Mutual Trust Bank financial analysis: NII squeezed by deposit costs, 5.8% NPL, 13.6% CRAR, no cash dividend under Tk2,000 crore rule (Oct 2026)

Investment considerations: a deposit-rich AA+ bank whose margin has been squeezed out, leaving bonds and tax credits to carry profit

Mutual Trust Bank PLC (MTB) is a third-generation private commercial bank licensed in October 1999. At 30 June 2026 it ran 122 branches, 14 SME/agri branches, 58 sub-branches, 180 agent banking centres and 8 airport lounges, with an offshore banking unit and an Islamic banking window, and two capital-market subsidiaries [2 p.1]. Its consolidated balance sheet was BDT 592.6bn, with deposits of BDT 401.6bn, loans of BDT 338.4bn and BDT 165.2bn of government securities [2 p.1].

The reported numbers for 2025 look stable: consolidated profit after tax up 7% to BDT 3,393m, a gross NPL ratio of 5.77% against a banking system in deep stress, and a CRISL AA+ rating [1 p.7] [2 p.1]. Underneath, the composition of earnings changed sharply. Net interest income fell to 12% of operating income, the bank now earns most of its revenue from government securities, and the tax line added to profit. This note sets out what an investor would weigh, with figures from the filings.

Business: a corporate-led lender (57% of loans) with a growing term-deposit base and a small card line

MTB lends to corporates, SMEs and retail customers, finances trade, and runs a treasury, card, remittance and privilege-banking business [2 p.1]. Corporate lending dominates: the business-segment note shows BDT 181,958m of corporate loans at Dec-2025, 57% of the book, against retail BDT 49,563m (16%) and SME BDT 24,353m (8%) [1 p.4] [17]. The corporate line was BDT 124,842m a year earlier, while the remaining lines (cards, staff loans, offshore unit and Islamic window) fell from BDT 107,775m to 61,378m, which looks like a reclassification between segments rather than BDT 57bn of new corporate lending, since total loans grew only BDT 18.7bn [1 p.4] [17].

The Islamic window was approved by BB on 25-Nov-2019 and launched in 2021; the offshore banking unit has operated since December 2009; agent banking since 2016; bancassurance with three insurers since 2024 [2 p.1]. The bank's 2025 segment statement shows the Islamic window and OBU are small: of the bank's BDT 21,340m main-operation operating income, the separate units add a few hundred million taka [1 p.7].

Cards and retail. Retail loans grew only 5.2% in 2025 and their share of the book was flat at about 16% [17]. Card fees and charges received were BDT 307m in 2025 against BDT 301m in 2024, 8.5% of commission, exchange and brokerage income [1 p.6] [17]. The bank presents card revenue and card costs incurred on a shared basis net [1 p.2], so the filings do not give a gross card-income or card-receivables figure that would allow a margin analysis; directors' credit cards are disclosed individually and are small [1 p.6]. The retail franchise shows up more on the funding side: savings deposits rose from BDT 51,103m to 61,303m between Dec-2024 and Jun-2026 and scheme deposits (DPS products such as Brick by Brick, Kotipati and Angona) from BDT 25,142m to 28,665m [1 p.4] [2 p.1].

Line items: interest expense took 90% of interest income in 2025; bond income and a tax credit kept profit up

Interest income rose from BDT 14,330m (2021) to 27,239m (2025) as the loan book grew 40% and lending rates were freed from the 9% cap in 2023-2024 [1 p.2] [4 p.1]. Growth slowed to 7% in 2025 because loans grew only 6.3% while deposits grew 10.7% [17]. In H1 2026 interest income rose only BDT 279m year on year, which management attributes to higher average balances and yields [2 p.1].

Interest expense is the line that changed the bank. It rose from BDT 8,821m (2021) to 24,585m (2025), up 40% in 2025 alone [1 p.2]. Three drivers are visible in the filings: the reported cost of fund rose from 8.47% to 9.15% [1 p.7]; deposits were added mostly as fixed and special-notice deposits, which were 64% of deposits at Jun-2026 while the CASA ratio fell from 30.6% to 26.7% [17]; and borrowings rose from BDT 43.7bn to 86.8bn in H1 2026 [2 p.1]. Management states that H1 2026 interest expense rose BDT 2,001m from BDT 51,782m higher average deposits and the repricing of existing deposits [2 p.1].

