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The loan classification-related policy relaxation introduced by the Bangladesh Bank lowered bank’s provision requirement and thus raised operating profits of most of the banks in 2021.
According to available data on operating profits of 18 banks, 17 banks posted an increase in operating profits against a decline in operating profit of only one bank.
Most of the banks witnessed a fall in operating profits in 2020 following the Covid outbreak and subsequent imposition of lending rate ceiling at 9 per cent from April 1 of the year.
The situation, however, changed in the just concluded year as the central bank continued providing policy relaxation to the scheduled banks, said senior officials of the banks.
Under the policy relaxation, borrowers remained unclassified by paying only 15 per cent of their overdue loan amounts for the year 2021.
Classification of loans reduces banks’ operating profits as they have to set aside substantial amounts against classified loans.
Provision against classified loans ranges between 20 per cent and 100 per cent.
Besides the loan classification-related relaxation, the banks managed to reduce their cost of fund substantially in 2021 until the minimum deposit rate was tagged with the inflation rate in August.
The rate was tagged with the inflation for deposits of individuals, pension funds of the government entities or private entities and term deposits of any amount meant for the payment of post-retirement benefits.
On top of these, business and economic activities rebounded strongly in the second half of 2021, creating business opportunities for the banks.
The country’s import spending rose by around 50 per cent against more than 20 per cent increase in export earnings year-on-year in the first four months of the current fiscal year.
Southeast Bank managing director and chief executive officer M Kamal Hossain told New Age that the banking sector had managed to post higher operating profits in 2021 due mainly to the BB’s policy relaxation on loan classification.
The loan classification-related policy relaxation helped the banks keep provision expenses low, Kamal said.
Besides, the country managed to recover the Covid-induced economic shocks to a great extent in the just concluded year, he said.
The readymade garment export orders posted a substantial growth and thereby boosting business cope for the banks as well, he said.
Kamal hopes a better business outlook for 2022 if omicron, a new variant of Covid-19, does not pose any major effect.
Sonali Bank managing director and chief executive officer Ataur Rahman Prodhan told New Age that the banks posted higher operating profits in 2021 as Sonali Bank’s classification did not increase against a moderate loan recovery.
The bank’s lending activities increased also and that’s why its operating profit grew, he said.
Besides, modernisation and expansion of its services also contributed to the situation, Ataur said.
He also hoped that the country’s economic activities would grow in 2022 so the banks would get wider scope for making profits, he said.
As per the data, Islami Bank Bangladesh posted the highest, Tk 2,430 crore, in operating profits in 2021, up Tk 80 crore on Tk 2,350 crore in the previous year.
In 2021, Pubali Bank made the third highest, Tk 1,150 crore, in operating profits, up Tk 215 crore on Tk 935 crore in 2020.
Of the 18 banks, Rupali Bank was the lone entity that made lower operating profits.
In 2021, it made Tk 150.2 crore in operating profits against Tk 159 crore in the previous year.
A senior official of a bank, however, said that the operating profits might not get reflected in any institutions’ net profits.
They said the banks having operating profits may even incur losses when the final report would be prepared.
So, the stock market investors should be cautious in making decisions based on operating profit data, the official said.
Apart from, IBBL, Sonali Bank and Pubali Bank, operating profits of Eastern Bank, Southeast Bank, Premier Bank, Exim Bank, Al-Arafah Islami Bank, Jamuna Bank, Shahjalal Islami Bank, NCC Bank, NRBC Bank, Union Bank, SBAC Bank, Midland Bank, Mercantile Bank and Meghna Bank increased in 2021.
State-owned Sonali Bank posted the second highest, Tk 2,200 crore, up Tk 46 crore on Tk 2,154 crore.
(NA)