Foreign banks posted sluggish net profits last year mainly due to political turmoil that forced them to set aside a significant portion of their income to deal with bad loans.
Their net profit rose only 2.63 percent year-on-year to Tk 1,615 crore in 2013, according to finance ministry statistics.
But in 2012, the growth in their net profit was 16.50 percent, and the amount stood at Tk 1,573 crore.
The foreign banks made a gross profit of Tk 3,098 crore last year, according to a Banking Division report placed in parliament along with budget documents on June 5.
Banks calculate their net profit by deducting tax and provisioning against default loans from the gross profit.
In 2013, the foreign banks paid Tk 1,267.80 crore in taxes from their gross profit.
Last year, many state and private banks got their bad loans rescheduled under Bangladesh Bank's relaxed loan rescheduling policy. But most of the foreign banks did not take the opportunity and had to go for provisioning against bad loans.
In 2013, Standard Chartered Bank made provision of Tk 170 crore for bad loans, more than double the previous year's amount at Tk 81 crore.
State Bank of India had to set aside Tk 40 crore for bad loans in 2013, a tenfold increase from a year ago.
The foreign banks' income rose by only 9 percent in 2013 over the previous year, according to the Banking Division report.
However, their expenditure went up by more than 15 percent. As imports fell last year, income of these banks from import trade decreased by around 0.60 percent.
In 2013, the foreign banks accounted for around 7.3 percent of the total asset in the banking sector.  
Of the major foreign banks, Standard Chartered's net profit rose 14 percent to Tk 896 crore in 2013, compared to the previous year.
The net profit of State Bank of India slumped 68 percent and stood at only Tk 24 crore. Citibank NA's net profit fell 34 percent to around Tk 86 crore.
In recent times, two Pakistan-based banks have been suffering losses every year and counted losses last year as well.
Profits of private banks, which control 60 percent of the total banking assets, also saw a slim growth last year.
The private banks' total operating profit rose 8.75 percent year-on-year to Tk 12,209 crore in 2013, when they made a combined net profit of Tk 5,536 crore.

Finance Minister Abul Maal Abdul Muhith today said Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB) have been working through 1,404 branches across the country for the development of the agriculture sector, reports BSS. “The BKB has 1,028 branches across the country excepting Rajshahi and Rangpur divisions,” he told the House while replying to a question of treasury bench member M Shibly Sadique.

The World Bank has projected 5.9 percent growth for the country in fiscal 2014-15, far below the government's target of 7.3 percent.
The forecast is in line with potential growth, the multilateral lender said in the Global Economic Prospects report released yesterday.
The figure is higher than that forecast for its South Asian neighbours save for India, which is expected to grow at 6.3 percent. The projection for South Asia, excluding India, is 5.1 percent and for developing countries 4.8 percent. “If you compare the global and regional economy, the growth forecast for Bangladesh is good,” said Zahid Hussain, lead economist of WB's Dhaka office.
The global economy is projected to expand by 2.8 percent this year, strengthening to 3.4 percent and 3.5 percent in 2015 and 2016. The Euro area is on target to grow by 1.1 percent this year, while the US economy is expected to grow by 2.1 percent.
China is expected to grow by 7.6 percent this year, but this will depend on the success of rebalancing efforts. If a hard landing occurs, the reverberations across Asia would be widely felt, the report said.
Hussain said an uncertainty has been prevailing among investors over political stability or rather lack of it.
“Investment is slow. The garment sector is going through a transitional period and remittance growth is also sluggish. Considering all these factors, the World Bank's GDP growth forecast is reasonable,” he added.
“I have been seeing for the last five years that the economic forecasts made for us by the World Bank and other multilateral agencies never came true. I think we will achieve high growth next year as well,” said Shamsul Alam, member of the General Economics Division of the planning ministry.
In the country's sixth five year plan, the target was to cross 8 percent in fiscal 2014-15, but due to the overall environment it was brought down to around 7 percent, he added.
“We hope that in the next fiscal year, investment, export and remittance flow will increase as it is expected that the global economy will experience accelerated growth,” Finance Minister AMA Muhith said in his budget speech.
During this period, food and energy prices in the international market are likely to decline slightly. Besides, an investment-friendly monetary policy will be maintained ensuring uninterrupted credit flows to the productive sectors, he added.
The government initiatives for developing physical infrastructure in the power, energy and communication sectors will continue.
Banking on favourable weather and political stability, Muhith is hopeful of achieving the GDP target of 7.3 percent for next fiscal year.
“I will not enter the debate on whether the GDP growth will cross the 6 percent-mark or not,” said Mustafizur Rahman, executive director of the Centre for Policy Dialogue.
The Bangladesh Bureau of Statistics has estimated 6.1 percent growth for the current fiscal year.
GDP growth depends on a number of factors, he said. “How will the political environment be? Will the slow loan growth accelerate? Will the agricultural sector be hit by natural calamity?”
The CPD executive director, however, said the low commodity, fuel and cotton prices in the international market are all favourable for achieving a good GDP growth figure.