Deposit cost vs peers. MTB's 9.15% cost of fund for 2025 compares with 6.70% cost of deposits at Jamuna Bank and 6.57% at NCC Bank [7 p.83] [9 p.184]. The measures are not identical (MTB's includes borrowings), but the gap is large. Historically, each 1pp rise in MTB's cost of fund came with about BDT 10,324m of extra interest expense in 2025, though volume growth is mixed into that figure [17].

Investment income filled the gap. It rose from BDT 3,392m (2021) to 14,374m (2025) and BDT 7,414m in H1 2026, which management attributes to higher gains on government securities [1 p.2] [2 p.1]. Government securities grew from BDT 93.6bn (Dec-2024) to 165.2bn (Jun-2026), 28% of assets [1 p.4] [2 p.1] [17]. At 31-Dec-2025 the bank had BDT 72.3bn of repo outstanding with Bangladesh Bank [1 p.4]: part of the bond book is funded with borrowed money, so the margin between bond yields and repo/deposit cost now drives profit. The reserve on investment in securities fell from BDT 2,780m to 1,774m in H1 2026 [2 p.1], so unrealised gains have already started to shrink.

Commission, exchange and brokerage peaked at BDT 7,288m in 2022, when the taka's fall lifted exchange gains, and was BDT 3,594m in 2025 and 1,509m in H1 2026 (H1 2025: 1,957m) [4 p.1] [1 p.2] [2 p.1]. Trade volumes and the FX spread drive it; a stable taka has cut it.

Operating expenses rose 13.4% to BDT 11,867m in 2025, of which salaries were BDT 6,744m [1 p.2]. Cost/income was 53.8% in 2025 and 59.1% in H1 2026 [17].

Provisions took 71% of pre-provision profit in 2025, up from 32% in 2021 [17]. Specific provisions were BDT 5,460m (2024: 3,713m) and BDT 3,238m in H1 2026 [1 p.2] [2 p.1].

Tax turned into a credit. Current tax of BDT 2,048m was more than offset by BDT 2,322m of deferred tax income in 2025, and in H1 2026 deferred tax income of BDT 889m produced a net credit of BDT 328m [1 p.2] [2 p.1]. The deferred tax asset grew from BDT 4,190m to 6,600m in 2025, largely on loan-loss provisions [1 p.4]. The effective tax rate was 32.2% in 2024 and -9.2% in 2025 [17].

Asset quality: NPL 5.77% with no reported shortfall or deferral, but helped by BDT 8.0bn of write-offs and with SMA up 81%

Classified loans fell from BDT 20,740m (6.95%) at Dec-2024 to BDT 18,295m (5.77%) at Dec-2025 [1 p.7]. The fall came from write-offs: BDT 8,034m of loans were written off in 2025 against BDT 2,699m in 2024, and cumulative write-offs rose from BDT 10,076m to 18,111m [1 p.4]. Added back, the 2025 ratio would be 8.09%, above the year before [17]. Recoveries of written-off loans were BDT 315m in 2025 and BDT 301m in H1 2026 [1 p.2] [2 p.1].

Provisioning and any BB-deferred shortfall. The 2025 provision note shows required and maintained provisions equal line by line: BDT 9,597m on unclassified loans, BDT 9,333m on classified loans (sub-standard 616m, doubtful 458m, bad/loss 8,258m) and BDT 1,391m on off-balance-sheet exposures [1 p.4]. The financial highlights report a nil surplus/deficit against classified loans for every year from 2021 to 2025 [1 p.7] [3 p.7] [4 p.7]. We found no provision deferral granted by BB and no shortfall carried forward in the 2025 statements. The auditor's opinion is unmodified. Its emphasis of matter refers to note 2.1, the BB-prescribed basis for loan classification and provisioning, which is the standard paragraph for Bangladeshi banks, and its key audit matter compares the bank's provision with the amount set by the auditor and the BB inspection team at a tripartite meeting [1 p.1].

Coverage is the weak spot. Specific provision covered only 51% of classified loans at Dec-2025, although 91% of them were bad/loss [17]. Under BB rules, provision on bad/loss loans is calculated after deducting eligible collateral and interest suspense, so this is consistent with full compliance, but the net exposure after specific provision was BDT 8,963m, 30% of solo equity [17]. Recovery from collateral is the assumption behind that number.

