Dhaka, Bangladesh (BBN)– The un-audited operating profits of the country’s private commercial banks (PCBs) got into a mixed bag in the just-concluded calendar year, primarily due to the swelling of non-performing loans (NPL).
Most of the banks, excepting a few, maintained their operating-profit growth despite political turmoil in the country and narrowing interest- rate spread, according to bankers.
Besides, they explained, the sluggish trend in the country’s capital market alongside the private-sector credit growth led to the lower level of profits of the banks in the past year.
“A section of banks have been able to increase their amounts of operating profits following higher earnings from treasury operations,” a senior official of a leading private commercial bank (PCB) told BBN in Dhaka.
He also said the banks having OBU (Offshore Banking Units) operations with sizeable amounts earned significantly through providing foreign-currency loans to their customers.
Currently, outstanding total foreign-currency loans stood at around US$8.0 billion, according to the central bank statistics.
However, the amount of NPLs rose by more than 4.0 per cent to BDT 547.08 billion during the July-September period of this year from BDT 525.19 billion in the preceding quarter. It was BDT 546.58 billion in the quarter 1 (Q1) of 2015.
The share of NPLs also rose to 9.89 per cent during the period under review from 9.67 per cent three months back. It was 10.47 per cent in the Q1 of this year.
The Bangladesh Bank (BB) has already asked the commercial banks to take effective measures to reduce the volume on NPLs by intensifying recovery drives across the country.
“We expect that the amount of NPLs will decline to some extent in the fourth quarter of 2015,” a BB senior official told BBN.
He also said the banks have already been instructed to take necessary measures so that the amount of classified loans does not increase further.
On the other hand, the interest rate spread in the country’s banking sector came down to 4.77 per cent in October last from 5.06 per cent in January 2015 as the commercial banks are slashing their leading rates to attract clients particularly corporate ones.
The weighted average rates on deposits came down to 6.58 per cent in October last from 7.26 per cent in January 2015 while interest rates on lending dropped to 11.35 per cent from 12.32 per cent, the BB data showed.
“The falling trend in overall interest rate spread may continue in the coming months following sufficient excess liquidity with the banks,” the private banker noted.
He also said some commercial banks are now offering lending rate below 10 per cent to attract good-performing corporate clients recently to expedite their business activities.
Islami Bank Bangladesh Ltd. (IBBL) was the top earner of operating profit in 2015. Its earnings rose to BDT 18.07 billion in 2015 from BDT 17.03 billion a year ago.
Southeast Bank Ltd stood in the second position with an estimated earnings of BDT 8.35 billion in operating profit — up from BDT 8.32 billion in 2014.
United Commercial Bank Ltd was third with an estimated earning of around BDT 8.33 billion in operating profit, compared to BDT 8.71 billion in 2014.
The operating profit of Pubali Bank Ltd rose to BDT 8.10 billion in 2015 from BDT 7.82 billion and AB Bank Ltd’s to BDT 7.60 billion from BDT 7.37 billion.
Al-Arafah Islami Bank made an operating profit worth BDT 6.50 billion in 2015 against BDT 6.13 billion of the previous year while Mutual Trust Bank earned BDT 3.03 billion, up from BDT 2.73 billion in 2014.
National Bank’s profit came down to BDT 7.10 billion in the last year from BDT 8.30 billion a year ago and Standard Bank to BDT 3.64 billion from BDT 4.14 billion.
Dhaka Bank rose to BDT 5.20 billion from BDT 3.85 billion and the Premier Bank to Tk 2.25 billion from Tk 2.03 billion.
The operating profits of EXIM Bank rose to BDT 6.60 billion in 2015 from BDT 6.15 billion and Social Islami Bank Ltd to BDT 5.80 billion from BDT 4.70 billion.
Dutch-Bangla Bank’s profit rose to BDT 6.70 billion from BDT 5.60 billion and IFIC Bank’s to BDT 4.06 billion from BDT 3.91 billion.
The operating profit of the National Credit and Commerce Bank Ltd (NCCBL) rose to BDT 4.19 billion in 2015 from BDT 3.87 billion in the previous year while Shahjalal Islami Bank’s reached BDT 2.75 billion from BDT 2.47 billion.
Eastern Bank’s profit rose to BDT 5.90 billion from BDT 5.89 billion and Trust Bank to BDT 4.55 billion from BDT 3.85 billion.
Prime Bank’s profit dropped to BDT 6.34 billion in the last year from BDT 6.62 billion a year ago and Mercantile Bank to BDT 4.10 billion from BDT 4.43 billion.
Bank Asia booked an operating profit worth BDT 6.05 billion in 2015 against BDT 5.78 billion of the previous year while Union Bank’s rose to BDT 1.12 billion from BDT 420 million.
Modhumoti Bank Ltd posted an operating profit worth BDT 1.06 billion in 2015 against BDT 520 million in 2014 while NRB Commercial Bank’s profit rose to BDT 1.06 billion from BDT 400 million
The operating profit of South Bangla Agriculture Bank more than doubled to BDT 810 million from BDT 320 million.
The City Bank booked an operating profit worth BDT 6.70 billion in 2015 against BDT 5.13 billion of the previous year while One Bank rose to BDT 4.27 billion from BDT 3.91 billion.
Operating profit, however, does not indicate the real financial health of a bank. Because, the banks have to make room for provisioning against bad loans and taxes that have to be paid to government from such profits.
Operating profits of banks and non-banking financial institutions are a major source of income taxes collected from business entities by the National Board of Revenue (NBR).
As such, the aggregate position of operating profits of PCBs has an impact — favourable or otherwise — on revenue collection, in the form of direct taxes, collected by the NBR, depending upon the level of such profits.