025 average deposits were about BDT 80.8bn, so each 1pp on the deposit cost moved interest expense by roughly BDT 808m, close to the whole of 2025 profit after tax [20].

Income from investments. This line rose from BDT 1,358m (2021) to 4,663m (2025), up 73% in 2025, and to BDT 1,815m in H1 2026 against 1,304m a year earlier [1 p.13] [2 p.7]. Management attributes the H1 rise to 'yield rate of Govt. bill/bond and increase the volume of investment' [2 p.11]. It is the line that now carries the bank: in 2025 it was larger than total operating income (104%), because NII was negative [20]. Its level depends on treasury yields, which BB sets the conditions for, and on the HTM/HFT accounting the auditor flagged as a key audit matter [1 p.276].

Fees and exchange. Commission, exchange and brokerage fell 24% to BDT 596m in 2025, which management called 'a deliberate moderation in foreign exchange transactions amid broader market constraints' [1 p.13] [1 p.67]. It recovered to BDT 359m in H1 2026 (+26%) [2 p.7]. Fee income was 13.2% of operating income in 2025 against 26.8% in 2022 [20].

Operating expenses. Opex grew 13.8% to BDT 1,799m in 2025; salaries were BDT 878m and depreciation and repairs BDT 342m [1 p.289]. Fixed assets rose from BDT 871m to 1,482m in 2025 [1 p.13]. Cost/income still fell to 40.0% because operating income rose faster [20]. Provisions rose from BDT 466m (2023) to 1,592m (2025), with specific provisions of BDT 1,391m [1 p.13] [1 p.289]; provisions over average loans reached 2.37% [20]. Tax was BDT 284m in 2025, an effective rate of 25.6%, helped by a BDT 172m deferred-tax credit on loan provisions; in H1 2025 the bank booked a net tax credit of BDT 44m [1 p.289] [2 p.7].

Deposits and funding: growth bought with fixed deposits and interbank money; cost of fund doubled to 8.27%

Deposits grew 24.7% in 2024 and 14.9% in 2025, but the mix moved towards high-cost money. Fixed deposits rose from BDT 42.9bn to 53.4bn in 2025 and deposit schemes from BDT 7.2bn to 9.1bn, while current deposits fell from BDT 9.7bn to 8.5bn [1 p.287]. Current plus savings deposits were 21.0% of deposits at Dec-2024, 17.0% at Dec-2025 and 16.8% at Jun-2026 [2 p.5] [20]. Management says 38.79% of deposits are individual, retail and small deposits [1 p.86], and the cost of fund on average deposits rose from 4.17% in 2021 to 8.27% in 2025 [1 p.14].

Wholesale funding grew too. Borrowings from banks, financial institutions and agents doubled to BDT 18.4bn in 2025 and reached BDT 23.6bn at Jun-2026 [1 p.287] [2 p.5]. Short-notice deposits, usually corporate and institutional, were BDT 11.6bn at Jun-2026 [2 p.5]. According to The Financial Express (27-Apr-2025), the Bangladesh Cricket Board said on 26-Apr-2025 that it had withdrawn Tk250 crore from banks it considered risky; Midland Bank called the statement misleading, said it was in BB's “Green” zone, and said it had repaid the deposit before maturity at BCB's request [14]. The episode shows the concentration risk in large institutional deposits. Liquidity ratios are comfortable on the short end (LCR 224.89%, SLR 41.04%) but the NSFR was 100.70% at Dec-2025, just above the 100% floor, down from 110.47% [1 p.14].

Asset quality: NPL of 3.1% is low, but a BDT 1,565m write-off and a doubling of SMA loans sit behind it

The reported NPL ratio has been low for the whole history: 1.68% in 2017, 3.17% in 2021, 3.81% in 2023, 3.78% in 2024 and 3.08% in 2025 [3 p.16] [1 p.14]. Classified loans were BDT 2,190m at Dec-2025: sub-standard BDT 223m, doubtful BDT 76m and bad/loss BDT 1,892m, so bad/loss is 86% of the total [1 p.320] [20]. Special mention loans, the early-warning bucket, doubled from BDT 1,076m to 2,165m, or 3.05% of loans [1 p.320].

