Operating profits of most banks rise in 2015

Despite surplus liquidity and growing burden of bad debts, operating profits of most of the private sector banks in the country have increased. 

Shaikh Abdullahbdnews24.com
Published : 2 Jan 2016, 07:43 PM
Updated : 2 Jan 2016, 07:43 PM

January 1 was a banking holiday. On that day, transactions in all the banks across the country were closed to prepare the income and expenditure accounts.

It was learnt that profits of most of the banks had increased as per initial estimate.

Leading bankers attribute this to the overall economic stability and growth in import-export.

Meghna Bank’s Managing Director Nurul Amin told bdnews24.com, “Operating profits have increased, but not to the extent we expected.”

“The loan disbursement target set in the fiscal policy for the private sector could not be achieved. Government did not borrow from the banking sector, either. Because of all these factors, there is surplus liquidity in the banks and that is why the profit margin was not as much as we expected.”

“Investment in capital market, merchant banking, guarantee income, income from service charges and multiple other sources of income are there for banks

“With the economic growth, income under these heads too has increased. Besides, income has increased due to the rescheduling of some bad debts,” said this former chairman of the ABB.

ABB’s Chairman and Managing Director of the Mutual Trust Bank Anis A Khan said, “Banking activities are always expanding. Banks are launching new schemes. Purchasing capacity of the people has also increased. Banking activities are also increasing through financial inclusion. Naturally, the banking sector is benefiting from these.”

Money flow throughout the year was excess in the currency market. So, the income from the interest on call money was not significant.

Last year, the interest rate on call money plunged even below two percent.

Credit growth, too, failed to meet expectations.

As per the latest figure of the Bangladesh Bank, credit growth to the private sector by the end of October last year was 13.22 percent.

The total deposit in the banking sector by the end of October last year was Tk 7.2586 trillion. The amount of loan disbursement during the same period was Tk 5.7962 trillion.

Despite Bangladesh Bank giving various facilities to reschedule default loans, the amount of bad debts increased in 2015.

By the end of September, the banking sector’s total bad debts stood at Tk 547.08 billion, which is 9.89 percent of the total loan disbursed.

In December, 2014, it was Tk 501.56 billion, which was 9.69 percent of the total loan issued then.

As per the rules of Bangladesh Bank, banks are not supposed to make public their operating profits.  Hence, no bank formally announces its profit figure.

Operating profit, however, is not the net profit of a bank. From the operating profit, net profit is calculated by adjusting safety reserves against bad debts and deducting taxes.

Apart from that, banks also allot money for the special general reserves.

It has been learnt that like previous years, Islamic Bank earned the highest operating profit among the banks. It has earned an operating profit of Tk 18.07 billion. In 2014, its operating profit was Tk 17.03 billion.

Bangladesh Bank, in the past few years, relaxed several rules for the banks.

Taking advantage of this opportunity, banks rescheduled many of their loans and also reconstructed loans of the large industrial groups. By regularising loans this way, the banks got the opportunity to show interest against these loans as income.

This, experts say, helped in increasing the operating profits of the banks at the end of the year.

Meanwhile, it has been learnt that the state-owned BASIC Bank incurred a loss of Tk 2.19 billion in 2015 largely because of the siphoning off of billions of Taka.

Toufique Imrose Khalidi
Editor-in-Chief and Publisher