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Banks profit amid challenges

  • Published at 11:45 pm July 2nd, 2018
  • Last updated at 11:48 pm July 2nd, 2018
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According to the banks’ calculation, Islami banks have made more profits compared to other conventional banks during the first half of the current year

Most private banks say their operating profits in the first six months of 2018 is higher, when compared to the same period last year, although the sector faced a number of challenges including a liquidity crisis, interest rate hikes, and non-performing loans (NPLs).

The Securities and Exchange Commission and Bangladesh Bank have imposed an embargo on disclosing information about operating profits.

The Dhaka Tribune collected information about the profit data of 25 out of 39 banks by contacting them. The authorities concerned marked the information about profit data as “sensitive.”

Among the 25 banks, only four saw a profit downturn at the end of June.

The operating profits are unaudited profits. In the final count, the amount may rise or fall minimally as the banks have to set aside funds to provision bad debts and taxes, payable to the government, from their operating profits, bankers say.

Although the fiscal year starts from July to June, the banks maintain January to December as their fiscal year. Sources in banks say they settle accounts by June 30 every year and enjoy a bank holiday on July 1, thus making a half-yearly calculation.

According to the banks’ calculation, Islami banks have made more profits compared to other conventional banks during the first half of the current year.

“The profit growth is not so high compared to the previous year’s as the country’s overall economy is expanding,” the managing director of a private commercial bank told the Dhaka Tribune.

“If the banks show poor profit, it will give a bad massage to the share market, and retail investors will become panicked, affecting the price index.”

The managing director said the central bank planned to highlight the positive performance of the banking sector ahead of the national election.

“In these circumstances, the central bank facilitated the banks in showing profit, on paper, by relaxing several rules,” the official added.

A managing director of a different private commercial bank said the banks had registered profits thanks to credit growth in the private sector, swift implementation of mega projects, and growth in the opening and settlement of letters of credit.

He, however, expressed concern that the profit margin might fall following the decision to maintain lower interest spread.

On June 20, the owners of private commercial banks decided to bring down the interest rate on lending to 9%, and that on deposits to 6%, which means the interest spread has to come down to 3% from the 5% limit set by the Bangladesh Bank.

The decision to lower interest rates, taken by the Bangladesh Association of Banks, was supposed to go into effect from July 1.