Two things flatter the 2025 ratio. First, the loan book grew 12.3%, which dilutes any NPL ratio. Second, BDT 1,565m of loans were written off in 2025 [1 p.301], equal to 65% of the opening NPL; interest suspense of BDT 428m was written off with them [1 p.328] [20]. Without the write-off, and ignoring recoveries, classified loans would have been about BDT 3.8bn, or roughly 5% of loans. The bank also filed more recovery suits: 95 money-loan court cases for BDT 3,386m against 66 for BDT 2,007m a year earlier [1 p.320]. BB's system figure is far higher; management cites an industry NPL above 15% [1 p.67].

Provisioning: requirement fully held under a BB tri-party letter, no deferral, coverage above 100%

There is no reported provision shortfall and no BB deferral in the 2025 accounts. The bank held BDT 2,970m against a requirement of BDT 2,943m, an excess of BDT 26.9m, and held the full BDT 209.5m required against off-balance-sheet exposures [1 p.320]. The auditor's key audit matter on loan provisions says the bank 'has fully adjusted the provision requirements as finalized in the Tri-Party meeting held with Bangladesh Bank' and calculated the requirement 'as per Bangladesh Bank letter BSD-5/103/2026/388 dated 23 April 2026', considering classified loans of Tk218.97 crore (3.08%) [1 p.276]. So the requirement itself was set with BB in a tri-party meeting; the letter is not described as a deferral.

Coverage is high on the reported basis. Specific provision of BDT 2,286m was 104% of classified loans, and with interest suspense of BDT 2,108m the cover was 201% [1 p.81] [1 p.328] [20]. Net NPL after both is nil, so no haircut to book value follows from the classified book itself [20]. The 2025 specific charge of BDT 1,391m came from 'classification of some default loan accounts during the year' [1 p.81]. In H1 2026 the specific charge was BDT 805m, down from BDT 973m [2 p.7].

Two items deserve watching. Net deferred tax assets were BDT 931m at Dec-2025 (BDT 759m a year earlier), mostly on loan provisions, and the auditor treated their recoverability as a key audit matter [1 p.277]; under BRPD rules the bank deducts deferred-tax income before paying dividends [1 p.82]. And BB plans to move banks to IFRS 9 expected-credit-loss provisioning by 2027, which management calls 'challenging' [1 p.86].

Capital: CRAR 15.9% with almost no tier-2, flattered by low risk weights on treasury assets

CRAR was 21.03% in 2017, fell to 14.83% in 2022 as loans grew, recovered to 17.28% after the 2023 IPO and was 15.92% at Dec-2025 against the 12.50% requirement including the conservation buffer [3 p.16] [1 p.14]. Tier-1 was 14.84%: almost all capital is core equity, with only BDT 685m of tier-2 (general provisions) [1 p.13]. Our recomputation from total capital and risk-weighted assets matches the reported ratio for every year [20].

The capital ratio is helped by the treasury shift. Risk-weighted assets were 74% of total assets in 2021 and 50% in 2025, because zero-risk-weight government securities grew and loans did not [20]. The leverage ratio, which ignores risk weights, fell from 9.89% to 6.83% over the same period [1 p.14], and equity over assets from 10.7% to 8.3% [20]. Peers: NCC Bank reported CRAR of 15.54% and Bank Asia 15.32% at Dec-2025 [8 p.183] [12 p.156].

Ratios: ROE near 8%, ROA down to 0.72%, cost/income improved to 40%

Returns have been modest throughout. ROE ran between 6.8% and 13.5% over 2018-2025, with a median of about 8.6%; the 13.5% of 2023 came with a tax charge of only BDT 144m, an effective rate of 11.3% [20]. ROA fell from 1.51% (2018) to 0.72% (2025) as the balance sheet grew faster than profit [20]. Profit after tax was BDT 660m in 2018 and BDT 826m in 2025: total assets grew 2.8 times over the same years, profit by a quarter [3 p.15] [1 p.13].

Cash conversion is hard to read for a bank, but the direction is clear in H1 2026: net operating cash flow was BDT 1,959m, after investing BDT 10,003m in treasury bonds funded by BDT 6,696m of new customer deposits and BDT 5,205m of borrowings [2 p.8]. The DSE-announced figures for Q3 2026 show EPS of BDT 0.63 for the quarter, 1.05 for nine months, NAV of BDT 15.99 and operating cash flow per share of BDT 7.37 [13]; the Q3 filing is not yet in our corpus.

