Jamuna Bank secured the top position on the performance list for the January-March period (Q1) of 2024, followed by Dutch-Bangla, Shahjalal Islami, Prime, Global Islami, BRAC, Pubali, Eastern, Uttara and City Bank.
The ranking has been designed by assigning equal weights to particular 10 criteria on 34 banks listed with stock exchanges by EBL Securities Ltd, a leading stockbroker firm in the country.
The major criteria are earnings per share (EPS), net asset value per share (NAVPS), cost-to-income ratio that reflects operating efficiency, return on equity (ROE), return on asset, spread, net interest margin, non-performing loan (NPL) ratio, and dividend yields.
The research team is not recommending any specific banks for investment purposes based on the analysis conducted in this report. Also, the brokerage house will not be held responsible for the buying or selling of any of the aforementioned shares.
EBL Securities strongly advises investors to exercise discretion when considering investments in listed companies.
According to the report, titled “Bank Sector Performance and Earnings Update 2023 & Q1'24", published last Thursday, Jamuna Bank scored the highest with 75.46 points out of 100. The bank’s rank was 11th in 2023.
Jamuna Bank’s profits stood at Tk 164.20 crore during the first quarter of 2024, compared to Tk 133.31 crore recorded in the same period last year.
The bank also reported an EPS of Tk 1.86, NAVPS of Tk 24.52, and a net operating cash flow per share (NOCFPS) of Tk 18.99 for the period.
The bank said that the EPS increased in Q1 due to an increase in net interest, investment and commission income, compared to the previous year.
Its NOCFPS increased compared to the previous year due to an increase in cash flows from operating activities and customer deposits. NAV increased compared to the previous year due to an increase in retained earnings, Jamuna Bank said.
The shift to a market-driven interest rate regime by abolishing the SMART reference rate is considered to be a major development for the banking sector in 2024, allowing further improvement in the interest rate spread, while banks’ diverting more funds to Treasury securities provide a boost in investment income amidst rising interest rates in the money market, EBL Securities said.
Dutch-Bangla Bank secured the second-highest position on the overall ratings, with 68.23 points, based on the performance of Q1 of 2024.
The bank recorded the highest net interest margin of 6 per cent in Q1 of 2024, while Uttara Bank was in the queue with a 5.5 per cent margin, followed by Global Islami Bank with a 4.6 per cent net interest margin.
Shahjalal Islami Bank reached third place with 67.57 points. The bank had come fifth in last year’s ranking.
As per the review, the fourth best-performing bank is Prime Bank, which secured a rating of 66.65. The bank’s position was 10th in 2023.
Global Islami Bank secured the fifth position with 65.56 on the performance list for Q1 of 2024. Its position was 16th last year.
BRAC Bank came in sixth with 65.12 rating points, followed by Pubali Bank with 64.15, Eastern Bank with 59.46, Uttara Bank with 59.19 and City Bank with 57.49 in Q1 of 2024.
However, BRAC Bank had the highest net profit after tax of Tk 273 crore in Q1, followed by Pubali Bank’s Tk 178 crore and Jamuna Bank’s Tk 164 crore.
In Q1 of 2024, Jamuna, BRAC and Pubali were the best-performing banks in terms of generating higher EPS. They recorded EPS of Tk 1.86, 1.54 and 1.54, respectively.
During the period, Pubali Bank recorded a staggering 147 per cent growth (YOY) in net interest income, followed by Al Arafah Islami Bank’s 87 per cent and South Bangla Agriculture and Commerce Bank’s 77 per cent.
Besides, Jamuna Bank logged 30.4 per cent ROE in Q1 of 2024 while Global Islami Bank was in the rally with 22 per cent, followed by Shahjalal Islami Bank with 19.6 per cent return on equity.
Banking sector performance in Q1
Meanwhile, the banking sector's deposit mobilisation remained on an uptick owing to higher returns on deposits despite the persistent inflationary pressures in the economy, according to the EBL Securities review.
It said that the total deposit in the banking sector logged 10.8 per cent (YOY) and 1.5 per cent (YTD) growth in Q1 of 2024.
The lending activities were accelerated by 10.6 per cent (YOY) and 2 per cent (YTD) in Q1, affiliating with the moderate deposit collection during the same periods.
The total assets of the banking sector increased by 10.6 per cent (YOY) and 1.9 per cent (YTD) in Q1, in line with the growth in loans and advances.
On the other hand, total liabilities of the sector recorded 10.8 per cent (YOY) growth in Q1.
Bank interest rate spread exceeded 5 per cent in February 2024 for the first time in nine years, following the implementation of a market-driven reference lending rate, EBL Securities said.
Moreover, the spread continued to be on a rising trend as the central bank recently abolished the SMART reference rate and shifted to a fully market-driven interest rate regime.
Rising NPLs have been a major concern for the banking sector, with classified loans reaching a record high of 11.11 per cent, totalling Tk 1.82 trillion as of March 2024, stemming from various loan irregularities, lending scams and weak corporate governance in banks with high NPL ratios.
Economist Ahsan H Mansur revealed discrepancies in reported financial figures on Saturday, stating that while Bangladesh Bank reports NPLs at 11 per cent, the actual figure is 25 per cent.
He warned that increasing supply liquidity to Shariah-based banks could drive inflation and devalue the taka, urging immediate intervention to stabilise the banking sector.
Ahsan, also the executive director of the Policy Research Institute (PRI), pointed out that banks are currently showing profits by considering interest from loans as income without actually collecting the loans. They are also distributing dividends from these so-called profits, while the government is collecting taxes on them.
"In reality, banks are not making any income. They are essentially consuming the depositors' money," he said, likening the situation to "selling household utensils to eat gourmet food."
Moreover, the correlation of the price movement of the bank sector with the market (DSEX) remained moderately positive during the first quarter of 2024 as well, while the banking sector slightly overperformed compared to the DSEX by the end of Q1 of 2024 (with both exerting corrections) since the overall market endured a relentless bearish spell during the latter half of the period amid subdued market sentiment and persistent pessimism following the withdrawal of floor prices, as per the EBL Securities review.
