Credit growth rises despite pandemic

Banks managed to post 8.95 per cent credit growth in the last fiscal year despite a steep fall in business in the last quarter owing to the coronavirus pandemic.

The credit growth improved as the lenders disbursed more funds from the stimulus packages that the government announced to help ailing businesses shrug off the jitters.

The country's 58 banks disbursed Tk 1,064,713 crore in fiscal year 2019-20 combined, data from the central bank showed.

State-run banks lent a total of Tk 199,919 crore in the last fiscal year, up 10.58 per cent year-on-year. 

Forty private commercial banks disbursed Tk 796,952 crore, which is 9.04 per cent higher than in the same period a year ago.

Foreign banks were very cautious in their lending: nine international banks operating in Bangladesh only disbursed Tk 38,065 crore, up 0.30 per cent from a year ago.

Lending by two state-run specialised banks – Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank – grew 7.83 per cent to Tk 29,775 crore in the last fiscal year.

HSBC's lending rose the highest 22.97 per cent among all banks, followed by Union Bank 21.31 per cent, City Bank 19.51 per cent, Rupali Bank 19.48 per cent, Exim 18.98 per cent and First Security Islam Bank 17.27 per cent.

NRB Commercial Bank's lending grew 16.98 per cent year-on-year, National Bank's 15.15 per cent, Premier Bank's 13.55 per cent and Sonali Bank's 13.08 per cent.

Islami Bank Bangladesh disbursed the highest Tk 87,980 crore last fiscal year, up 10.50 per cent year-on-year.

Sonali Bank came second with the lending of Tk 53,697 crore, followed by Janata Bank Tk 52,313 crore and Agrani Bank Tk 46,828 crore.

First Security Islam Bank lent Tk 38,932 crore, National Bank Tk 37,867 crore, Exim Bank Tk 36,821 crore and United Commercial Bank Tk 31,425 crore. 

Among foreign banks, Standard Chartered disbursed the highest Tk 17,523 crore, followed by HSBC Tk 10,975 crore.

Citi NA's lending contracted the most among all the banks, by 36.28 per cent. Woori Bank's credit fell by 23.17 per cent, BB data showed.

National Bank of Pakistan, Habib Bank, Standard Chartered, Jamuna, Bangladesh Commerce, ICB Islamic, BASIC Bank, and One Bank also saw a negative credit growth in the last fiscal year.

Zaid Bakht, chairman of Agrani Bank, said lending by the state-run banks rose as they disbursed more funds from the stimulus packages and they are lending at within the central bank's ceiling of 9 per cent interest rate.

The state-banks also lent more to the small and medium enterprises, he said.

Because of the lower lending rates, many large borrowers have switched to state banks from private ones, said Bakht.

"Banks are lending cautiously because of the coronavirus-induced uncertainty," said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

The sustainability of credit growth would rely on how exports pick up, he said.

"If the coronavirus pandemic is not brought under control at home and abroad, the uncertainty would linger," said Rahman.

Private banks are also worried as many of their loans may turn sour because of the tough business condition, said another banker.   

The central bank has set a public sector credit growth target of 44 per cent for fiscal 2020-21 and kept unchanged the private sector credit growth target at 14.8 per cent.

The advance-to-deposit ratio (ADR) of state banks stood at 60.06 per cent last fiscal year, private commercial banks 83.29 per cent, foreign banks 58.22 per cent and the two specialised state banks at 77.39 per cent.

ADR is used to assess a bank's liquidity by comparing a bank's total loans to its total deposits for the same period.

If the ratio is too high, it means that the bank may not have enough liquidity to cover any unforeseen fund requirements. Conversely, if the ratio is too low, the bank may not be earning as much as it could be, according to Investopedia.