Most banks see higher profit in H1 2023
Most of the listed banks posted year-on-year growth in profit in the first half of 2023, despite inflationary pressure on deposit rates.
The Bangladesh Bank has fixed the deposit rate in line with inflation, stating that it should not be below the three-month average of inflation, currently above 9%, while the lending rate was capped at 9%.
As a result, deposits have become expensive, leading to a shrink in the banks' core income. Moreover, the central bank has also withdrawn the lending rate cap effective from 1 July this year.
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According to bankers, gains from foreign currency exchange helped most banks absorb inflationary pressure and post higher profits last year.
This year, the exchange gain was not as overwhelming, but interest income and capital gain from government securities, along with lesser provisions against classified loans, helped the lenders manage profit growth, they added.
Out of the 35 banks listed on the country's capital market, 32 disclosed their unaudited reports for the January-June period this year. Twenty posted growth in profit, 10 suffered profit drops, and two incurred losses.
AB Bank, Bank Asia, City Bank, Exim Bank, First Security Islami Bank, Global Islami Bank, Islami Bank, Jamuna Bank, Prime Bank, Shahjalal Islami Bank, Pubali Bank, Social Islami Bank, Eastern Bank, South Bangla Agriculture and Commerce Bank, NCC Bank, Union Bank, Premier Bank, IFIC Bank, Brac Bank, and Midland Bank logged higher profits.
In its half-yearly financial report, First Security Islami Bank said the profit has increased mainly on the back of a rise in deferred tax income.
In a stock exchange filing, IFIC Bank reported that its consolidated profit surged due to the better performance of its subsidiaries, while SBAC Bank said lower provision requirements helped it post higher profit.
On the other hand, Mutual Trust Bank, Trust Bank, Uttara Bank, One Bank, Al-Arafah Islami Bank, Dutch-Bangla Bank, NRBC Bank, Southeast Bank, Standard Bank, and Mercantile Bank experienced a decline in profits.
Mutual Trust Bank said higher provisions against loans and tax cuts affected its profits while Southeast Bank experienced a decrease in profit due to an increase in interest expenses and provisions against loans.
Al-Arafah Islami Bank said profit has decreased due to an increase in profit paid on deposits and borrowing, a decrease in commission, exchange, and brokerage income, and an increase in total operating expenses compared to the previous corresponding period.
The loss-making banks are National Bank and ICB Islamic Bank.
According to its financial statement, National Bank incurred a loss due to lower income from interest on loans and advances.
Net operating cash crisis
In the first half, 12 banks faced a net operating cash crisis as they posted negative cash flow in their financial statements.
The banks are AB Bank, First Security Islami Bank, Global Islami Bank, Islami Bank, National Bank, Prime Bank, Uttara Bank, Pubali Bank, Social Islami Bank, Eastern Bank, Standard Bank, and IFIC Bank.
Islami Bank said its net operating cash flow per share has significantly decreased year-on-year mainly due to a decrease in deposits.
Global Islami Bank said that net operating cash flow decreased due to an increase in profits paid on deposits and a decrease in deposits from other borrowings.
According to data from the Bangladesh Bank, bank spread, which is the gap between deposit interest rate and lending rate, came down to 2.93% from 2.96% in June this year compared to March 2023.
Banks' stock performance
Amid the ongoing economic crisis and an increase in defaulted loans, most banks posted higher profits. However, their positive performance did not attract investors as most of the stocks are stuck at the floor price.
According to the Dhaka Stock Exchange, the share prices of 29 out of 35 banks are stuck at the floor price. However, stock market analysts say banks' shares are the most attractive ones for investment. This is because the price-earnings ratio in the banking sector is below 8%, and the dividend yield is pretty good.
