Rejaul Karim Byron

Most private banks clocked up significant growth in profit in the six months to June despite a fall in contributions from the stockmarket although they claimed a liquidity crisis over the period.

Data from 23 private commercial banks shows that 16 of them logged profit growth ranging between 8 percent and 125 percent. Thirty private commercial banks operate in the country.

Three banks retained the same profit growth, while five profited less than in 2010 but they are still in the positive territory.

In the same period of last year, most banks made profit ranging from 30 percent to 90 percent.

In the final count, the percentage of profit growth may be a little higher or lower, said officials of different banks.

Although banks' earnings from the stockmarket dropped, their growth was led by high imports and credit growth.

The central bank's decision to withdraw the lending rate ceiling helped many banks charge high interest rates, fattening up their coffers in the process.

Shahjahan Bhuiyan, managing director of United Commercial Bank Ltd, said banks have increased both deposit and lending rates. The lending rate rise came into effect immediately, but the new deposit rate was enforced later, which may have contributed to widening the profit margins.

Bhuiyan said the banks whose profit base was smaller last year recorded high profit growth this year.

He however said as banks' profit from the share market fell their operating profit was also lower than last year.

This year's figures are satisfactory compared to the banks' high profit base in 2010, said a banker, asking not to be named.

A senior official of Pubali Bank said the profits of some PCBs may edge down, as the central bank enforced rules against various irregularities strictly.

Last year 47 banks made a total profit of Tk 16,000 crore. Of them, 28 banks made Tk 2,497 crore from the share market.

In the last six months, Social Investment Bank posted the highest profit of Tk 135 crore, up 125 percent from a year ago. Al-Arafah Bank's operating profit rose to Tk 177 crore from Tk 85 crore last year.

Islami Bank logged Tk 650 crore in profits, National Bank Tk 415 crore, Prime Bank Tk 405 crore and South East Bank Tk 325 crore.

UCBL made a profit of Tk 280 crore, while Basic Bank's profit stood at Tk 136 crore. Dutch Bangla Bank earned Tk 245 crore.

IFIC Bank posted a profit of Tk 185 crore, Uttara Bank Tk 170 crore, Shahjalal Bank Tk 156 crore, NCC Bank Tk 201 crore, First Security Bank Tk 78 crore and Dhaka Bank Tk 195 crore.

Bank Asia made a profit of Tk 215 crore, BRAC Bank Tk 230 crore, and AB Bank Tk 200 crore. The three banks earned the same amount in the first six months of 2010.

Five banks saw their profit growth decline between 1 percent and 50 percent.

News: The Daily Star/ Bangladesh/ July-03-2011

Palashbari branch of Sonali Bank Limited has achieved the top position in realizing classified
loan among its branches in the district during the last fiscal year. Official sources said the bank realized a total of Taka 1.11 crore as classified loan out of targeted one crore from the defaulters in last month through conducting two loan recovery camps in the upazila.
Of the total, Taka 70 lakh was realized in the last camp held on June 29 and TK 41 lakh in the first camp on June 09.
The bank took a decision to conduct campaign in the district to recover classified loan from the defaulters of 16 branches here last month to increase its capital.
As per the decision and the directions of the bank, M. Saidur Rahman, manager of the branch conducted the campaign and realized a good amount of classified loan from the defaulters during the month.
It had been possible to collect a huge amount of classified loan from the defaulters in active cooperation of the staff of the bank and Bangladesh Rural Development Board here, said Manager M. Saidur Rahman.

News: The Independent/ Bangladesh/ July-03-2011

BRAC Bank will introduce mobile banking service using cell phone as a tool to extend its services to the doors of the people.

The bank authority has unveiled the initiative at a press conference on the occasion of the bank’s 10th founding anniversary at Dhaka Reporters Unity yesterday, said a press release.

BRAC Bank Managing Director and CEO Syed Mahbubur Rahman, Deputy Managing Director Mohammad Mamdudur Rashid and Head of Corporate Affairs Zeeshan Kingshuk Huq, among others, were present on the occasion.

The bank will provide the banking service using coded VSAT technology platform through Bikash, a joint venture of the bank and US-based Money in Motion, speakers told journalists.

Syed Mahbubur Rahman hopped that the ‘Bikash’ will change the traditional banking process.

