The latest regulatory change to interest and lending rate caps has triggered a downfall in interest income of non-bank financial institutions (NBFIs) as the country’s all top-ranked NBFIs witnessed a year-on-year plummet in profit in the first six months of the current year.
Most leading NBFIs, including IDLC Finance, IPDC Finance, LankaBangla, Bangladesh Finance, DBH Finance, and National Housing Finance reported less-than-expected net profits in the January-June period of 2023.
IDLC Finance posted a 21 per cent year-on-year decline in net profit in H1 of the current year, thanks to a fall in net interest income.
The publicly traded company’s net profit fell to Tk 72.33 crore in January–June 2023 from Tk 91.87 crore reported in the same period one year ago.
As per its unaudited financial statements, IDLC’s consolidated earnings per share (EPS) declined to Tk 1.74 in January–June 2023 from Tk 2.21 in the same period last year.
The earnings slumped owing to a fall in net interest income, investment income, commission exchange and brokerage, and other operating incomes, said IDLC.
Besides, the NBFI posted a 13 per cent year-on-year lower profit of Tk 37.83 crore in the April-June quarter of 2023, compared to Tk 43.65 crore in the same quarter the year before.
Its consolidated EPS fell to Tk 0.91 in the second quarter this year from Tk 1.05 for the April–June quarter of 2022.
Another leading non-bank financial institution PDC Finance Limited’s profit after taxes stood at Tk9.5 crore, a 78 per cent year-on-year fall, in the January–June period this year compared to that in the same period last year.
The company in April-June quarter of 2023, posted a net profit of Tk 8 crore, which was nearly five times lower than what in the same quarter last year.
Market experts said the NBFI sector has gone through a tough time in the first half of 2023 due to a pressure to pay more interest against collected funds and the inability to charge their borrowers more because of the lending rate cap.
The spread — the difference between borrowing and lending rates — came down to a historic low of less than 1 per cent for the overall NBFI industry, and less than 3 per cent for top tier firms, they said.
LankaBangla Finance Limited posted a 43 per cent decline in its consolidated annual profits in the first six months of the ongoing year.
The company’s profit after taxes stood at Tk 18 crore in H1 of 2023, which was Tk 31.7 crore in the same period one year earlier.
Its consolidated earnings per share (EPS) stood at Tk 0.32 in the current year’s first half, which was Tk 0.58 for the same period one year ago.
LankaBangla said in an official disclosure that its earnings reduced due to a reduction of interest income triggered by the imposition of a rate cap by the regulator, an increase in provision due to slightly deteriorated asset quality, and a decrease in commission, exchange, and brokerage income due to the declining average turnover in bourses.
Bangladesh Finance, another leading NBFI, reported a huge decline in net profit in the first six months of 2023 due to a fall in net interest income and lower investment returns.
The company posted a net profit of Tk 5.53 crore in the first six months (January-June) of 2023, which was nearly 70 per cent lower than the profit of Tk 18.20 crore made in the corresponding period last year.
As per its unaudited financial report posted on the DSE website on Monday, the listed NBFI’s interest income in the first six months of 2023 stood at Tk 65.47 crore, against Tk 78 crore in the same period last year.
Thus, the company’s interest income plunged by 16.06 per cent year-on-year in the first half of the current year.
The NFBI posted a net profit of Tk 3 crore in the April-June period, compared to Tk 8.84 crore in the same period last year.
DBH Finance PLC, a housing finance institution, reported a profit decline of 10.5 per cent year-on-year in the first six months of 2023. The company posted Tk 49 crore in net profit in the January-June period this year against the profit of Tk 54.8 crore in the same period last year.
Another publicly traded NBFI – National Housing Finance and Investments Limited – saw its profit declined by 20 per cent in the first half of this year. Its net profit stood at Tk 12 crore at the end of June this year, compared to Tk 15 crore in the same period last year.
