The operating profit of majority of the private commercial banks (PCBs) shrunk in the just-concluded calendar year mainly due to the impact of Covid-19 and implementation of the single-digit interest rate.
Except for a few, most of the PCBs witnessed lower operating profit in 2020 amid a falling trend in both private sector credit growth and interest rate spread that persisted almost throughout the year, senior bankers have said.
The FE collected unaudited operating profit of 12 banks, out of 41, including nine new PCBs, until 10:00 pm on Thursday. Of them, the operating profit of five PCBs increased in 2020 and seven others witnessed fall, according to available information.
National Bank Ltd. registered a Tk 10.15 billion operating profit in 2020 compared with Tk 9.56 billion in 2019.
The operating profit of Pubali Bank Ltd. came down to Tk 9.35 billion in 2020 from Tk 10.25 billion a year ago, while the profit of Southeast Bank Ltd. fell to Tk 7.70 billion from Tk 9.87 billion.
Al-Arafah Islami Bank Ltd. made an operating profit of Tk 7.10 billion in the last year against Tk 8.01 billion a year ago, while the profit of EXIM Bank Ltd. came down to Tk 7.41 billion from Tk 7.80 billion.
The operating profit of Eastern Bank Ltd. also fell to Tk 8.50 billion in 2020 from Tk 8.85 billion and that of Jamuna Bank Ltd. to Tk 6.50 billion from Tk 7.26 billion.
On the other hand, the operating profit of NRBC Bank Ltd. rose to Tk 3.23 billion in 2020 from Tk 2.65 billion a year before, while Meghna Bank Ltd. earned Tk 850 million, up from Tk 820 million in 2019.
Modhumoti Bank Ltd. posted an operating profit worth Tk 2.78 billion in 2020 against Tk 2.13 billion in the year before, while the profit of NRB Bank Ltd. rose to Tk 1.07 billion from Tk 930 million.
The operating profit of South Bangla Agriculture and Commerce Bank Ltd. came down to Tk 1.52 billion in the outgoing year from Tk 2.26 billion in 2019.
The senior bankers, however, said private sector credit growth has maintained a falling trend in the recent months as fresh demand for loans dropped due to the second wave of Covid-19 pandemic.
The private sector credit growth fell to 8.21 per cent (year-on-year) in November this year from 8.61 per cent a month ago, according to the Bangladesh Bank (BB)'s latest statistics.
This growth was 3.29 percentage points lower than the BB's target of 11.50 per cent for the first half (H1) of the current fiscal year (FY2020-21).
Such growth was 9.20 per cent in January 2020.
The net interest income has dropped significantly as the banks brought down the lending rate to 9.0 per cent as part of a government move to bring down the rate to single digit from April 01, 2020, they explained.
Meanwhile, the weighted average spread between the lending and deposit rates offered by the commercial banks came down to 2.98 per cent in November from 3.97 per cent in January 2020, the BB data showed.
Actually, the interest rate spread dropped significantly to 2.92 per cent in April from 4.07 per cent a month before, following implementation of the single-digit interest rate in the country's banking sector.
Besides, lower foreign trade particularly import businesses has pushed down the operating profit of the banks, the bankers added.
The import growth dropped 8.84 per cent to $ 20.24 billion during the July-November period of the current fiscal year (FY) from $22.20 billion in the same period of the previous fiscal.
Talking to the FE, M Kamal Hossain, managing director (MD) and chief executive officer (CEO) of Southeast Bank Limited, said the operating profits dropped mainly due to implementation of the single-digit interest rate.
"The interest rate on lending came down to 9.0 per cent in April from 12 per cent earlier," Mr. Hossain said while explaining the causes of lower operational profits.
He also said the letters of credit (LCs) particularly for importing capital machinery were not opened during the pandemic situation.
"Most of the businesses are still maintaining a 'wait-and-see policy' for expansion of their businesses due to the pandemic," the senior banker noted.
The 66-day shutdown starting from March 26 last amid the pandemic had hit the overall banking businesses hard, according to another CEO of a leading PCB.
"Our businesses suffered serious setback during the April-May period of this year due to the pandemic," he noted.
The operating profit, however, does not indicate the real financial health of a bank since the lenders have to make room for provisioning against the loans particularly classified ones and taxes that have to be paid to the government from the profits.
Operating profits of the banks and non-banking financial institutions are a major source of income tax of the National Board of Revenue (NBR).
As such, the aggregate operating profit of the PCBs has an impact on the revenue collection in the form of direct taxes collected by the revenue board
