Staff Correspondent: The banking sector witnessed higher operating profit last year due to satisfactory business performance in the country, said senior bankers. Syed Habib Hasnat, Managing Director of NRB Global Bank told the Daily Industry on Monday that the private sector credit growth maintained a satisfactory trend in recent months, which allowed banks to register in a handsome amount of operating profit. Talking on the operating profit of the fourth generation bank, Hasnat said, the banks have failed to receive the expected level of profit due to lower lending rate and the raising of NPL.
Business-friendly environment is important to attain banking business smoothly. Considering this, the last year the banking business
expanded extensively, he opined. Now, private banks are more cautious to disburse large, SME and retail loans with a view to evading risk factors and of course NPL. Apart from this, the NPL is rapidly increasing in the last year which had put an adverse impact on the banks’ operating profit, he said.
Kazi Masihur Rahman, Managing Director and Chief Executive Officer of Mercantile Bank said that last year the banking business was satisfactory, and for this, most of the banks earned higher operating profit. “If such trend continues in the coming year, the profit of the banks will increase”, Rahman added.
Anis A Khan, Managing Director of Mutual Trust Bank said that country is developing gradually, and for this, the banking business is expanding across the country.
Now, banks are providing various kinds of financial inclusion programme as per the instruction of the central bank resulting higher profit from the previous year.
Dr. Mohammad Haider Ali Miah, Managing Director of Exim Bank said that another reason behind the rising of operating profits is the acceleration of implementation of mega infrastructural projects as the banks have enjoyed a heavy amount of charges and commissions against the guarantee they offered to contractors. The opening and settlement of letters of credit (LCs) have registered huge growth in recent months, he added.
Managing Director of Standard Bank Mamun-ur Rashid told that the operating profit should not measure as the financial strength of a bank. The real strength will ascertain when the net profit will be satisfactory, he added.
Md Reazul Karim, Managing Director of Premier Bank told Daily Industry that the Premier Bank has achieved remarkable progress in all areas of banking, making the financial footing strong of his bank. In 2018, the bank has been able to mitigate required amount of provision shortfall by keeping sufficient provision against its regular and non-performing loans.
Sirajul Islam, Bangladesh Bank spokesman said the percentage of NPL had declined in October and December which was one of the major reasons for attaining higher profit of the banks last year.
Already, the central bank instructed banks to be more cautious in disbursing loan as well as strengthening monitoring cell to reduce NPL, Islam said.
“I hope the NPL will decline in the current year due to the strict measures of Bangladesh Bank which will help banks to operate their business smoothly and to earn more profit”.
Meanwhile, banks have started to cut down the interest rates to ‘single digit’ on loans and deposits in line with the decision of the Bangladesh Association of Banks from July 1 last year and banks will have to bring down the interest rates for lending and deposit to 9 percent and 6 percent respectively, meaning that the interest spread will come down to 3 percent from the 5 percent limit set by the central bank.
The rising of operating profit is not the true picture of the banking sector and the actual profit will change significantly after accounting for provisioning and corporate tax, he explained.
According to the banking sources, the sluggish trend in the country’s capital market had also put a negative impact on profits of the banks in the concluded year. On the other hand, some banks have been able to increase their operating profits following higher earnings from their treasury operations, they said.
They said the banks having OBU (Offshore Banking Units) operations with notable amounts earned through providing foreign currency loans to their customers. A good number of banks earned higher profits from their ‘interest income’ as the banks had charged higher on lending while provided lower interest rates on deposits’ under the decision of the Bangladesh Association of Banks.
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