City Bank Ltd, one of the first generation PCBs faced challenges to grow its business during first half of year due to capping on lending rate amid the havoc like Covid-19.
However, having strong growth in loan by 18.4 per cent (Tk 45.48 billion) from December last year, City Bank’s interest income decreased 2.8 per cent (Tk 360 million) to Tk 12.48 billion, when the new interest rate regulation imposed a 9.0 per cent cap on loans from April 1.
On the other hand, interest expenses on deposit in the same period of Tk 840.2 crore grew by 10.8 per cent (Tk 81.7 crore) over last year mainly due to growth in deposit volume (Tk2,822 cr from Dec’19), despite the bank’s cost of deposit remaining on the same level of 5.5 per cent. However, non-interest income of Tk. 461.7 crore in year to date June grew by 14.8 per cent or Tk 59.6 crore over last year, contributed mostly by increased income from government securities by Tk 46.1 crore.
In June, bank’s half-yearly revenue decreased by Tk 57.8 crore (6.2%), whereas, operating expenses increased by Tk 46 crore (8.9%) over same period of last year, mainly due to increase in salary expenses, Managing Director Mashrur Arefin said.
Bank’s total assets grew to Tk 4,451 crore (12.5%) to Tk 40,146 crore during January to June. Total equity rose 2.2 percent to Tk 2,507 crore. Loans rose by 18.3% to Tk 29,322 crore. SME & commercial loans grew by 12 per cent to Tk 6,767 crore. Between January and June, City Bank’ deposits advanced 11.4% to Tk 27,465 crore and advance to deposit ratio stood at 81.5%, capital adequacy ratio (consolidated) in June stood at 12.9% against minimum requirement of 12.5%.
City Bank’s default loan ratio declined to 4.5 per cent in June this year against 5.8 per cent of December last year, mostly driven by regulatory changes, according to the managing director of the bank.
Mashrur Arefin said, “Agent Banking and Women Banking, along with our Retail Banking, are expected to contribute considerably in our low-cost deposit mobilization in coming years.”
City Bank’s agent banking deposits shot up 17.2% in the last 6 months and women banking deposits rose 7.6% in the same period.
The central bank’s new regulations on classification, provisioning and credit guarantee schemes will make investments in SME segment more profitable for banks as well, City Bank MD said.
City Bank’s number of SME outlets reached to 116 in June this year and agent banking outlets will also be used to rollout small business products & services and SME loans thrived in 1st half, with 21.7% growth.
City Bank has been actively participating in the Stimulus Packages introduced by the central bank to rejuvenate private sector businesses through the financial system. The bank disbursed Tk 731 crore till date under such packages. The Bank’s solo half-yearly revenue was reduced by 17.2 percent from the usual scenario that would have prevailed without new regulation of interest cap and Covid-19 pandemic.
At the same time, provision expenses increased by 24.9 percent, impacted mainly by the increase in provision on off-balance sheet items and investments and prudential risk and balance sheet management, which eventually took provision coverage ratio to 109 percent in June this year from 78 percent. This indicates that bank is making the balance sheet more resilient if any unforeseen risk arises.
As a result of the above, consolidated profit after tax of the bank for 1st half 2020 stood at Tk 1,06.8 crore with a decrease from last year’s number by Tk 78 crore. Return in asset declined from 1.1% to 0.6%, return on equity declined from 14.5% to 8.6%, earning per share declined from 3.6 taka to 2.1 taka in the same period.
“Nonetheless, the decline in the profitability of the bank during this period is mostly caused by external, regulatory and macro factors rather than internal lack of efficiency. A testament to this fact is the outstanding growth in the balance sheet items of the bank during this period, even with the Coronavirus outbreak impacting all businesses severely,” Mashrur added.