Banks in Bangladesh posted a hefty operating profit in the first half of 2021 despite the business slowdown caused by the coronavirus pandemic, data of 20 lenders showed.
The lower interest rate on deposits and the moderate lending rate helped banks register the higher operating profit in the January-June period, bankers said.
For all latest news, follow The Daily Star’s Google News channel.
Lenders also managed a good profit from their investment in the capital market as the bourses performed well during the period.
The foreign exchange business also made a turnaround, and banks received good commissions and fees from the sharp rise in exports and imports.
A number of officials of the Bangladesh Bank, however, said that some banks might have shown their incomes from credits even if they did not get any instalment on the loans in the first half of the year.
The BB earlier allowed banks to grant deferral supports to clients in the first quarter, meaning that borrowers had not turned defaulters despite failing to repay the loan.
In such a situation, banks might have shown unrealised interest as incomes, inflating profits, said a BB official.
Islami Bank Bangladesh posted the highest profit amounting to Tk 1,020 crore in the first half in contrast to Tk 1,007 crore during the same period a year ago.
The profit in Dutch-Bangla Bank stood at Tk 504 crore, up 21 per cent year-on-year.
Syed Mahbubur Rahman, managing director of Mutual Trust Bank, said that both interest rates on loans and deposits declined sharply in the first six months due to the business slowdown.
But, the interest rate on savings fell faster than that of the lending rate, allowing lenders to make a higher profit.
Many banks now mobilise deposits by giving 3-4 per cent in interest, whereas they offer loans at 7-8 per cent.
The interest rate spread, the gap between lending and deposit rates, stood at 3.26 percentage points in May in contrast to 2.94 percentage points a year ago, data from the central bank showed.
Rahman said the profit earned by the banks was much higher than expected, given the declining trend of the private sector credit growth.
The credit growth stood at 8.29 per cent in April, down from 8.82 per cent year-on-year.
Rahman said some banks might have added their unearned interest to incomes.
Emranul Huq, managing director of Dhaka Bank, said that banks’ earnings from export and import activities rose significantly in the first half.
“This helped banks enjoy a magnificent profit growth,” he said.
On top of that, the construction of extensive infrastructure has been underway despite the pandemic.
“Banks’ lending to projects is highly secured, and they earned handsomely from the segment,” Huq said.
M Kamal Hossain, managing director of Southeast Bank, said that his bank had cut operating expenses recently, which gave a boost to the profit.
The profit of the bank grew 38 per cent to Tk 472 crore.
He credited the central bank’s deferral support for the higher profit.
Mirza Elias Uddin Ahmed, managing director of Jamuna Bank, said investment in the secondary bond market had helped his bank post a hefty profit.
The profit of the lender rose 15 per cent to Tk 301 crore. The bank has invested more than Tk 10,000 crore in the secondary bond market.
Mohammad Ali, additional managing director of Pubali Bank, said that his bank had taken various steps to keep its profit in the positive territory during the pandemic.
Pubali’s profit stood at Tk 503 crore, up 25.43 per cent year-on-year.
There are 60 banks in Bangladesh.
