Dhaka, Bangladesh (BBN)- The operating profit of Bangladesh’s private commercial banks (PCBs) showed a mixed trend in the first half (H1) of 2018.
Of the 40 PCBs, the operating profit of 14 recorded an upward trend, while that of six banks witnessed a downturn, according to the provisional data for the six-month period from January to June this calendar year.
The data of the rest PCBs were not immediately available.
In the final count, the amount of profit may be a little higher or lower, said officials of different commercial banks.
They also said the upward trend in private sector growth helped the banks to pick up their operating profit in H1 of this year compared to that of the same period last year.
The private sector credit growth was higher than the target, set by the Bangladesh Bank (BB) for the January-June period of the just-concluded fiscal year (FY), 2017-18.
However, the last couple of months of the year saw a falling trend in the private sector credit, they added.
The credit growth rate came down to 17.65 per cent in April 2018 on a year-on-year basis from 17.98 per cent in March, the BB data showed. It was 18.49 per cent in February 2018.
The central bank of Bangladesh earlier projected that the private sector credit would grow at the rate of 16.80 per cent in June 2018.
Talking to the BBN, a senior executive of a leading PCB said the private sector credit growth increased significantly in the recent months due to higher trade financing by the banks for settling import payment obligations.
Bangladesh’s overall imports grew by over 15 per cent in the first 10 months of FY 2018, mainly due to higher import of food grains and fuel oils.
The settlement of letters of credit (LCs), in terms of value, rose to nearly US$ 43 billion during the July-April period of FY 18 from $ 37.37 billion in the same period of FY 17.
Besides, the upward trend in interest rate spread also pushed up the overall operational profit of the banks, the private banker explained.
The weighted average spread between lending and deposit rates offered by the commercial banks rose to 4.46 per cent in April 2018 from 4.41 per cent in January.
The senior bankers also said some banks could not perform as expected during the period under review, mainly due to an increase in their volume of non-performing loans (NPLs).
The volume of classified loans in the banking system jumped by over 19 per cent to BDT 885.89 billion during the January-March period of this year from BDT 743.03 billion in the preceding quarter.
A sluggish trend in the share market has also pushed down the banks’ profit during the period, another banker said.
Between January 01 and June 28, DSEX, the prime index of the Dhaka Stock Exchange (DSE), slumped more than 839 points or 13.44 per cent, ending at 5,405.
They also said the banks’ profit may decrease in the second half (H2) of this year, as they have decided to slash their interest rates on lending and deposit in line with the decision of the Bangladesh Association of Banks (BAB).
On June 20, the BAB decided to bring down the interest rates on both lending and deposit to 9.0 per cent and 6.0 per cent respectively from July 01.
The unaudited operating profit, however, does not indicate the actual financial position of a bank. The banks have to leave aside funds for provisioning their bad debts and taxes payable to the government.
BBN/SSR/AD
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