Most of the country’s commercial banks have showed positive earnings for the third quarter (July-September) of this year, but their cumulative earnings in three preceeding quarters (January-September) were negative.

Out of 30 listed banks, 28 have so far declared their third quarter earnings – 15 showing positive earnings, few of them even recovering from heavy losses of the same quarter previous year, according to published earnings statements.

Nine of them made a profit this quarter, but this was dlown from the same quarter of the previous year while the remaining four incurred net losses.

During the nine month period of this year, the cumulative earnings of 21 companies, however, still remained in the negative territory with only seven showing very marginal profits.

The banks continued to wrestle with the rising non-performing loans stemming mainly from the country’s ongoing political uncertainty, bankers said.

Political uncertainty, which discouraged private investment, and higher provisioning against non-performing loans (NPL) hit profitability, they said.

NPL is a loan on which the borrower is not making interest payments or repaying any principal. Banks normally set aside money to cover potential losses on loans (loan loss provisions) and write off bad debt in their profit and loss account.

Spillover effects of bad loans, which started to shoot up from last year following a series of financial scams, continued this year too, bankers said. The situation might turn worse in the coming months because of deepening political chaos they warned.

National Bank Ltd (NBL) was the worst performer posting a net loss of almost Tk4bn for the nine months ending September 30, down from the Tk1.3bn profit in the same period of 2012.

NBL was followed by Mutual Trust Bank, Exim Bank and One Bank.

“Political uncertainty holds back overall businesses, bringing down the banks earnings,” said Helal Ahmed Chowdhury, managing director of Pubali Bank. “Though economic growth remained positive over the last several years  credit growth was not encouraging.”

On bank to bank varying profit, he said the banks that had to keep aside smaller amounts of money for loan provisioning or recovering previous bad loans posted higher profits. “The banks with higher non-performing loans made less profit.”

He said the banks awash with huge liquidity had to face the increased cost of funding, which also brought adverse impact on net profit.

The banks’ income mainly comes from two areas, core banking and capital market investment.

According to the Bangladesh Bank data, defaults on loans in the banking sector increased by more than 19% to Tk510bn as of March 31, 2013 from December last year.

Private borrowing grew by over 11% in August this year compared to about 20% in the corresponding month of last year.

Ali Reza Iftekhar, managing director of Eastern Bank, said higher provisioning due to rising NPL is the main reason behind the fall in net profits. “The business was very bad, so the profit was not satisfactory. Some even recorded higher profits. But the large provisioning has eaten up all the profits.”

He said: “This, coupled with the bearish trend of the stock market, has forced the banks to provision a substantial amount, which has cut the profit.”

Iftekhar sees more difficult days ahead in the run up to the general election. “Banks might see worse days in the coming months because of intensified political chaos.”

Banks that saw decline in their profits are First Security Bank, Al-Arafah Bank, AB Bank, Social Islami Bank, Eastern Bank, Trust Bank, Dhaka Bank and Islami Bank.

Banks that saw positive in their profits are United Commercial Bank, NCC Bank, Premier Bank, Jamuna Bank, City Bank, Bank Asia, Uttara Bank, Rupali Bank, Pubali Bank, Dutch-Bangla Bank, Mercantile Bank, Southeast Bank, IFIC Bank, Prime Bank and Shahjalal Bank. 

News:Dhaka Tribune/03-Nov-2013