Governance: 76.6% sponsor-held, a garment-exporter sponsor base, and a 2023 IPO the public took only 0.74 times

Ownership is concentrated. At Dec-2025, 32 sponsors and directors held 76.60% of the 658.9m shares, 151 financial institutions 8.91% and 5,119 members of the public 14.49%; 49 holders of more than one million shares owned 91.43% [1 p.89]. The sponsor list mixes a family group and garment exporters. Five Zafarullah/Zafar sponsors (Kazi Zafarullah, Nilufer Zafarullah, Kazi Omar Zafar, Anushka Mehreen Zafar and Kazi Raihan Zafar) hold 8.24% in total; Ms. Scherezad Joya Monami Latif holds 8.68%, the largest single stake; knitwear and garment companies (Reedisha Knitex, Mondol Fabrics, Liberty Knitwear, Beq Knit, Next Collections, Explore Garments, Hazrat Amanat Shah Spinning and Garment Export Village) together hold about 28.9% [1 p.15]. The chairman in the 2025 report is Mr. Ahsan Khan Chowdhury (4.45%) [1 p.67] [1 p.15]; Mrs. Nilufer Zafarullah signed the January 2024 IPO report as chairman [6 p.2].

The sponsors' three-year IPO lock-in on 563.8m shares ended on 27-Mar-2026, according to the prospectus data in our DSE events feed [13]. At 76.6% there is a large overhang of tradable sponsor shares relative to the 14.5% public float [1 p.89]. Garment-exporter sponsors are also natural trade-finance customers; the AR does not quantify loans to related parties in the pages read.

IPO. MDB raised Tk70 crore by issuing 70m shares at the BDT 10 par value; proceeds were received on 23-Mar-2023 [6 p.2]. Applications covered only Tk51.86 crore, 0.74 times the offer, and the underwriters took the remaining Tk18.17 crore [6 p.2]. The Business Standard reported it as the first time bank IPO shares went unsold, citing weak investor confidence in banks [15]. The use of proceeds was not growth capital in the usual sense: Tk61.58 crore (88%) went into government securities, Tk5 crore into listed shares and Tk3.42 crore to IPO costs; shareholders at an EGM on 29-Oct-2023 moved the unspent Tk46.7 lakh of the expense budget into treasury bills, and utilisation was certified complete at Dec-2023 [6 p.1] [6 p.2]. With the IPO, paid-up capital rose from BDT 5,697m to 6,397m in 2023 and CRAR moved from 14.83% to 17.28% [1 p.13] [1 p.14].

Dividends: 3% cash a year at best so far, and none allowed from FY2026 until paid-up capital nearly triples

The payout record is thin. Paid-up capital rose from BDT 4,795m (2017) to 5,697m (2019) [3 p.15]. For 2021 the bank declared 5% (type not stated in AR2025 p.86), then 5% cash for 2022 and 2023, then 3% cash plus 3% stock for both 2024 and 2025 [1 p.86] [4 p.62] [5 p.259]. The cash payout was 50.7% of profit for 2022, 28.2% for 2023 and 23.9% for 2025 [20]. For 2025, profit available for distribution after the statutory reserve, start-up fund and deferred-tax adjustment was BDT 1,232m, so the 3% cash dividend (about BDT 198m) used roughly a sixth of it [1 p.82]. Cash dividends paid in H1 2026 were BDT 198m [2 p.8]. The board says it met the conditions of DOS Circular 01 (2025) and SPCD Circular 05 (2026) for the 2025 dividend [1 p.82].

