City Bank constructing lavish building risking customers’ interests

Concerns have emerged over alleged waste and corruption following City Bank’s decision to purchase land at more than double the market price to construct a high-rise building. Questions have been raised from various quarters as to whether the interests of the bank’s capital market investors and depositors were overlooked by buying land at such an inflated price. Instead, critics argue that using customers’ deposits for this purpose would increase risks to deposits, raise the bank’s operating costs and reduce its profit margin.

As a result, small investors in the capital market may be deprived of their expected dividends. Moreover, declining profits due to excessive expenditure would also reduce the amount of tax paid to the government, depriving the state of anticipated revenue. Such a hasty decision is reportedly being pursued by the bank’s authorities.

It has been learnt that City Bank has already obtained approval from Bangladesh Bank to construct its own 28-storey building on 40 kathas of land in Gulshan, Dhaka. To build the structure, the bank is purchasing an additional 20 kathas of land adjacent to its existing 20 kathas on Gulshan Avenue. Including the cost of the new land and other related expenses, the total expenditure is estimated at Tk3.45 billion. However, there are rumours that the land is being bought at a price far higher than its market value.

The newly acquired 20 kathas are reportedly costing the bank around Tk170–180 million per katha, which many have described as unexpected. Local residents say land in that area should not be worth such a high price. Real estate professionals believe that land transactions at such inflated rates could affect neighbouring land and property owners. Why City Bank is purchasing land at such a price has already sparked criticism and debate.

Inquiries reveal that commercial land on Gulshan Avenue is currently being traded at around Tk80 million per katha. However, City Bank is buying land there at Tk172.5 million per katha.

Commenting on the matter, senior Supreme Court lawyer Ahsanul Karim said, “If land is purchased at a price higher than the market value, there is scope to examine whether any undue benefit has been sought. Whether the seller actually received the money, what the real value of the land should be, and whether any corruption was involved—these issues warrant investigation.”

Meanwhile, the estimated cost of constructing the 28-storey building on a total of 40 kathas of land—combining the original 20 kathas and the newly purchased 20 kathas—stands at Tk8.55 billion. This brings the combined cost of land acquisition and construction to approximately Tk12 billion. The bank has already received the necessary approvals from the Capital Development Authority (RAJUK) and Bangladesh Bank.

Most recently, at a meeting of City Bank’s board of directors held last Wednesday, the decision to construct the bank’s own building and to purchase an additional 20 kathas of land was approved, according to bank sources.

The bank was established in 1983 by 12 leading businessmen of the country at the time and was listed on the stock exchange in 1986. It began operating its head office in its own building for the first time in 2009. The head office was housed in an eight-storey building on 20 kathas of land on Gulshan Avenue, adjacent to Gulshan-2. However, due to space constraints, the old building was demolished and plans were taken up to construct a 28-storey structure.

City Bank is a listed company, and as such, the decision to purchase land and construct a building at such a high cost is price-sensitive information. This could affect investor interests and the bank’s share price in the capital market. Although the bank has disclosed this information to investors, questions remain as to whether they will suffer if the bank’s profit margin declines due to excessive expenditure.

Sources said Bangladesh Bank granted City Bank the necessary approval for land acquisition and building construction on 6 January. Following the central bank’s approval, the decision was finalised at the board meeting last Wednesday.

Banking sector sources also said that approval from RAJUK for the construction of the 28-storey high-rise building has already been obtained. Of the 28 floors, five will be allocated for car parking, while the remaining 23 floors will house the bank’s head office operations. With the increase in land area, there is now further scope to expand the height and scale of the building.

City Bank’s Managing Director and Chief Executive Officer, Masrur Arefin, told the media: “Across the world, bank buildings and offices are highly aesthetic and visually appealing. We also want to set such an example in the country’s banking sector. We are grateful to Bangladesh Bank, the sector’s regulator, for endorsing our plans and initiatives. We will make every effort to complete our own building and commence operations there as quickly as possible.”