WASHINGTON: The World Bank lowered its projection Tuesday for global economic growth this year, as developing countries head for “disappointing growth” while high-income countries gain momentum.

The Washington-based institution forecasts the global economy to grow 2.8 percent this year, down from its January estimate of 3.2 percent, according to its twice-yearly Global Economic Prospects report.

“Developing countries are headed for a year of disappointing growth, as first quarter weakness in 2014 has delayed an expected pick-up in economic activity,” the report said.

Bad weather in the United States, the Ukraine crisis, rebalancing in China and political strife in several middle-income economies slowed progress on structural reform, it said.

The bank lowered its forecasts for developing countries to a growth of 4.8 percent this year from its January estimate of 5.3 percent, the third year in a row of below 5 percent growth. However, growth is forecast to pick up to 5.4 percent in 2015 and 5.5 percent in 2016.

China was expected to grow 7.6 percent this year, slightly down from the January estimate of 7.7 percent, the bank said.

—Xinhua

The just announced national budget is expected to offer a good business opportunity for the commercial banks operating in the country, after having a hard time in last couple of years.

Bankers have foreseen the prospect based on the measures proposed in the budget for next fiscal year in enhancing both public and private investments.

They are, however, considering how the banking sector would face challenges like the private investors do not suffer from non-availability of fund due to increased public financing.

The increased demand for fund might also push up the lending rate as well as the inflation – which are also being considered as other major challenges.

“High borrowing target is good for the economy as it reflects the government’s efficiency of implementation the mega project that has been taken in the new budget,” said NCC Bank Managing Director Golam Hafiz Ahmed.

He said more project implementation would raise demand for credit in the private sector as employment and import of raw materials would be increased. “When the demand will increase both in private and public sector, the credit-deposit ratio will increase, which will help the banks to make more profit.”

The existing average credit-deposit ratio of the banks remained at around 70% and there is a chance it would be increased up to 81%. That means the banks now disbursing loans of Tk70 against deposit of Tk100, despite they can disburse up to Tk81, he said. The banks’ have made profit less than expected, as a result.

“The lending rate though remained on the down trend at present, it will climb up in the new fiscal year due to the expected rise in credit demand,” said the senior banker.

He further said the private sector is unlikely to be crowded out if the projects are implemented with foreign financing. Foreign fund inflow would have double effect as it would have to be converted into local currency after entering into the country, and it would enrich the reserve.   

He was, however, skeptical about the banking business as all depend on the budget implementation and political stability. “If the projects are implemented efficiently, the banks will get the opportunity of doing good business.”

Though it is a challenge to maintain a balance between public and private credit, “we hope the private investment will not be affected as the government borrowing will remain within the target,” said Pubali Bank Managing Director Helal Ahmed Chowdhury.

“The government cannot not utilise its full space of borrowing target according to our earlier experience. So, if the borrowing reaches even at the ceiling, private sector will not be affected much as the banks have enough liquidity to face the demand.”

The banking business went sluggish for more or less a couple of years due to poor credit demand amid prolonged political unrest, resulting in poor performance particularly in the just concluded year of 2013.

The banks had to take cover of a relaxed loan rescheduling guideline to give some dividend for the year 2013.

“If the government reaches the borrowing target, it would put some pressure on inflation,” said Bangladesh Bank Chief Economist Hassan Zaman.

“We do not think the government will reach the target as it could not reach there as of now. We think it will not be able to utilise the full space of the borrowing target eventually.”

Hassan Zaman foresees the big size budget would not be implemented fully because it is not possible to improve implementation capacity over night.

“We see an implementation gap between actual and revised budget every year, which would be continued in the new fiscal year too. As a result, domestic borrowing target will not be fulfilled. So we do not have concerns about our monetary program.”

However, he said, if the government really reaches the borrowing target anyway, it would then be a risk on inflation, he added.  

Bank borrowing from banking system by government remained slow since several months and it stood at Tk23,000 crore at the end of May this year while Tk20,000 crore has already been repaid, according to the Bangladesh Bank data.

The borrowing target for the next fiscal year has been set at Tk31,221 crore, which is 20% higher from Tk25,993 crore set for the outgoing fiscal year.