Home ›› 10 May 2022 ›› Stock
In spite of the economic shock that followed the pandemic, Prime Bank—a second-generation commercial bank—against all odds recorded the highest profit in six years, thanks to strong business performance with minimal operating expenses.
However, despite the bank's high profitability, its non-performing loans (NPL) climbed in the same year compared to the year before.
As such, the bank is taking initiatives to reduce its defaulted loans to 2 per cent by 2025.
This information came from the bank's most recent annual report and an interview with its chairman.
According to the annual report, the listed bank earned Tk 311 crore in profit after tax in 2021, up from Tk 180 crore in 2020, a 73 per cent rise. The profit was the highest since 2016.
Profit for the year 2019 was Tk 166 crore, with profits of Tk 219 crore, Tk 125 crore, and Tk 141 crore for the years 2018, 2017, and 2016.
Besides, the company’s net interest income increased from Tk 557 crore to Tk 806 crore in 2021, while the bank’s investment income was Tk 411 crore in the same year.
Speaking to The Business Post, Prime Bank Chairman Tanjil Chowdhury, said, “The outstanding growth was largely driven by effective liability management (low cost of deposit) and significant growth in non-funded income, fuelled by a surge in trade finance, which saw a 30 per cent and 50 per cent increase in export and import volume, respectively.”
Prime Bank’s deposit increased by over 4 per cent to Tk 24,307 crore last year while loans and advances increased 13 per cent to Tk 26,301 crore for the same year.
The Bank’s NPL amount increased 58 per cent to Tk 1,271 crore last year, which was 4.83 per cent of its total loans and advances.
Tanjil Chowdhury said the NPL amount grew due to the loan moratorium facility and poor performance of various enterprises, but it will decrease this year.
“The NPL rate dropped to 4.4 per cent in the first quarter of this year, and we expect it to shrink below 2 per cent by 2025,” he added.
The bank maintains a significant level of loan concentration among a small number of clients, as over 50 per cent of the total loans have ended up in the hands of 34 firms.
The 34 clients' total outstanding loan amount was Tk 13,195 crore at the end of 2021, accounting for 50.17 per cent of the bank's total outstanding debt of Tk 26,301 crore, stated the annual report.
While affirming the risks associated with loan concentration, Prime Bank claimed that all of its big clients were responsible borrowers. Furthermore, the bank said it was placing more importance on loan diversity.
“We are trying to diversify the portfolio. However, we can’t go aggressively in SMEs and Consumer Banking because of concerns about the rise in NPL. Our big clients are very good companies, so I don't see any risk,” said Tanjil Chowdhury.
Most of the non-performing loans of the bank are now bad or lost. The bad loan amount was Tk 1,099 crore last year, which was 86 per cent of its total NPL.
In an attempt to recover its bad debts, the bank filed various cases for the recovery of Tk 3,602 crore. The cumulative amount of written-off loans stood at Tk 2,167 crore as of December 2021.
“We have formed a good team, who are working tirelessly to collect the default loan. I hope to get good results,” the chairman added.
Propelled by the high profit after tax the bank could propose a 17.50 per cent cash dividend for its shareholders, which is the maximum dividend permitted by Bangladesh Bank, stated the annual report.
Last year the bank’s share price moved between Tk 15.40 to Tk 28, according to the Dhaka Stock Exchange (DSE).
The Bank was listed in the capital market in 2000.
