Eastern Bank posts higher Q1 profit despite rising costs
Highlights
● Solo EPS in Q1 2023 Tk1, up from Tk0.97 a year ago
● Consolidated EPS Tk1, down from Tk1.11 in Q1 2022
● Investment income grew 47%
● DSE share price: Tk29.4
Despite struggling with higher foreign currency borrowing cost and expensive deposits, Eastern Bank Limited, posted a nearly 4% year-on-year growth in net profit on a solo basis in the first quarter of 2023.
The bank's March quarter profit was mainly driven by a significant growth in investment income and release of provision against its unrealised losses in listed securities, the bank said in a statement.
Eastern Bank's Managing Director and Chief Executive Officer Ali Reza Iftekhar said, "Despite rising inflation, dollar crisis, and market volatility, the bank saw higher profits thanks to our prudent banking and responsible lending."
The banking sector has faced a decrease in net interest income, fees and commission earnings including foreign exchange gain during the first quarter of 2023.
This was mainly because of the ongoing economic crisis due to scarcity of the US dollar. As a result, foreign currency borrowing cost, particularly for offshore banking operations, increased.
Also, decline of exports due to challenges in opening new letters of credit, increase in default loans and shrinking interest rate spread affected the banking sector.
Besides, significant fall of trading turnover on the bourses sharply impacted the banks' consolidated profits having capital market subsidiaries.
In the first quarter of 2023, many banks failed to manage year-on-year growth in revenue and profits due to expensive cost of funds, both deposit and foreign currency borrowing costs.
In the first three months of this year, investment income of the bank itself increased by 47% due to increase of investment in the Treasury bills and bonds, preference shares and quoted securities resulting in an increase of operating income by 12% compared to that in the first quarter of 2022.
The bank's fees, exchange and commission income decreased by 6% due to decrease of trade business and negative loan growth in the first three months of the year.
However, the sharp growth of investment income has compensated the negative growth in net interest income and fees, exchange and commission income over the quarter.
Eastern Bank's solo earnings per share (EPS) for the quarter increased to Tk1 from Tk0.97, while the consolidated EPS, that includes the figures of subsidiaries, decreased to Tk1 from Tk1.11 a year ago.
Capital-to-risk weighted assets ratio of the bank, on the other hand, improved to 15.10% on 31 March 2023 from 14.61% in December 2023.
Eastern Bank shares closed at Tk29.4 apiece at the Dhaka Stock Exchange on Wednesday.