State-owned banks cut capital deficit

Three state-owned commercial banks cut their capital deficit by Tk 6,219 crore in the three months to March, turning cumulative losses into assets in what is known as valuation adjustment.
After a deep cut in the shortfall, the banks' integrated capital deficit stood at Tk 962 crore at the end of March, down from Tk 7,181 crore in December 2007.
According to a quarterly evaluation report by Bangladesh Bank, the banks counted their integrated losses as 'goodwill' and converted the losses into 'other assets'.
“As a result, massive changes have taken place in the banks' capital structure,” the report said.
After the end of December, the banks transferred the cumulative losses of Tk 8,791 crore into assets. Sonali Bank converted the cumulative losses of Tk 6,574 crore into assets, Janata Bank Tk 888 crore and Agrani Bank Tk 1,329 crore.
The three banks started a new journey after they became public limited companies last year.
"A new company never takes responsibility for the losses of the previous ones. On the other hand, the government has full ownership of the banks. That's why the losses have been converted into assets as goodwill," Agrani Bank Managing Director Syed Abu Naser Bakhtiar told The Daily Star yesterday.
A senior Janata Bank official said the banks have a well set-up branch network across the country apart from the government ownership. “We also evaluate the assets of the branches and consider cuts in the capital deficit,” the official said.
According to the central bank's quarterly report that covered three months from January, Sonali Bank's integrated capital deficit stood at Tk 527 crore in March, down from Tk 4,359 crore in December 2007, thanks to an adjustment of cumulative losses.
In March, Agrani Bank's integrated capital deficit narrowed to Tk 449 crore from Tk 1,963 crore in December 2008.
Janata Bank now runs a surplus of Tk 14 crore. It recorded a deficit of Tk 859 crore in December 2007.
Despite the reduction in the capital deficit, the Bangladesh Bank report expressed concern over the banks' loan centralisation in specific sectors.
More than 163 percent of Sonali Bank's capital is centred on the RMG and textile sector in loans, although the standard limit is 25 percent to 50 percent.
The bank gave 66.01 percent of capital in funded loans to Bangladesh Petroleum Corporation and 38.09 percent of capital in non-funded loans to Power Development Board, although the permitted limits are 15 percent and 35 percent respectively.
Janata Bank and Agrani Bank handed 189 percent and 204 percent of their capital respectively to the RMG and textile sector in loans.