More than half of the listed financial institutions have bagged net profits in the third quarter of this year, posting higher than corresponding period of previous year.
Twenty companies out of the 22 listed NBFIs have so far published their unaudited financial statements. Of them, 12 reported net profits while profit of six companies fell and two incurred losses.
Industry insiders said the institutions, those recovered previous bad loan, concentrated less in non-performing loan (NPL) or kept aside lesser amount of provision against bad loans, registered higher profits.
Profits of some NBFIs might not reflect the real picture as margin loan that has become overdue because of down-swing of stock market might be included in the profitability.
The NPL is a loan on which the borrower is not making interest payments or repaying any principal. Financial institutions normally set aside money to cover potential losses on loans and write off bad debt in their profit and loss accounts.
International Leasing Finance and Services Ltd (ILFSL), BD Finance, First Lease International, National Housing Finance and Investment Ltd, Bangladesh Investment Finance Corporation, Prime Finance and Investment and Bay Leasing emerged as top seven performers, which saw hefty profits in the third quarter.
ILFSL’s profits were up 1,430% to Tk104m, holding the top position among its peers. BD Finance came second as it recorded a profit of Tk51m. The firm’s profits were just Tk3m in July-August period of the last year.
Profit of other companies including IDLC Finance, Lanka Bangla Finance, Peoples Leasing and Financial Services Ltd, United Leasing, Union Capital, United Leasing, Uttara Finance dropped. Premier Leasing and Fareast Finance incurred net losses.
The third quarter profits of the three NBFIs – ICB, DBH and Midas Finance – were not available.
“Quarterly profits depend on amount of provisioning against bad loans,” said Asad Khan, president of Bangladesh Leasing and Finance Association and Managing Director of Prime Finance and Investment Ltd.
As compared to the banks, financial institutions are in good position in earnings because of their long term financing and no window dressing opportunity, he said. But current political uncertainty would not bode well for the institutions as it might increase non-performing loans, he said.
The operations of non-bank financial firms range from credit disbursement and property investments to money trading and portfolio management.
Selim RF Hussain, Managing Director and Chief Executive Officer at IDLC Finance, said provisioning for the subsidiary company IDLC Investment that incurred losses because of sluggish stock market hits profitability of the group as a whole.
“But the parent company are doing very well as its loan-deposit business performed well,” he added.
Twenty nine NBFIs are operating in Bangladesh, of which 22 are listed with the Dhaka and Chittagong stock exchanges. The listed NBFIs make up around 13% of the total market capitalisation.