From the year ending 31-Dec-2026, BB's SPCD Circular 06 of 23-May-2026 forbids any cash dividend by a bank whose paid-up capital is below Tk2,000 crore, and caps cash at 50% of the total dividend for banks that qualify [7 p.1]. MDB's paid-up capital was Tk678.6 crore at Jun-2026 after the 3% bonus [2 p.5], so it is 66.1% short (1 - 678.6/2,000). Reaching the line needs paid-up capital 2.95 times today's: about 12 years of 10% stock dividends or 37 years at the 3% rate of 2024-2025 [20]. The Tk1,321 crore gap is 126% of total equity and 16 times 2025 profit, so retained earnings alone cannot close it [20]. Authorised capital is only Tk1,000 crore and would have to double first [1 p.328]. A rights issue or a merger would close it faster; neither has been announced. NCC Bank, at Tk1,155 crore, is 42.3% short [9 p.8] [20].

Peers: better NPL than the median, dearer funding, similar CRAR

On asset quality MDB sits in the better half of the listed private banks: its 3.08% NPL is 0.86pp below the median of NCC Bank, Prime Bank and Jamuna Bank [8 p.183] [10 p.286] [11 p.83] [20]. On funding it is worse: its cost of fund on deposits of 8.27% is 1.64pp above the average of NCC Bank's cost of deposits and borrowings (6.57%) and Jamuna Bank's cost of deposit (6.70%) [8 p.184] [11 p.83] [20]. The definitions differ: on their own broader 'cost of fund' measures NCC Bank reported 8.81% and Jamuna Bank 9.55%, so the comparison is line for line, not a single gap. What the comparison does show is that MDB pays at least as much as larger, older banks for its money while earning less on loans, because its loan book grew slowly in 2025-2026 and its deposit base has a smaller share of current and savings accounts. Its CRAR is close to NCC Bank and Bank Asia. For the Tk2,000 crore rule size matters: MDB must add capital equal to 16 years of 2025 profit [20].

What's next: the Q3 filing, the deposit-versus-treasury rate race, IFRS 9 and a capital plan for Tk2,000 crore

These are the dated items that will move the lines, with direction only; no figures are forecast.

Rates are the biggest swing factor. If deposit rates fall faster than treasury yields, interest expense falls on a BDT 93.8bn deposit base and NII recovers; if treasury yields fall first, the investment-income line that now carries profit shrinks while deposit costs lag [2 p.5]. Management's stated aim is to move from 'defensive resilience to accelerated, purposeful growth' [1 p.67]; on 28-Oct-2026 the bank signed an MoU with CG Runner BD, the BYD distributor, to offer car loans of BDT 0.4m-8m, according to The Financial Express [18]. The FY2025 accounts and dividend were approved by the board on 28-Apr-2026 [1 p.82], so the FY2026 equivalent, and with it any capital plan for the Tk2,000 crore rule, would come at a board meeting expected in late April 2027.

The Q3 filing. The DSE announcement of 29-Oct-2026 gave nine-month EPS of BDT 1.05 against BDT 0.42 for the first half, so the third quarter alone earned BDT 0.63 a share [13] [2 p.7]. The full statements, due on the DSE in November 2026, will show whether this came from a better interest line or from more treasury income, and whether special mention loans kept rising. Those two numbers decide whether the recovery in profit is a margin story or a bond story.

The dividend window. SPCD Circular 06 applies to dividends declared for the year ending 31-Dec-2026 and later [7 p.1]. At Tk678.6 crore of paid-up capital MDB cannot declare cash for FY2026 [2 p.5]. A stock-only dividend remains possible, but it adds shares without adding capital: equity stays the same and book value per share falls. Raising real capital needs a rights issue, a placement or a merger, and each needs authorised capital above today's Tk1,000 crore [1 p.328].

IFRS 9 by 2027. Under expected-credit-loss rules, provisions are set from expected losses across the whole book, not only on classified loans [1 p.86]. For MDB the bucket most exposed is the BDT 2,165m of special mention loans, which carry only BDT 90m of provision today [1 p.320]. The move would raise the provision line and reduce equity on transition; it would not change the cash the loans generate.

Risks: deposit costs and treasury yields matter most; SMA migration, IFRS 9 and the dividend rule follow

Each risk below is tied to the line it moves. Size them against 2025 profit before provisions of BDT 2,702m and equity of BDT 10.5bn [20].

Key questions: NII, treasury income, NPL durability, funding cost and the route to Tk2,000 crore

MIDLANDBNK at BDT 17.2 trades at 1.12x Jun-2026 standalone NAV and 14.1x FY2025 profit on the post-bonus share count [19] [20]. These are facts about the price, not a view on it.

