Most private banks’ operating profits rise

Most of the private commercial banks' (PCBs) operating profit increased in 2021 compared to the previous year thanks to the widening interest rate spread and recent improvement in private sector credit growth.

The Business Post obtained provisional data of 10 private commercial banks out of the 42 PCBs that recorded increased operating profits last year. The data of the rest of the PCBs was not available.

Bank officials said that the profit might fluctuate slightly in the final count.

Generally, the un-audited operating profit does not reflect the actual financial position of the banks as the lenders will have to keep provisions against bad loans and pay taxes.

Bankers said that the widening trend of interest rate spread and improvement in private sector credit growth are the main reasons behind the profit rise.

They said the interest rate on deposits has dropped compared to the lending rate, which has helped raise profit through interest.

In November last year, the weighted average interest rate on deposits of private commercial banks stood at 4.15 per cent, which was at 4.90 per cent at the same time in 2020.

The interest rate of private banks' lending stood at 7.45 per cent in November last year, which was at 7.92 per cent in the corresponding period of the previous year.

Senior private bank officials said the private sector credit growth increased as the Covid-19 pandemic helped boost operating profits.

The private sector credit growth stood at 10.11 per cent in November last year which was at 8.21 per cent in the same month of the previous year, Bangladesh Bank data show.

The central bank mega discount for banks might have been the reason behind the increase in operating profits, said a senior BB official.

He said that banks now allowed taking unrealised interest into profit that helped the lenders register operating profits.

Borrowers will not be declared defaulters if they pay 15 per cent of the overdue loan amount in 2021, BB said Thursday.

The banks could show unrealised interest income as profits if borrowers paid only 15 per cent of their payable amount last year.