Eastern Bank Limited has witnessed a 63% jump in its investment in risk-free government securities on the back of high returns from it.
As a result, bank has earned Tk128.86 crore from this investment in the third quarter of this year, which was 100% higher than in the previous year at the same time.
Besides, provisioning deferment and the high returns on the investment have helped the bank post higher growth in net profit. It posted 98% year-on-year increase in net profit in the July-September period of this year, taking the profit to Tk138 crore.
In the first three quarters this year, the bank registered a total net profit of Tk295.65 crore and earnings per share was Tk3.64. However, in this period, its interest income fell by 9%.
A stock market researcher said interest income – the core earning of the bank – fell drastically due to non-payment by borrowers amid the pandemic.
The suspension of loan classification from January to December facilitated the lenders to save provisioning costs as there were no new default loans.
Helped by the decline in provisioning requirement, the banks could show inflated earnings in the third quarter, he added.
A loan loss provision is an expense set aside from profit to cover up losses if loans are not performing.
As private sector credit growth tumbled to 8% level after the outbreak of the novel coronavirus in March amid stagnant business expansion, banks preferred investing in risk-free tools – government treasury bills, according to the Bangladesh Bank data.
The interest rate of government treasury bills picked up to above 8% in June amid high borrowing by the government from banks when the interest rate of risky private-sector loans was 9%, data showed.
Earlier, Eastern Bank has paid 15% in cash dividend to its shareholders for the 2019 year.
The bank was listed with the Dhaka Stock Exchange (DSE) in 1993. The closing price of the bank's each share was Tk35.30 on Sunday at DSE.
Out of total shares, sponsor directors of the bank hold 30.18%, institutional investors 42.66%, foreign investors 3.21% and general investors hold 23.95%.