Political stability has helped banks earn handsome operating profits in 2016 despite a sharp fall in lending rates, data collected from different banks showed.
Some new banks recorded more than 200 percent rise in operating profits, while struggling Premier Bank saw 78 percent growth.
Largest private lender in terms of deposits and advances, Islami Bank Bangladesh, has booked more than Tk 2,000 crore as operating profits for the first time in its history of three decades in business. The amount was an increase of 11 percent year-on-year.
Even, troubled state-run BASIC Bank made nearly Tk 15 crore operating profits after two years’ of losses.
Anis A Khan, chairman of the Association of Bankers, Bangladesh, said banks’ operating profits increased despite falling lending rates in 2016.
“The calm and peaceful political atmosphere has helped the banks raise their profits,” said Khan, also the managing director of Mutual Trust Bank.
Mutual Trust Bank’s operating profits increased about 21.78 percent to Tk 369 crore last year. Khan said credit, export and import business growth of the bank helped them make profits.
On the 78 percent growth in profits, Ehsan Khosru, an adviser of Premier Bank, said: “Some big corporate clients who became our customers last year have fuelled the growth.”
Improved and faster services have also helped the bank get new clients in the just concluded year, he added.
Shafiqul Alam, managing director of Jamuna Bank, said his bank performed well in 2016 despite a sharp fall in lending rates.
“Rise in business volume and efficient treasury management have driven the growth,” Alam said.
Managing Director of South Bangla Agriculture and Commerce Bank Rafiqul Islam said people were able to run their business smoothly and it helped the banks boost their profits.
He also said the new banks’ profit growth has been rising every year as their branches along with business are increasing and the amount of classified loans is low.
Yet, there is nothing to cheer up as the profits may end up in meeting the regulatory requirement against bad loans, bankers said.
Also, banks have to pay 42.5 percent tax on their net incomes.
The impact of bad loans will become clear after the calculation of the net profits, bankers said.
“We expect that profit after tax will come down due to higher provisioning required against default loans,” Khan of Mutual Trust Bank said.
Last year default loans increased and lending rate was lowered but the banks succeeded in making higher profits which helped GDP growth cross 7 percent. The government expects the economic growth to reach 7.5 percent this year.
Bangladesh economy had a very tumultuous time in 2013-2015. The year 2015 had started with political turmoil spanning over three months in a row which affected every sector in the economy, including banks.
Since the middle of 2015, a calm political situation has been prevailing in the country. But the militant attack on Holey Artisan bakery in Gulshan in July last year made a scary situation for businesses.
But strong drive by the law enforcing agencies dispelled the apprehension.
According to Bangladesh Bank statistics, credit growth increased to 16.78 percent in fiscal 2015-16 and in November it rose 15 percent year-on-year.