Most NBFIs see rise in profits

Most of the listed non-bank financial institutions (NBFIs) posted higher profits in the July-September quarter thanks to the lower provisioning regime amid the ongoing pandemic.

All but Peoples Leasing out of the 23 listed NBFIs published their financial reports. Of them, the earnings of 10 rose year-on-year, and four bounced back and returned to profits.

The earnings of one NBFI remained the same, while the rest seven experienced a fall in the current year's third quarter.

IDLC Finance booked higher earnings per share, followed by DBH and National Housing Finance.

BD Finance, the Investment Corporation of Bangladesh, LankaBangla, and Midas Financing returned to the black after incurring a loss in the same quarter last year.

Uttara Finance and International Leasing Financial services drowned into losses in the quarter.

Despite posting higher profits, investors are still feeling shaky to invest in the stocks of the NBFIs as they fear bad times are coming next year.

"The NBFIs' margin rose on the back of lower deposit rates," said Arif Khan, managing director of IDLC Finance.

"When the deposit rate falls, banks and NBFIs get its benefits because their interest cost falls instantly. Their interest income drops slowly."

Many loans carry a fixed interest rate, and the loan contracts are made for three to four years. So, these loans bear higher earnings despite the fast fall of interest on deposit, he clarified.

The government set the ceiling on banks' lending rate at 9 per cent, and the deposit rate at 6 per cent for the sake of industrialisation and the rates came into effect on April 1 this year.

Many NBFIs reduced their operating costs during the pandemic, which gave a boost to their profits, Khan said.

As the stock market was on an upward trend, many NBFIs booked profits this year whereas they needed to keep provision for the losses made in the previous year, Khan said.

The brokerage income of IDLC Finance also rose in the last quarter, he said.

The DSEX, the benchmark index of the Dhaka Stock Exchange, rose 28 per cent, or 1,130 points, in the July-September period. It dropped 8.1 per cent, or 436 points, in the same period last year.

The Bangladesh Bank allowed banks and NBFIs to restructure loans and keep classification unchanged until December to help entrepreneurs stay afloat amid the pandemic, which ultimately helped the NBFIs see the rise in profits, Khan said.

"It was a timely decision taken by the banking watchdog because the pandemic year is not comparable to the normal time. It was necessary to give the chance of restructuring loans to help the economy revive."

The NBFIs whose business was in good shape and whose business was in bad shape would be evident next year, he said.

The NBFIs will fall into problem next year as they will be bound to classify bad loans, said Abdul Mannan, a stock investor.

Because this is not the real scenario of the sector and most of the entrepreneurs who failed to continue to pay their loans now will become defaulter next year, he said.

Moreover, the rising non-performing loans (NPLs) are also a big headache for the NBFIs.

The NPLs in 33 NBFIs in Bangladesh, including the listed ones, stood at Tk 8,905.62 crore as of June this year, which were 13.29 per cent of the outstanding loans, according to data from the Bangladesh Bank. It was Tk 6,399 crore, or 9.53 per cent of the total loans, in December last year.

Of the listed NBFIs, the stocks of nine traded below their face value on the DSE on November 12.