Most Bangladeshi Private Commercial Banks See Operating Profits Increase

| Update:
02 July 2021 16:08:30

Most private commercial banks (BPCs) posted increasing operating profit in the first six months (S1) of this calendar year (2021), despite the upward trend of all loans classified in the banking system, the bankers said.

Out of the 42 PCBs, FE obtained provisional data for 15 PCBs which recorded an increase in operating profits during the period January to June.

Data for other PCBs were not immediately available.

In the end, the amount of profit would be a little higher or lower, officials from various commercial banks said.

Unaudited operating profit, however, does not reflect the actual financial position of banks as they have to set aside funds to provision bad debts and pay taxes.

The trend of widening interest rate spreads helped banks record more operating profits in the period under review compared to the same period in 2020, according to senior bankers.

The weighted average spread between lending and lending rates offered by all listed banks rose to 3.26% in May 2021, from 2.94% in the same period last year, according to the latest central bank statistics. .

During the period, the interest rate differential widened as banks cut their deposit rates more deeply than credit rates, the bankers said.

The weighted average interest rate on deposits fell to 4.14% in May 2021, from 5.24% during the same period in 2020, while this rate on loans fell to 7.40% from 8.18%, according to BB data.

“The fall in the cost of funds pushed up the operating profit of banks during the period under review,” a senior executive at a major PCB told FE.

He also said that banks, which had managed non-performing loans (NPLs) using the BB’s relaxed loan classification rules, recorded better operating profits in the first half of 2021.

At the same time, the amount of classified loans increased by more than 7.0% to reach Tk 950.85 billion in the first quarter of 2021, compared to Tk 887.34 billion in the previous quarter, despite political support from the central bank.

“The upward trend in the capital market has also helped banks increase their operating profits in the first six months of this year,” the banker explained.

Between January 1 and June 30 of this year, the DSEX, the main index of the Dhaka Stock Exchange (DSE), rose 748 points or 13.85% to stand at 6,150 on Wednesday.

“Banks were trying to offset the negative impact of the Covid-19 pandemic on their businesses by using BB’s refinancing programs against stimulus packages as well as the central bank’s relaxed loan classification rules,” he said. said another senior banker in answering a question. .

He also said banks could face more challenges in recording similar operating profits by the end of this calendar year if the ongoing Covid-19 pandemic continues.

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