Banks' operating profits soar
Most of the private banks' operating profits soared -- ranging between 10 percent and 60 percent -- in the outgoing year on the back of a resurgence of demand for credit from the private sector.
Take, for instance, the case of Islami Bank Bangladesh, the largest private lender in terms of deposits and loans. The bank logged in about Tk 2,400 crore as operating profits for 2017, up 57 percent year-on-year.
Operating profit is a profit from business operations (gross profit minus operating expenses) before deduction of interest and taxes.
The upward trend of private sector credit growth in recent months helped banks record handsome profits for 2017, said Syed Mahbubur Rahman, managing director of Dhaka Bank.
At November's end, private sector credit growth stood at 19.06 percent — way past the target of 16.2 percent set by the central bank for the first half of fiscal 2017-18.
“The banks got a remarkable amount of income from the interest of their disbursed credit.”
Besides, banks' export and import business grew this year, Rahman said.
He, however, cautioned that the final profit figures might have to be revised downwards to meet provisioning requirements.
Also, banks have to pay 42.5 percent tax on their net incomes, he added. Some banks earned a hefty amount of income last year from their offshore lending, according to MA Halim Chowdhury, managing director of Pubali Bank.
Pubali Bank's operating profits surged 30.34 percent to Tk 915 crore last year, Chowdhury said, adding that almost all banks saw income from capital market investments.
“The banks also made an effort to recover their non-performing loans. This had a positive impact on their profit figures,” he added.
The banking sector's liquidity base had remained stable in 2017, which, enabled the lenders to disburse credit uninterruptedly, said Shafiqul Alam, MD of Jamuna Bank.
“The cost of deposits was also lower last year. This also helped in generating profits,” he said.
Jamuna Bank has registered profit growth of 14.65 percent in 2017.
The operating profit of problem-ridden Farmers Bank slumped to Tk 26 crore in 2017 from Tk 92 crore a year earlier.