The pipeline. Special mention loans rose from BDT 10,312m to 18,672m in 2025, from 3.45% to 5.89% of loans [1 p.4] [17]. H1 2026 specific provisions of BDT 3,238m, with BDT 2,238m in Q2 alone, show classification continuing [2 p.1]. The bank identified 80 accounts as wilful defaulters under BRPD Circular 06 of 2024 and reported them to BB [1 p.4]. The H1 2026 summary filing in our corpus does not include a classification table, so the Jun-2026 NPL ratio is not available from filings.

Earnings quality: profit after tax above profit before tax, and cash profit halved in H1 2026

What changed in five years. In 2021 MTB was a conventional spread lender: net interest income was 46% of operating income, interest expense took 62% of interest income, and loans were larger than deposits on the highlights basis [4 p.1] [17]. Three shocks reshaped it. The 2022 currency crisis produced a one-year spike in exchange income (commission, exchange and brokerage reached 47% of operating income). The end of the lending-rate cap and the rise of the policy rate in 2023-2024 lifted deposit costs faster than loan yields. And after August 2024, deposits moved from weak banks to banks seen as safe: MTB's deposits grew 25.1% in 2024 while loan demand stayed weak [17]. The bank put the surplus into treasury bills and bonds yielding more than its cost of fund, which is why investment income rose more than four-fold between 2021 and 2025 [1 p.2] [4 p.1].

Earnings quality. Three features of the 2025 and H1 2026 profit matter to a shareholder. First, profit before tax fell from BDT 4,589m to 2,994m in 2025 while profit after tax rose, because the tax line turned into a credit [1 p.2]; in H1 2026, profit after tax was 144% of profit before tax [17]. Second, a large part of investment income is gains on government securities, which depend on yields continuing to fall and are not recurring in the way a loan spread is [2 p.1]. Third, the perpetual bond coupon (BDT 391m in 2025) is paid out of profit before ordinary shareholders, but the reported EPS of BDT 3.02 divides the full profit after tax by the share count [1 p.2].

Cash conversion. For a bank, operating cash flow mostly tracks deposit and loan movements. Solo operating cash flow was BDT 23,445m in 2025 and BDT 49,723m in 2024, and consolidated operating cash flow was BDT 59,234m in H1 2026 against a profit of BDT 1,068m [1 p.2] [2 p.1]. The more useful measure is cash profit before working capital: BDT 10,319m in 2025 against BDT 9,370m in 2024, and BDT 1,675m in H1 2026 against BDT 3,048m in H1 2025, which follows the fall in net interest income [1 p.2] [2 p.1]. Income taxes paid in H1 2026 were BDT 1,661m, well above the reported tax charge [2 p.1].

Ratios: ROE near 12% for four years, but NII share fell from 46% to 12% of income

Returns. Solo ROE was 11.0% in 2022, 12.1% in 2023, 12.8% in 2024 and 11.9% in 2025; ROA stayed between 0.67% and 0.76% [17]. The stability hides changing sources: in 2025, without the deferred tax income, profit before tax was 35% lower than in 2024 [1 p.2].

Growth. Deposits grew 9.7%, 12.7%, 25.1% and 10.7% in 2022-2025; loans 12.3%, 1.8%, 15.5% and 6.3% [17]. The highlights' own lending-deposit ratio fell from 84.19% (2023) to 75.05% (2025) [1 p.7] [3 p.7]. Deposits that cannot be lent at a margin go into securities.

Efficiency and credit cost. Cost/income ranged 47.7%-58.8%; credit cost (specific plus general provisions over average loans) rose from 1.67% in 2022 to 2.36% in 2024 and 2.25% in 2025 [17].

Capital: CRAR 13.55% leaves 1.05pp of headroom, and Tk1,211 crore of paid-up capital rules out cash dividends under SPCD C06

CRAR. Consolidated CRAR was 14.41% (2021), 14.50% (2022), 14.98% (2023), 13.62% (2024) and 13.55% (2025) [4 p.6] [3 p.6] [1 p.5]. Against the 12.5% minimum including the conservation buffer the headroom is 1.05pp; CET-1 of 7.73% is 0.73pp above 7.0% and Tier-1 of 9.02% is 0.52pp above 8.5% [17]. Tier-2 instruments supply 4.5pp of the ratio [1 p.5]. MTB's CRAR is 1.88pp below the median of Bank Asia (15.32%) and NCC Bank (15.54%) [8 p.156] [9 p.183] [17].

