BB says strict provisioning rules will strengthen the banks' capital base

Star Business Report

Banks’ net profit slumped 40.6 percent to Tk 4,466 crore last year due to stricter provisioning requirements against their default loans, according to a Bangladesh Bank report released yesterday.
The banks made a net profit of Tk 7,520 crore in 2011.

However, the banks’ operating profit rose by 5.6 percent to Tk 19,730 crore in 2012 compared to a year ago.
Increased provisioning is expanding the capital base of the banks,

which will brighten their image to their foreign counterparts, BB Governor Atiur Rahman said while launching the Financial Stability Report 2012 at his office.

Chief executives of banks and other financial institutions were present.
The report said the capital market is still going through price correction amid a dearth of confidence among the participants.

 
On the weakness of the banking sector, the report said some financial soundness indicators, such as profitability, capital adequacy ratio, and non-performing loans ratio, recorded a slide.

 
Returns on asset and equity dropped in line with a fall in the net profit, the report added.

“The decline in aggregate profitability was widespread throughout the system, partly due to additional provisions for the stricter loan-loss provision regulations adopted in 2012 by the BB.”

The governor said the report would be helpful to the officials of the financial institutions in their efforts to improve the resilience in combating the adverse situations in local and international financial markets.