Shareholders and bank directors should be ready to embrace conservative dividends for this year, as banks will have to maintain high reserves as a precautionary measure against the predictable NPL wave.
Banks should take income in a conservative way, as most interest will remain due. Therefore, banks will have to book income industry wise and based on borrowers' performance. If banks book excess income based on only paper, then they will have to give tax on income and high dividend, which will ultimately result in a big trouble for them in the next year when they will fail to recover money from borrowers.
We have to be extra cautious about taking income in book. Banks should now focus more on credit losses than super profitability.
In this critical situation, we, as bankers, request all the shareholders to behave rationally in terms of expecting dividends.
Syed Mahbubur Rahman, managing director at Mutual Trust Bank