Capital actions over 24 months. (1) A 10% stock dividend for 2024 lifted paid-up capital from BDT 9,831m to 10,814m [1 p.7] [15]. (2) A 12% stock dividend for 2025, with no cash, received BSEC consent in May 2026 and shareholder approval at the 27th AGM on 16-Jul-2026 [13] [12] [14]; it takes paid-up capital to about BDT 12,112m [17]. (3) Subordinated debt was repaid: BDT 1,700m in 2025 and 890m in H1 2026, leaving BDT 3,960m outstanding beside the BDT 4,000m perpetual bond (Additional Tier-1, issued 2020) [1 p.2] [2 p.1] [1 p.4]. (4) On 25-Aug-2026 the board approved raising Tk500 crore through a seven-year bond, conventional or Shariah-compliant, subject to BB and BSEC approval; the bank describes it as strengthening regulatory capital [10] [11]. Both outlets report it, so we treat it as the bank's plan; its Tier-2 status is not stated.

The SPCD C06 dividend rule. BB's SPCD Circular 06 of 23-May-2026 says a bank with paid-up capital below Tk2,000 crore may not pay any cash dividend, and banks that qualify may pay at most 50% of the declared dividend in cash; it applies to dividends for the year ending 31-Dec-2026 onward, and keeps DOS Circular 01 of 2025 in force [5 p.1]. MTB's paid-up capital after the 12% bonus is about Tk1,211 crore, so it cannot declare cash for FY2026. Reaching Tk2,000 crore needs 65% more shares: 4.4 years of 12% stock dividends, or a rights issue of about BDT 7,888m, 2.3 times FY2025 profit [17]. Authorised capital is exactly Tk2,000 crore, so any route to the threshold uses all of it [2 p.1]. DOS Circular 01 conditions (NPL below 10%, no deferral, no shortfall) are met on the 2025 figures [1 p.7]. Separately, deferred tax income on specific provisions is not distributable under BRPD Circular 11/2011 [1 p.4], which narrows distributable profit.

Balance sheet and subsidiaries: a borrowing-funded bond book and two small capital-market arms (3.8% of profit)

Between Dec-2025 and Jun-2026 the consolidated balance sheet grew BDT 87.4bn to BDT 592.6bn: deposits +37.5bn, borrowings +43.1bn; on the asset side government securities +51.2bn and loans +19.3bn [2 p.1]. Equity was flat at BDT 30.5bn, so equity/assets fell from 6.0% to 5.1% [17]. Operating cash flow of BDT 59.2bn in H1 2026 reflects these deposit and borrowing inflows, not earnings [2 p.1].

Off-balance-sheet exposures were BDT 191.1bn at Jun-2026: acceptances 58.7bn, guarantees 56.6bn, letters of credit 47.8bn [2 p.1]. CRISL rated the bank AA+/ST-2 on 14-May-2026 [2 p.1].

Subsidiaries. MTB Securities PLC (brokerage, dealer and margin lending since 2010) earned BDT 114m after tax in 2025 on operating income of BDT 419m, after BDT 104m of provisions on margin loans and shares; MTB Capital Limited (merchant bank since 2011) earned BDT 10m [1 p.7]. Together they added 3.8% to bank profit and returned 3.6% on the bank's BDT 3,500m investment at cost [1 p.4] [17]. They depend on DSE turnover and margin-loan quality; consolidated less solo profit was BDT 56m in 2024 and 158m in 2022 [1 p.7] [4 p.1].

Governance and events: sponsor-led board with NORFUND, no BB intervention found, a capital-raising bond pending approval

Sponsors and directors held 29.17% at Dec-2024 per the 2024 statements [3 p.6] and 33.26% at 31-Jul-2026 according to The Daily Star [10] (single outlet). The board includes Syed Nasim Manzur as chairman, NORFUND as an institutional shareholder represented on the board, and independent directors including Dr. Mohammad Tareque, who chairs the audit committee [1 p.7] [3 p.6]. Syed Mahbubur Rahman is managing director and CEO and chairs both subsidiaries [1 p.7]. We found no Bangladesh Bank board reconstitution, observer appointment or resolution action for MTB in the filings and T2 news we reviewed.

