Which banks top equity analysts’ ranking

Infographic: TBS

Due to higher non-performing loans despite relaxed rules and challenges in retaining deposits amid the capped lending rate, the banking business in 2022 was not worry-free at all.

However, with smart management of the crisis, most of the banks experienced growth in their net profits for the year, and this trend continued till the first quarter of 2023, according to an EBL Securities review.

Analysts at the brokerage have conducted research based on a set of popular indicators to sort out the best-performing listed banks for investors.

Dutch-Bangla Bank secured the top position on the performance list for 2022, followed by Premier Bank, Prime Bank, Eastern Bank, Shahjalal Bank, The City Bank, Uttara Bank, Pubali Bank, Brac Bank, and NRB Commercial Bank.

The banks that ranked between 11th and 20th were Trust Bank, Exim Bank, Bank Asia, Global Islami Bank, NCC Bank, Union Bank, Jamuna Bank, United Commercial Bank, IFIC, and Mercantile Bank.

The ranking has been designed by assigning equal weights to particular eight criteria - earnings per share (EPS), cost-to-income ratio that reflects operating efficiency, return on equity, return on asset, spread, net interest margin, non-performing loan ratio, and dividend yields.

The ranking was not a stock recommendation to investors; instead, the analysts tried to present a comparative picture of the publicly traded banks through the widely followed indicators, said Rehan Kabir, head of research at EBL Securities.

According to the report "Bank Sector Performance 2022 & Q1'23 Earnings Update," published on Wednesday, Dutch Bangla scored the highest with 77.72 points out of 100, while Rupali scored the lowest with 11.78 for their performance in 2022.

"Of the 35 publicly traded banks, we did not include the financials of National Bank and ICB Islamic Bank while preparing the sectoral average to avoid outlier effects as the two posted losses," said Kabir.

Islami Bank, First Security Islami, Al-Arafah Islami, Social Islami, Mutual Trust, Midland, Dhaka Bank, South Bangla Agricultural Bank, South East Bank, Standard Bank, One Bank, AB Bank, and Rupali Bank were in the 21st to 33rd spots for their weaker annual performance observed by the analysts.

Dutch-Bangla championed the average spread as the difference between its average borrowing and lending rates was 6.2% in 2022, while AB Bank stood last with a 1.9% spread.

Shahjalal Islami and Premier jointly championed return on equity, which means how much profit a bank makes against the shareholders' takeaway from a company. The two banks generated 16% return on equity in the last year, while Rupali and AB Bank were at the bottom with 2-3% return on equity.

Rupali Bank was at the worst point of the cost-to-income ratio table, which means spending more to earn less, The ratio reflecting operational efficiency at lower reading was 92% for Rupali, and the lowest one was 36% for Trust Bank.

The 33 banks' net profit growth for the last year was 12.1% on average, while One, Union, and Exim outperformed with up to 85% growth, and Rupali, Jamuna, and Mercantile led the 12 banks that saw declining profits.

Based on the March 2023 unaudited financials, EBL Securities found Jamuna, Shahjalal, Dutch-Bangla, Prime, NRB Commercial, Bank Asia, Pubali, Eastern Bank, Global Islami, and Brac as the top performers.

Banking stocks have long been depressed in the bourses of Dhaka and Chattogram due to a significant lack of investor confidence amid high non-performing loans and governance problems in the sector.

Of course, there are well governed banks that keep their bad loans within a tolerable limit.

The total market capitalisation of the 33 banks was Tk66,275 crore, while their total shareholders' equity was above Tk90,000 crore.
Exim, Premier, and Prime were the banks that generated the highest dividend yield – over 9% – for investors in 2022, while their depositors got a much lower annual return.