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Banks’ operating profits rise despite excess liquidity, NPLs

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FT ONLINE

Despite the pressure of excess liquidity and non-performing loans (NPLs), most public and private banks have seen an increase in their operating profits in the first six months of the calendar year compared to the same period a year ago.

As there is an embargo from Bangladesh Securities and Exchange Commission (BSEC) and Bangladesh Bank on disclosing information about the operating profits, the FT Team collected a total of 45 banks’ profit data by contacting them respectively.

The authorities concerned marked down the information about profit data as “sensitive”.

The data shows that at least 22 banks have made significant profit at the end of June while only three of them have seen profit downturn.

Though the fiscal year is counted from July to June period, banks maintain January to December period as their fiscal year. For this, every year banks settle accounts by June 30 and enjoy holiday known as bank holiday on July 1, thus making a half-yearly calculation.

But this year has been an exception because July 1 fell on Saturday. Moreover, settling accounts was easier than previous years as most banks automate their business process, said sources in the banks.

According to the banks calculation, Islami banks have made more profits than others in the first half of the current year.

The operating profits of the banks are, however, not the final profit. It is the unaudited profits. In the final count, the amount may be a little higher or lower as the banks have to set aside funds for provisioning bad debts and taxes payable to the government from their operating profits, according to the bankers.

Pressure of excess liquidity, NPLs

Though the operating profits have been on an upward trajectory, banks face huge pressure from excess liquidity and non-performing loans, which are affecting performance, according to sector people.

The latest central bank data released on March this year showed that the excess liquidity in the banks stood at Tk1,22,073 crore at the end of 2016 while it was Tk1,20,679 crore in 2015.

The non-performing loans in the banking sector increased by Tk11,237 crore in the first three months of the current year.

At the end of March, the total NPL stood at Tk73,409 crore which is 10.53% of total outstanding loans.

The default loan of private banks stood at Tk29,727 crore in the first quarter of the year, up 28.93% from the last three months of 2016.

The state banks’ default loans expanded from Tk4,691 crore to Tk35,716 crore during the first quarter of the year.

The foreign banks’ default loans declined from Tk2,405 crore to Tk2,282 crore.

The NPL was Tk62,172 crore at the end of December, 2016.

-SAM

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