What's next: deposit repricing, bond yields and the bond issue decide the next two years

The direction of net interest income depends on how fast term deposits reprice. In H1 2026 the bank paid BDT 13,736m of interest against BDT 14,413m earned [2 p.1]. Each 1pp change in the ratio of interest expense to interest income moved H1 2026 net interest income by about BDT 144m [17].

Risks: a negative core spread, falling bond yields and SMA migration, each with a dated signpost

These are the line items an investor would watch. None of them is a forecast: they are the variables that moved the 2021-2026 results.

Key questions: the spread, the bond book, NPL durability and the route to Tk2,000 crore

At BDT 12.7, MTB trades at 0.51x Jun-2026 consolidated NAV and 4.5x FY2025 consolidated profit on the post-bonus share count [16] [17]. The bank's own highlights show year-end P/E of 5.65x (2023), 3.89x (2024) and 3.97x (2025) [3 p.7] [1 p.7]. These are facts about the price, not a view on it.

FAQ

What is Mutual Trust Bank's NPL ratio?

5.77% at 31-Dec-2025, down from 6.95%, after BDT 8,034m of loans were written off in 2025 [1 p.7] [1 p.4].

Does MTB have a provision shortfall or BB deferral?

No. Required and maintained provisions are equal and the surplus/deficit line is nil; no deferral is disclosed [1 p.4] [1 p.7].

Why did MTB's net interest income fall?

Interest expense rose to 90% of interest income in 2025 and 95% in H1 2026 as cost of fund reached 9.15% [1 p.7] [17].

What is MTB's capital adequacy?

Consolidated CRAR 13.55%, Tier-1 9.02% and CET-1 7.73% at Dec-2025 [1 p.5].

Can MTB pay a cash dividend for 2026?

Not under SPCD Circular 06 while paid-up capital (about Tk1,211 crore after the 12% bonus) is below Tk2,000 crore [5 p.1] [17].

What subsidiaries does MTB have?

MTB Securities PLC (BDT 114m profit in 2025) and MTB Capital Limited (BDT 10m) [1 p.7].

Which results does this note use?

Audited statements for 2021-2025 and the unaudited H1 2026 statements. Q3 2026 results are not yet in our corpus.

Sources

1. Mutual Trust Bank PLC audited financial statements 2025 (year to 31-Dec-2025) · link · accessed 2026-10-31
2. Mutual Trust Bank PLC unaudited consolidated financial statements, six months to 30-Jun-2026 · link · accessed 2026-10-31
3. Mutual Trust Bank PLC audited financial statements 2024 (with 2023 comparatives) · link · accessed 2026-10-31
4. Mutual Trust Bank Limited audited financial statements 2022 (with 2021 comparatives) · link · accessed 2026-10-31
5. Bangladesh Bank SPCD Circular No. 06, 23-May-2026, dividend declaration policy for banks (Bangla) · link · accessed 2026-10-31
6. Prime Bank PLC Annual Report 2025 (peer NPL) · link · accessed 2026-10-31
7. Jamuna Bank PLC Annual Report 2025 (peer NPL, cost of deposits) · link · accessed 2026-10-31
8. Bank Asia PLC Annual Report 2025 (peer NPL, CRAR) · link · accessed 2026-10-31
9. NCC Bank PLC Annual Report 2025 (peer NPL, CRAR, cost of deposits) · link · accessed 2026-10-31
10. The Daily Star, 'Mutual Trust Bank to raise Tk 500cr capital' (27-Aug-2026) · link · accessed 2026-10-31
11. The Financial Express, 'MTB to issue Tk 5b subordinated bond' (28-Aug-2026) · link · accessed 2026-10-31
12. The Daily Star, 'Mutual Trust Bank approves 12% stock dividend for 2025' (17-Jul-2026) · link · accessed 2026-10-31
13. The Business Standard, 'BSEC clears stock dividends for MTB, Southeast Bank, Trust Bank' (22-May-2026) · link · accessed 2026-10-31
14. The Financial Express, 'Mutual Trust Bank approves 12pc stock dividend at 27th AGM' (Jul-2026) · link · accessed 2026-10-31
15. The Business Standard, 'Mutual Trust Bank holds 26th AGM, approves 10% stock dividend' (2025) · link · accessed 2026-10-31
16. AnalystBro price data (TradingView feed): DSE:MTB weekly bars to the week of 26-Oct-2026 · link · accessed 2026-10-31
17. AnalystBro model for this report (workbook tabs below) · link · accessed 2026-10-31