Most banks’ operating profits rise in ’19, NPL worries remain

New Age Jan 01,2020

Almost all the banks posted higher operating profits in the just concluded year 2019 as the banks managed to expand their trade- and consumer-based business, but the high defaulted loans in the country’s banking sector remained a major concern.

Bankers, however, said that the majority of the banks might fail to sustain their profits after taxes (net profits) as the entities were supposed to keep provision against non-performing loans from their profits.

As an impact of high NPL, many banks even failed to keep adequate provision against NPL, leaving no option for them but to take the Bangladesh Bank’s approval for staggering provision to maintain some net profits with a view to keeping their shareholders satisfied, bankers said.

According to the available data, the provisional operating profits of 19 out of 21 banks increased in 2019 and only two faced a decline in the profits.

Of the banks, Sonali, Southeast, Agrani and Pubali banks each posted operating profits of over Tk 1,000 crore. Among the banks, Sonali Bank posted the highest — around Tk 1,200 crore — in operating profits in the year 2019, but the amount was Tk 1,900 crore in 2018.

Officials of Sonali Bank told New Age that the implementation of 9 per cent lending rate was the main reason for the sharp decline in its operating profits.

They said that the banks even issued credit to some sectors at less than 9 per cent.

As of September 2019, the amount of banks’ defaulted loans swelled to Tk 1,16,288 crore from Tk 93,911.4 crore in December 2018 as a special loan rescheduling policy encouraged borrowers to be chronic defaulters.

With the addition of fresh Tk 22,377 crore in defaulted loans in January-September of the year 2019, the defaulted loans increased to 11.99 per cent from 10.3 per cent of the outstanding loans at the end of December 2018.

If the written off loans to the tune of Tk 53,258 crore and the loans amounting to Tk 80,000 crore, the recovery of which was stalled due to court proceedings, were included, the amount of total defaulted loans in the country’s banking sector would have been Tk 2,49,546 crore.

NCC Bank managing director and chief executive officer Mosleh Uddin Ahmed told New Age, ‘There might be some sort of competition among the banks to announce better operating profits.’

But, the figures should not be used for making any speculation about the banks’ health as the banks are not supposed to follow any regulatory framework in preparing the operating profits, he said, adding, ‘The operating profits do not reflect anything as the banks will have to keep provision against non-performing loans and taxes along with facing regulatory requirements before announcing profits after tax (PAT) or net profits.’

Due to high non-performing loans in the banks, it cannot be projected based on operating profit data how many of them would finally manage to make net profits, said Mosleh Uddin.