Banks' dull business
- Most banks' operating profits fall in the first half of 2020
- Banks were unable to operate fully for more than two months amid Covid-19 restrictions
- They could not even put pressure on clients for loan installments as per BB instruction
- Banks' earnings from retail business and foreign trade also suffered
Most banks witnessed their operating profits fall in the first half of 2020 compared to that of the same period a year ago amid an unprecedented situation triggered by Covid-19.
This scenario stands in contrast to a trend of 20-30 percent annual growth in operating profits the banking sector made over the last few years.
Banks were unable to operate fully for more than two months amid restrictions imposed to curb the spread of the novel coronavirus in the country.
Moreover, banks' earnings from retail business and foreign trade have suffered massive a setback because of the cancelation or holding up of export orders. Also, they could not make expected business from the commission on foreign exchange due to travel ban.
They cannot even put pressure on their clients to recover loan installments as the central bank has imposed restrictions on classifying any borrower as a defaulter for failing to pay back their debts till September this year.
Bankers say banks' business was dull for almost three months of the first half of the year. From March 26 to May 31, banks were operating on a limited scale. Therefore, most of the private banks saw their operating profits edge down in the first half of the year, they added.
The Business Standard obtained data of some banks and most of them posted fall in operating profit – the profit before deducting taxes and provisioning for loan classification and other liabilities -- ranging from 2 percent to 100 percent.
Most banks tried to hide their profit to keep their image though, as there are also restrictions from the Bangladesh Securities and Exchange Commission on revealing operating profit as it is a price sensitive information.
Based on information acquired from insiders, it has been found that Southeast Bank -- one of the largest private sector banks -- posted a Tk163 year-on-year drop in operating profit in six months to June this year to reach Tk342 crore.
However, state-owned Rupali Bank, whose operating profit escalated by over 70 percent, saw all its departments perform well, according to its Managing Director Md Obayed Ullah Al Masud.
On the other hand, the amount of defaulted loans decreased by Tk1,820 crore in the first three months of this year as the Bangladesh Bank suspended reporting of default loans from January to help businesses tide over the coronavirus pandemic.
The total amount of defaulted loans stood at Tk92,510 crore at the end of March 2020, which was 9 percent of the total outstanding loan in the banking sector, according to the latest Bangladesh Bank data.
But the growth in credit flow to the private sector came down to 8.82 percent in April 2020 on a year-on-year basis from 8.86 percent a month ago, according to the Bangladesh Bank statistics.
Meanwhile, the government's 2 percent incentive on inward remittance has helped remittance inflow to rise even at the time of coronavirus pandemic.