Dhaka, Bangladesh (BBN)– Net income of all banks after provisioning and tax dropped by 32.69 per cent or BDT 8.96 billion as on June 30 this year mainly due to higher classified loans.

The net income of the all scheduled banks came down to BDT 18.45 billion as of June 30, 2017 from BDT 27.41 billion a year ago, according to unaudited and provisional figures, compiled by Bangladesh Bank (BB), the country’s central bank.

The net profit of the banks decreased significantly during the period under review mainly due to higher provisioning requirements against the bad debts, senior bankers said.

The provisioning against total bad debts of all banks rose to BDT 52.56 billion on June 30, 2017 from BDT 34.08 billion in the same period of the last calendar year, the BB data showed.

They also said some banks did not perform as per their respective desired levels during the period under review mainly due to increase in their volume of non-performing loans (NPLs).

The volume of classified loans rose by more than 19 per cent to BDT 741.48 billion as on June 30, 2017 from BDT 621.72 billion as on December 31, 2016. The amount of NPLs was BDT 633.65 billion a year before.

Talking to BBN in Dhaka, a senior executive of a leading private commercial bank (PCB) said there is a twin-effect of classified loans in the banking system.

The banks will have to keep the interest earned from classified loans to their interest-suspense account, instead of taking it into profit account, according to the private banker.

Besides, the banks will have to ensure required provisioning against total classified loans from their profits, he explained.

He also said the falling trend in interest rate spread has also pushed down the overall net profits of the banks during the period under review.

The weighted average spread between the lending and deposit rates offered by the commercial banks came down to 4.72 per cent in June 2017 from 4.85 per cent in June 2016.

“We expect the profits might rise in the second half of this year if the banks could reduce the amount of NPLs through strengthening their recovery drives across the country,” he noted.

BBN/SSR/AD