Most of the listed banks have reported higher earnings per share (EPS) in the first nine months (January-September) of the ongoing calendar year, compared to the same period last year, due to relaxed loan classification and provisioning rules amid the Covid-19 pandemic.
According to the Dhaka Stock Exchange (DSE) data as of Sunday (November 1), 29 out of 30 listed banks have disclosed their financial statements, where 18 banks saw higher EPS while 10 other banks witnessed negative income growth during the period.
The EPS is a listed company's profit allocated to each share, indicating a company's profitability.
Talking to Dhaka Tribune, bankers and experts said that most of the listed banks’ earnings were healthier as the Bangladesh Bank in July eased loan classification and provisioning rules for cottage, micro, small and medium enterprises (CMSMEs), to encourage banks for disbursing more loans to them.
Exim Bank Managing Director and CEO Mohammed Haider Ali Miah told Dhaka Tribune that the EPS increased mainly due to decrease in investment provision.
The default loan also decreased due to capacity strengthening of the loan recovery teams, he added.
A managing director of a stock brokerage house told Dhaka Tribune that rise in profits at the banking sector bore good news for stock investors.
The enhanced profitability of banks would thus have a positive impact in the stock market, he added.
As per the unaudited financial statement, Al-Arafah Islami Bank Limited registered the highest growth by 463% in the first nine months of the current year. Its EPS stood at Tk1.35, which was at Tk0.24 in the same period a year ago.
Company Secretary of Al-Arafah Islami Bank Md Mahmudur Rahman said that the EPS in the reporting period shot up as provision against investment decreased by Tk181.33 crore in the period compared to previous corresponding period.
The EPS of Exim Bank soared 225% to Tk1.43 in the January-September period against Tk0.44 in the same period last year.
One Bank's EPS rose 86% to Tk1.21, up from Tk0.65, while AB Bank’s EPS also jumped by 61% to Tk0.29 from previous Tk0.18.
According to the Dhaka Stock Exchange (DSE) data, the earnings of Trust Bank, Rupali Bank, Pubali Bank, Dhaka Bank, City Bank, Jamuna Bank, Dutch-Bangla Bank, Islami Bank, Mutual Trust Bank, Shahjalal Islami Bank, Uttara Bank, First Security Islami Bank, Bank Asia and Social Islami Bank Limited also rose in the first nine months of 2020, compared to the same period last year.
On the other hand, IFIC Bank saw the highest fall in EPS, by 42%, to Tk0.76 from Tk1.32 in the same period last year.
The EPS of Prime Bank, Mercantile Bank, UCB, Southeast Bank, NCC Bank, Premier Bank, National Bank and Brac Bank also fell between 9%-30% during the period.
In July 2020, Bangladesh Bank relaxed loan classification and provisioning rules for the CMSME sector to encourage bank lending in the sector.
The central bank circular said that in the CMSME sector, banks had to treat loans as substandard if no installments were paid from six months to 18 months, the latter of which was nine months previously.
Non-payment of loan installments for a period of 18 months or beyond but less than 30 months will now be classified as doubtful, up from 12 months currently.
Those which remain unpaid for a period of 30 months or beyond will now be treated as bad or loss.
As per the new directives, banks will also have to keep 0.25% provision for their regular loans in the CMSME sector; 5% provision for substandard loans; 20% provision for doubtful loans and 100% provision for bad and loss-classified loans.
Before, banks had to keep 0.50% to 5% provision against defaulted loans of regular category, 20% against substandard category, 50% against doubtful category, and 100% against bad or loss category.
