City Bank's profit tumbled 42 per cent in the first half of 2020 due to the new interest rate regime and disruption in business caused by the pandemic.
The lender's profit after tax between January and June stood at Tk 106.8 crore, according to the bank's half-yearly report.
"The decline in the profitability of the bank during this period is mostly caused by external, regulatory and macro factors rather than internal lack of efficiency," said Mashrur Arefin, managing director of City Bank.
The government imposed a ceiling of 9 per cent in the lending rate that came into effect on April 1.
This ceiling brought down the interest income of City Bank in the first half of the year to Tk 1,248 crore, down 2.8 per cent year-on-year.
On the other hand, the bank's interest expense grew 10.8 per cent in the same period depending on the growth in deposit volume, although its cost of deposit remained the same at 5.5 per cent.
The bank's deposits grew 11.4 per cent year-on-year to Tk 27,465 crore.
"A testament to this fact is the outstanding growth in the balance sheet items of the bank during this period, even with the coronavirus outbreak impacting business severely," Arefin said.
The bank's loans increased 18.3 per cent to Tk 29,322 crore and total assets 12.5 per cent to Tk 40,164 crore.
Its default loan ratio fell to 4.5 per cent from 5.8 per cent six months earlier.
City's agent banking and women banking along with the retail banking are expected to contribute considerably in low-cost deposit mobilisation in the coming years, according to Arefin.
The lender's agent banking deposits increased 17.2 per cent in the last six months and women banking deposits 7.6 per cent. Its SME loans have soared 21.7 per cent.
The financial institution's number of agent banking outlets reached 650 in June against 154 at the end of 2018. These outlets will be used not only for agent banking but also to distribute SME loans to new customers.
Arefin is also buoyant about the potential of the bank's digital lending programme, which it has recently rolled out on a pilot basis with bKash.
A select group of bKash users will now be able to get a loan of up to Tk 10,000 collateral-free on an instant from City.
The digital lending model, which harnesses the power of technology, means loan seekers no longer need to under a completely physical process to procure a loan. The whole process is presence-less and paperless and the service delivery cashless. And all this is done in just a few minutes.
The lending model is immensely popular in neighbouring India, and the Bangladesh Bank has warmed to the idea as it stands to expedite the financial inclusion agenda in the country.
"This is expected to contribute significantly in the bank's business growth in the years to come," Arefin said.
The bank's non-interest income spiralled 14.8 per cent to Tk 461.7 crore mostly due to the increase in income from government securities.
In the first half of the year, the provision expenses increased 24.9 per cent thanks mainly to an increase in the provision on off-balance sheet items and investments and prudential risks and balance sheet management, which eventually took provision coverage ratio to 109 per cent in June this year from 78 per cent on 31 December 2019.
"This indicates that the bank is making the balance sheet more resilient if any unforeseen risk arises," Arefin added.
Listed in 1986, City stock closed at Tk 16.60 yesterday, up 0.61 per cent from the previous day.
The bank announced a 15 per cent cash dividend for the year ended on 31 December 2019.