2020 will perhaps go down as the year in which Standard Chartered Bangladesh showed its mettle, outperforming its parent company, whose earnings took a massive hit for the pandemic.
The Bangladesh subsidiary of the British bank logged in profit-after-tax of Tk 1,367.5 crore (about $161 million) for the year -- the highest yet in its 116 years of operations in the country.
The amount is an increase of 6.6 per cent from a year earlier, its first single-digit profit growth in three years.
“In a year with so much adversity, this is quite a good result for us,” Naser Ezaz Bijoy, chief executive officer of Standard Chartered Bangladesh, told Dhaka Tribune.
Standard Chartered Bangladesh’s performance in 2020 is in stark contrast to its parent company, which saw its pre-tax profit crash 57 per cent to $1.6 billion on higher credit impairments due to the pandemic.
However, it is in line with the Indian subsidiary, whose profit-before-tax quadrupled to $337 million in 2020.
While the London-headquartered bank’s interest income fell 15.4 per cent to Tk 1,885.9 crore, its interest expense also came down.
The interest rate cap from April 1 last year was a factor, according to Bijoy.
This was offset by the income from investment, which more than doubled to Tk 496.1 crore. The bank invested heavily in 91-day Treasury bills last year: from Tk 538.7 crore in 2019 to Tk 1,629.9 crore.
At the end of 2020, Standard Chartered Bangladesh’s loans and advances stood at Tk 21622.8 crore, down 13.9 per cent year-on-year.
“There were muted economic activities and the demand for credit was low,” said Bijoy, who took charge of the lender in November 2017 from Abrar Anwar.
In 2020, private sector credit growth averaged 8.9 per cent, in contrast to 10.4 per cent a year earlier, as jittery businesses went on a self-preservation mode, putting their investment plans and businesses on hold indefinitely, according to data from the Bangladesh Bank.
Besides, the bank played it safe with its lending activities.
“We had a cautious approach in a high-risk environment -- our primary focus was the quality of the book.”
Its default loans at the end of 2020 accounted for 1.62 per cent of its total outstanding loans, down from 1.67 per cent. At the end of last year, the banking sector’s default loan ratio was 7.7 per cent.
Its loan-deposit ratio came down from 62 per cent to 47.2 per cent, which is way lower than the ceiling of 85 per cent.
The bank’s deposits though swelled: it stood at Tk 31,175.9 crore, up 11.2 per cent year-on-year.
“In March, when uncertainty was at its peak, we created a war chest of deposit, so that our clients could dip into it when needed.”
The bank also kept provisioning over and above what was required by the regulatory body in anticipation of the surge in bad loans once the loan moratorium facility is lifted in 2021.
As per the central bank regulations, banks have to keep 0.50 per cent to 5 per cent in provisioning against general category loans, 20 per cent against classified loans of substandard category and 50 per cent against classified loans of doubtful category. It is set at 100 per cent against classified loans in the bad or loss category.
But for 2020, banks could defer the provisioning as no loan was allowed to be classified by the BB with the view to providing borrowers with some breathing room from the abrupt economic challenge brought on by the global coronavirus pandemic.
Standard Chartered kept Tk 478.5 crore as provisioning against classified loans in 2020, up 36.1 per cent year-on-year.
The bank was also involved in two landmark mergers and acquisition transaction that took place last year: Unilever’s purchase of 82 per cent stakes of GlaxoSmithKline and Evercare’s purchase of Apollo Hospitals.
“We spent heavily on community engagement -- we spent more than $2 million on CSR activities. All in all, in a difficult year, we saw an exceptional performance,” Bijoy added.
