Banks pass a gloomy year

Scams and dull stocks eat into their profit; state banks the worst sufferers

Banks ended 2012 on a gloomy note as the recent scams and a sluggish stockmarket brought down their operating profit growth to only 0.56 percent.

A total of 34 banks made a profit of Tk 18,660 crore, which was Tk 18,556 crore in 2011, according to the preliminary data of the individual banks.

Of the four state banks except Rupali, all saw a slump in profit, Sonali being the worst sufferer with a 30 percent fall due to the Hall-Mark scam.

In 2012, the four state banks' profit fell 19 percent, whereas their profit soared 46 percent in 2011.

Sonali made a profit of Tk 1,056 crore in 2012, down from Tk 1,506 crore a year ago.

Five firms including Hall-Mark siphoned off Tk 3,547 crore from Sonali Bank through forged documents. The Hall-Mark Group alone embezzled Tk 2,686 crore.

Sonali Bank officials said around Tk 400 crore of Hall-Mark Group was classified at the end of September and the amount rose further in December.

This led to a fall in profit of the bank, they said.

Krishi Bank Chairman Khondker Ibrahim Khaled said the banks' profit fell as a big portion of their investment in the stockmarket turned into defaulted loans due to a continuous slide in stock prices.

Khaled said, if Bangladesh Bank conducts a study, it will find that banks having higher stock exposure were the worst sufferers.

The former BB deputy governor also said banks became more cautious in sanctioning loans after the recent irregularities in the banking sector, including the Hall-Mark scam.

He said credit growth of the banks was also slow last year, putting an adverse impact on their profit.

Khaled said deposit rates of the banks have gone up due to a competition, which, in turn, increased their cost of fund.

The amount of defaulted loans rose by about Tk 14,000 crore in nine months till September last year, according to BB statistics.

A BB official said the central bank has strengthened its supervision after the incidents of loan scams in some state banks.

The central bank also identified irregularities in some private banks that have already classified their loans, leading to a rise in the total amount of their bad loans, he said.

The central bank tightened its loan classification rules to raise Bangladesh's banking standards to the international level.

The rules took effect in December, which caused a rise in defaulted loans and a fall in their profit, bank officials said.

They also said the amount kept for provisioning will increase further at the end of December due to the new rules of the central bank.

Khaled of Krishi Bank said it would not be right to withdraw the central bank's new rules on loan classification under any pressure.

Though the owners of the banks may get less profit in the short term, the new rules will ultimately improve the banks, he added.

Source:The Daily Star