Seven banks will post record profits in 2023

Despite economic challenges posed by persistent inflation and a dollar crisis, seven listed banks achieved record profits in 2023, thanks to their effective business policies and strategies.

Of the 36 banks listed on the exchanges, nine have published their financial reports and recommended dividends for 2023.

According to its financial statements, Dutch-Bangla Bank achieved 42% profit growth to Tk801 crore in 2023 compared to the previous year, marking the highest profit in its history. It also recommended a cash dividend of 17.50% and a stock dividend of 17.50% for shareholders.

BRAC Bank’s profits rose 35% to Tk827 crore, while Pubali Bank saw a 23% rise in profits to Tk695 crore.

BRAC Bank has declared a cash dividend of 10% and a stock dividend of 10% in the last year, while Pubali Bank has recommended a cash dividend of 12.50% and a stock dividend of 12.50%.

City Bank’s profits rose 33% to Rs 638 crore, while Eastern Bank’s profits grew 20% to Rs 612 crore.

City Bank declared a 15% cash dividend and 10% stock dividends for the past year, and Eastern Bank declared a 12.50% cash dividend and 12.50% stock dividends for the past year.

Moreover, Shahjalal Islami Bank saw a modest increase in profits to Rs 358 crore, and Uttara Bank’s profits rose 17% to Rs 317 crore.

Shahjalal Islami Bank recommended a cash dividend of 14%, and Uttara Bank suggested a cash dividend of 17.50% and 12.50% stock dividends.

This performance, according to industry insiders, was attributed to the banks’ ability to control their deposit costs, grow their performing loan portfolio and generate substantial income from investments in government bonds.

However, they added that exchange rate gains were not as impressive as in 2022.

Eastern Bank, in its 2023 annual report, said Bangladesh has been facing unprecedented macroeconomic pressure since 2022, reflected in unabated inflation, rapid depletion of foreign exchange reserves and increasing pressure on currency liquidity.

As a result, private sector credit growth contracted to 10.13% in December 2023, compared to 12.89% in December 2022. Confidence in the macroeconomy has weakened, hurting foreign direct investment inflows and the country’s credit rating has been downgraded.

All this made the already fragile banking sector very weak. The lack of good governance, liquidity crisis and high loan defaults caused the banking sector to underperform, endangering the overall economy, the report added.

Moreover, Mutual Trust Bank posted 21% profit growth to Rs 286 crore in 2023, although this is not the highest in its history. It proposed a 10% cash dividend to shareholders.

Only Mercantile Bank failed to achieve profit growth; on the contrary, profits fell by 12% to Rs 206 crore last year compared to the previous year. Despite the decline in profits, a 10% cash dividend was paid out over the past year.

Selim RF Hussain, managing director of BRAC Bank, told The Business Standard that the bank achieved its highest ever profit last year, mainly driven by interest income.

He added that the bank’s loan disbursements and deposit collections experienced growth that exceeded the banking sector average, which was made possible by the development of digital banking services.

In Eastern Bank’s annual report, Ali Reza Iftekhar, the bank’s managing director, said that as customer confidence in underperforming banks fell last year, mainly due to governance issues, Eastern Bank continued to grow as a bank of choice for customers for its track. track record of advocating for compliance.

In 2023, the bank achieved the milestone of crossing Rs 600 crore profit mark, reflecting efficient ALM practice, prudent risk management and varied cost rationalization measures during sustained high inflation, he added.

Asset-liability management, known as ALM, is the practice of managing financial risks that arise due to mismatches between assets and liabilities as part of an investment strategy in financial accounting.

A senior official at Dutch-Bangla Bank told TBS on condition of anonymity that the robust profits the bank achieved were mainly driven by growth in high-quality loans and a faster rise in loan yields compared to the cost of deposits in 2023. unlike 2022, under the SMART tariff mechanism.

Earlier, Bangladesh Bank’s derivation of a new formula for interest rates for commercial banks has helped ease pressure on deposit costs. Under the new interest rate policy, the interest rate will be based on the weighted average rate of six-month treasury bills plus a 3% premium, which will be effective from July 1, 2023.

Standard loan

The country’s banking sector saw a surge in loan defaults by Rs 25,000 crore in 2023, amid electoral political uncertainties and a severe dollar shortage that slowed business activity, leaving many borrowers unable to service their debts.

At the end of December last year, total defaults in the banking sector stood at Rs 1.45 lakh crore, accounting for 9% of total loans, which stood at Rs 16.17 lakh crore, according to Bangladesh Bank data.

The Bangladesh Bank recently unveiled its roadmap that aims to reduce default lending to 8% by June 2026, to meet a condition imposed by the International Monetary Fund (IMF) as part of a 4.7 billion loan package dollars.