“When the mobile baking will be launched the customers will not come to the bank; instead the bank will go to doors of the customers,” he added.

News: Daily Sun/ Bangladesh/ July-03-2011

Food inflation is likely to come down to below 10 per cent during the first quarter of the current fiscal year, a top Bangladesh Bank (BB) official said on Thursday. Referring to the BB statistics, the official said that on a point-to-point basis, inflation declined to 10.20 per cent in May from 10.67 per cent in April, and 10.49 per cent in March 2011 as a result of a slight drop in the prices of rice and vegetables. The downtrend in food inflation is likely to continue in June too, he said.
The BB official further noted that the recent conference of the central banks, which was organised by the Bank for International Settlements (BIS) in Switzerland, called upon the US and UK central banks to adopt tight monetary policies to help contain the high global inflation.
BB governor Dr Atiur Rahman attended the two-day conference beginning June 28.
The BB official said aid the central banks of China and India had been executing a tight monetary policy since last fiscal year as a precautionary measure to check inflation.
“Execution of the BIS call by the US and UK central bank, would help contain inflation globally and Bangladesh, too, would benefit from it,” said the official.
The prices of rice have gone down in the international market for the last couple of months following improved supply, the Centre for Policy Dialogue (CPD) executive director, Prof (Dr) Mostafizur Rahman, told The Independent.
“Yes, present international market indicators clearly signal that point-to-point inflation is set for a slight decline globally in the coming months. However, it would vary on movement of fuel prices,” he said.
The budgetary allocation for agriculture would increase productivity, which may ease inflationary pressure to some extent unless there is a natural disaster affecting production of crops, he added.
Rahman warned that all efforts and estimates might go awry if there is no coordination between monetary and fiscal policies like in last fiscal year. “It is very important to maintain good coordination between fiscal and monetary policies to achieve the target of bringing down inflation,” he pointed out.
The CPD executive director said growth in credit and broad money had overshot targets. This resulted in the highest-ever 28 per cent credit growth in the private sector and fuelled inflation.
Rahman welcomed the BB target to bring down credit and broad money growth to 18 and 15 per cent, respectively, this fiscal year.

News: The Independent/ Bangladesh/ July-02-2011

Sajjadur Rahman

Banks now have to maintain a higher capital -- at 10 percent of their risk-weighted assets -- from July 1 in line with a directive that came as a Basel II requirement.

Risk-weighted capital asset ratio (RWCAR), which is an important cushion to protect depositors or other lenders against unexpected shocks, was 9 percent till June 30 this year.

“The deadline for minimum capital adequacy ratio requirements is September 30 though banks will start maintaining the new capital standard from July 1,” said Jahangir Alam, executive director, banking regulations and policy department of the central bank.

The Bangladesh Bank (BB) analyses the banks' capital position on a quarterly basis and accordingly, it will assess the RWCAR at the end of September, said Alam.

In line with Basel II framework, the banks are required to hold capital for different classes of assets, based on a credit risk criterion.

The RWCAR or capital adequacy ratio determines the capacity of a bank in terms of meeting the time liabilities and other risks, such as credit risks and operational risks. Banking regulators in most countries define and monitor the ratio to maintain confidence in the banking system.

Inquiries, however, show that some banks, particularly state-owned and third generation private ones, are not strong enough to meet their capital adequacy requirements in their present situation.

According to BB officials, three state-owned commercial banks, five private commercial banks (PCBs) and two specialised banks owned by the government ran short of capital to meet the target of 9 percent set by the central bank.

“These banks will face difficulties in meeting the new capital requirement,” said another BB official, requesting not to be named.

However, no foreign banks have any such shortfall, he said.

The BB officials said many banks at the time of profit distribution did not take the risk factor into consideration. On the other hand, some banks distributed more dividends to their shareholders than the profit they made. As a result, they could not preserve the required amount of capital.

According to BB decision, the banks that will fail to maintain the minimum capital requirement will face regulatory actions including a downgrade in their ratings.

Even, the noncompliant banks will not be able to open any branch or exchange house abroad and also face restrictions in opening new branches at home.

The state banks' shortfall in maintaining the minimum capital may be addressed by issuing bonds by the government.

Bangladesh entered the Basel II regime, the latest version of risk-based capital standards set for banks worldwide, on January 1 2010.

News: The Daily Star/ Bangladesh/ July-02-2011