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Banks show ‘paper profit’

  • Published at 06:56 pm December 31st, 2013

The country’s commercial banks have showed marginal operating profit as they closed the last year’s books of accounts yesterday.

They made the marks, as reflected from the unaudited results of some banks, despite continuous political chaos, sluggish investment and lower loan disbursement throughout the year.

“Few banks made good profits, but the performance by majority banks was as disappointing as last year because the business went sluggish throughout the year due to political unrest and a slump in the capital market,” NCC Bank Managing Director Nurul Amin told the Dhaka Tribune.

“The profit growth is not so high compared to the previous years as the country’s overall economy was in down trend due to political unrest,’’ said BRAC Bank Managing Director Mahbubur Rahman.

“The new banks could not do well in business due to the unrest,” said Modhumoti Bank Managing Director Mizanur Rahman.

Although the banks showed profits, but they were mostly in paper as the actual cash flow was poor, said a senior executive of Bangladesh Bank. He added the banks showed profit by means of rescheduling huge amount of classified loans at the end of the year.

Bangladesh Bank has relaxed the loan rescheduling rules for SMEs and big borrowers in December to help the banks show reduced non-performing loan and provisioning so that they could show healthy profit at year-end.

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

Moreover, he said, Bangladesh Bank planned to show positive performance of banking industry ahead of the national election. In these circumstances, the central bank facilitated the banks to show paper profit through relaxing the loan rescheduling rules, he said.

However, the actual figure will reflect on the next year’s balance sheets as the banks will enjoy the provisioning facility up to June 30 next year, said the central bank executive.