Banks’ profits rise on regulatory forbearance, credit demand 

Bangladesh Bank’s regulatory forbearance and increasing credit demand during the Covid-19 pandemic helped most banks register higher operating profits in 2021 than the previous year.

The Business Post obtained provisional data of 22 out of 51 state-run and private commercial banks. Operating profits of only two of them, Rupali Bank and National Bank, fell. The data of other banks were not immediately available.

More banks recorded an increasing amount of operating profits from 20 per cent to 35 per cent in the year. Bank officials said that the profit might fluctuate slightly after 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.

Southeast Bank’s operating profits stood at Tk 1,016 crore in 2021, up from Tk 816 crore in the previous year.

Its Managing Director and CEO M Kamal Hossain said regulatory forbearance throughout the year helped the lenders register a good amount of profits.

Borrowers, who paid 15 per cent of the overdue loan amount in 2021, were not listed as defaulters.

Hossain said that 2021 was better than 2020 as the economy started reopening in July. “This was another reason behind the increased profits,” he said.

Pubali Bank recorded at Tk 1,145 crore as operating profits in 2021, up 22.98 per cent from the previous year. Its Managing Director Safiul Alam Khan Chowdhury attributed the increase to their skilled and reputed workforce.

On the other hand, National Bank’s operating profits stood at Tk 248 crore, down from Tk 920 crore in 2020.

Industry insiders said the bank’s internal conflicts and irregularities last year affected the profits.

Speaking about the overall rise in operating profits, bankers said the widening trend of interest rate spread and improvement in private sector credit growth were the main factors.

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 4.9 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.

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

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

On Thursday, BB said borrowers would not be declared defaulters if they pay 15 per cent of the overdue loan amount in 2021. The banks could show unrealised interest income as profits if borrowers paid only 15 per cent of their payable amount last year.