Bangladesh
5 years ago

Some PCBs earn higher operating profit in 2018

Troubled loans keep plaguing the sector

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The operating profits of the country's private commercial banks (PCBs) witnessed a healthy growth in the outgoing year, even if soured loans are on the rise, bankers said.

Most of the banks, excepting a few, maintained their operating profits growth, despite the declining trend in interest rate spread, they said.

The FE could collect the unaudited operating profits of 11 banks, out of a total of 40, including nine new PCBs, until 10:00 pm when it went to the press.

The operating profit of Pubali Bank Ltd rose to Tk 10.25 billion in 2018 from Tk 9.15 billion a year ago.

Southeast Bank Ltd made Tk 10.02 billion profit in 2018, compared with Tk 9.06 billion a year ago.

The operating profit of Eastern Bank Ltd increased to Tk 7.80 billion in 2018 from Tk 7.50 billion, and that of Bank Asia Ltd to Tk 8.11 billion from Tk 6.71 billion.

Shahjalal Islami Bank Ltd made an operating profit of around Tk 5.0 billion in 2018 against Tk 3.60 billion of the previous year, while Mutual Trust Bank Ltd earned Tk 5.15 billion, up from Tk 4.17 billion in 2017.

South Bangla Agriculture and Commerce Bank Ltd posted an operating profit worth Tk 2.05 billion in 2018 against Tk 1.82 billion the year before, while the profit of Modhumoti Bank Ltd rose to Tk 1.97 billion from Tk 1.51 billion.

NRB Bank Ltd's profit rose to Tk 910 million in 2018 from Tk 850 million a year ago.

On the other hand, the operating profit of Mercantile Bank Ltd came down to Tk 6.68 billion in 2018 from Tk 7.11 billion in the previous calendar year.

Meghna Bank's also fell to Tk 930 million from Tk 1.02 billion the year before.

The weighted average spread between lending and deposit rates offered by the commercial banks came down to 4.22 per cent in October from 4.41 per cent in January 2018, according to the Bangladesh Bank (BB) statistics.

Besides, the bankers noted, the sluggish trend in the country's capital market alongside the private-sector credit growth had a negative impact on profits of the banks in 2018.

The capital market witnessed a gloomy year, as the core index of the Dhaka Stock Exchange (DSE) suffered a 14 per cent slump as investors' confidence sapped.

Between January 01 and December 27, DSEX, the prime index of DSE, shed 859 points or 14 per cent to close the year at 5,385 on Thursday, the last trading day of 2018.

The private sector credit growth reached 14.72 per cent in October 2018 on a year-on-year basis compared with 14.67 per cent a month ago. It was 14.95 per cent in August 2018.

The growth was more than 2.0 percentage points lower than the BB's target of 16.8 per cent for the first-half of the current fiscal year (FY) 2018-19.

The amount of classified loans jumped by nearly 34 per cent or Tk 250.67 billion to Tk 993.70 billion as on September 30, from Tk 743.03 billion as on December 31, 2017, according to the central bank's latest statistics.

On the other hand, some banks have been able to increase their operating profits following higher earnings from their treasury operations, according to banking sector insiders.

They said the banks having OBU (Offshore Banking Units) operations with notable amounts earned significantly through providing foreign currency loans to their customers.

Currently, 35 commercial banks out of 57 have been running their OBUs across the country since December 17, 1985.

A good number of banks earned higher profits from their 'interest income' as the banks had charged higher on lending while provided lower interest rates on deposits in line with the decision of the Bangladesh Association of Banks (BAB), the lobbyist group.

Earlier on June 20, the grouping decided to cut back on the interest rates on both lending and deposits at 9.0 per cent and 6.0 per cent respectively from July 01.

"Some banks have already been able to reduce the volume of their NPLs through boosting their recovery drives along with rescheduling of their troubled credits ahead of the polls," a senior executive of a leading PCB told the FE, explaining the higher growth in operational profits.

The volume of NPLs in the banking sector will fall in the final quarter of 2018, the private banker claimed.

Operating profit, however, does not indicate the real financial health of a bank since the lenders have to make room for provisioning against bad loans and taxes that have to be paid to the government from the profits.

Operating profits of the banks and non-banking financial institutions are a major source of income tax of the National Board of Revenue (NBR).

As such, the aggregate operating profits of the PCBs have an impact on the revenue collection in the form of direct taxes collected by the revenue board

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