FAQ

What is Midland Bank's NPL ratio?

3.08% at 31-Dec-2025 (BDT 2,190m), down from 3.78% a year earlier after BDT 1,565m of write-offs [1 p.14] [1 p.301].

Does Midland Bank have a provision shortfall or BB deferral?

No. It held BDT 2,970m against BDT 2,943m required, calculated under BB letter BSD-5/103/2026/388 of 23-Apr-2026 after a tri-party meeting [1 p.320] [1 p.276].

Why was Midland Bank's net interest income negative in 2025?

Interest paid on deposits and borrowings (BDT 8,065m) exceeded interest income (BDT 7,160m); the coupon on its government securities is booked separately as income from investments (BDT 4,663m) [1 p.289].

Can Midland Bank pay a cash dividend for 2026?

Not under SPCD Circular 06 while paid-up capital (Tk678.6 crore) is below Tk2,000 crore; it is 66.1% short [7 p.1] [2 p.5].

When did Midland Bank list and how were IPO proceeds used?

It raised Tk70 crore at par in 2023 (proceeds received 23-Mar-2023); 88% went to government securities, Tk5 crore to listed shares and the rest to IPO costs [6 p.2].

What is Midland Bank's capital adequacy?

CRAR 15.92% and Tier-1 14.84% at Dec-2025 [1 p.14].

Which results does this report use?

Standalone annual figures 2017-2025 and the unaudited H1 2026 statements. Q3 2026 figures are from the DSE announcement; the Q3 filing is not yet in our corpus.

Sources

1. Midland Bank PLC Annual Report 2025 (year to 31-Dec-2025) · link · accessed 2026-10-31
2. Midland Bank unaudited financial statements, six months to 30-Jun-2026 · link · accessed 2026-10-31
3. Midland Bank Annual Report 2021 (five-year data 2017-2021) · link · accessed 2026-10-31
4. Midland Bank Annual Report 2022 · link · accessed 2026-10-31
5. Midland Bank Annual Report 2023 · link · accessed 2026-10-31
6. Midland Bank report on utilisation of IPO proceeds and auditor's certificate, quarter to 31-Dec-2023 · link · accessed 2026-10-31
7. Bangladesh Bank SPCD Circular No. 06, 23-May-2026, dividend declaration policy for banks (Bangla) · link · accessed 2026-10-31
8. National Credit and Commerce Bank PLC Annual Report 2025 (peer NPL, CRAR, cost of deposits and borrowings) · link · accessed 2026-10-31
9. NCC Bank unaudited statements, six months to 30-Jun-2026 (peer paid-up capital) · link · accessed 2026-10-31
10. Prime Bank PLC Annual Report 2025 (peer NPL) · link · accessed 2026-10-31
11. Jamuna Bank PLC Annual Report 2025 (peer NPL, cost of deposits) · link · accessed 2026-10-31
12. Bank Asia PLC Annual Report 2025 (peer CRAR) · link · accessed 2026-10-31
13. DSE announcements via AnalystBro events: Q1-Q3 2026 results (29-Apr, 29-Jul, 29-Oct-2026), lock-in expiries from the BSEC prospectus data · link · accessed 2026-10-31
14. The Financial Express, 'Midland Bank refutes BCB statement on Tk 2.5 billion fund transfer' (27-Apr-2025) · link · accessed 2026-10-31
15. The Business Standard, 'Bank IPOs unsold for the first time as investors not confident' (2023) · link · accessed 2026-10-31
16. Midland Bank press release, carried by The Daily Star, 'Midland Bank rolls out digital loan service MDB e-Loan' (2026) · link · accessed 2026-10-31
17. Midland Bank press release, carried by The Business Standard, 'Midland Bank launches digital e-loan service' (2026) · link · accessed 2026-10-31
18. The Financial Express, 'Midland Bank signs MoU with CG Runner BD for BYD auto financing' (28-Oct-2026) · link · accessed 2026-10-31
19. AnalystBro price data (TradingView feed): DSE:MIDLANDBNK weekly bars to 29-Oct-2026 · link · accessed 2026-10-31
20. AnalystBro model for this report (workbook tabs below) · link · accessed 2026-10-31