PCBs' operating profits see 'slower growth' in 2019

FT ONLINE

The operating profits of the country's private commercial banks (PCBs) witnessed a 'slower growth' in the outgoing calendar year (2019) because of a rising trend in classified loans in the banking sector.

Most of the banks, however, maintained growth in their operating profits, despite a declining trend in foreign trade, private sector credit growth, and interest rate spread, senior bankers said.

The FT Team collect the unaudited operating profit reports of 21 banks, out of a total of 40, including nine new PCBs, until going to the press at 10:00 pm.

Southeast Bank Ltd made Tk 10.60 billion operating profit in 2019, compared to Tk 10.12 billion a year ago.

The profit of Pubali Bank Ltd rose to Tk 10.50 billion in the outgoing calendar year from Tk 10.10 billion in 2018.

The operating profit of Bank Asia Ltd increased to Tk 9.40 billion in 2019 from Tk 8.11 billion, and that of Eastern Bank Ltd rose to Tk 9.00 billion from Tk 7.80 billion.

Al-Arafah Islami Bank Ltd made an operating profit of Tk 8.01 billion in 2019 against Tk 6.40 billion in the previous year, while Shahjalal Islami Bank Ltd earned Tk 6.53 billion, up from Tk 4.75 billion in 2018.

The operating profit of City Bank Ltd rose to Tk 8.20 billion in 2019 from Tk 6.64 billion, and that of Union Bank Ltd to Tk 2.73 billion from Tk 2.51 billion in 2018.

The operating profit of EXIM Bank rose to Tk 7.80 billion in 2019 from Tk 7.50 billion of the previous year, and that of Social Islami Bank Ltd (SIBL) to Tk 6.82 billion from Tk 6.67 billion.

Mercantile Bank Ltd booked an operating profit amounting to Tk 7.53 billion in the just-concluded year against Tk 6.73 billion of the previous year, while that of Meghna Bank Ltd rose to Tk 1.24 billion from Tk 910 million.

Jamuna Bank Ltd made Tk 7.30 billion operating profit in 2019 against Tk 6.20 billion of the previous year, while the profit of NRB Bank Ltd rose to Tk 930 million from Tk 910 million.

The operating profit of National Credit and Commerce Bank Ltd (NCCBL) rose to Tk 7.52 billion in 2019 from Tk 6.55 billion in the previous year, while that of NRB Commercial Bank Ltd reached Tk 2.62 billion from Tk 2.03 billion.

South Bangla Agriculture and Commerce Bank Ltd posted an operating profit of Tk 2.28 billion in 2019 against Tk 2.03 billion in the previous year, while the profit of Modhumoti Bank Ltd rose to Tk 2.18 billion from Tk 1.97 billion.

On the other hand, the operating profit of National Bank Ltd came down to Tk 9.52 billion in the outgoing year from Tk 12.06 billion a year before, while the profit of One Bank Ltd fell to Tk 4.33 billion from Tk 5.60 billion.

"Most of the banks witnessed a slower growth in 2019 following a declining trend in private sector credit growth, foreign trade volume, and interest rate spread," M Kamal Hossain, managing director (MD) and chief executive officer (CEO) of Southeast Bank Limited, said on Tuesday evening.

The private sector credit growth came down to 10.04 per cent in October 2019 on a year-on-year basis from 11.26 per cent in July, according to the central bank's latest statistics.

The growth was 3.16 percentage points lower than the central bank's target of 13.20 per cent for the first half (H1) of the fiscal year (FY) 2019-20.

"The banks have maintained a conservative approach in sanctioning and disbursing fresh loans, which pushed down the private sector credit growth," the CEO of another leading PCB explained.

He also said the sluggish trend in the country's capital market along with lower growth of foreign trade, covering both export and import activities, had a negative impact on profits of the banks in 2019.

The capital market passed yet another gloomy year, as the core index of the Dhaka Stock Exchange (DSE) - DSEX - eroded 18.50 percent year-on-year in 2019, after hitting a 42-month low.

Between January 1 and December 30, the DSE prime index lost 1,012 points or 18.52 percent to close the year at 4,452 on Monday (Dec 30).

On the other hand, the weighted average spread between lending and deposit rates, offered by the commercial banks, came down to 3.92 percent in October from 4.15 percent in January 2019, according to the Bangladesh Bank (BB) statistics.

Another senior executive of a PCB said the banks, which managed non-performing loans (NPLs) well by using the BB's relaxed policy on loan rescheduling, made better operating profits by the year-end.

The volume of classified loans jumped by nearly 24 percent to Tk 1,162.88 billion as on September 30, 2019, from Tk 939.11 billion as on December 31, 2018.

However, the amount of NPLs in the banking sector will fall in the final quarter of 2019, the private banker opined.

On the other hand, some banks have been able to increase their operating profits following higher earnings from their treasury operations, according to another PCB high-up.

"Increased yields on the government securities have helped some banks boost their operating profits," he added.

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

Operating profits of the banks and non-banking financial institutions are a major source of income 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 NBR.