Unrest weighs on banks' profits

Most of the renowned banks saw their profits decline in 2013 due to political unrest and an increase in default loans.
For the first time in recent years, Islami Bank's profit witnessed a fall, by 12.5 percent, compared to 2012.
Islami Bank accounts for 10 percent of the total credit in 54 banks in Bangladesh.
Janata, Agrani, Rupali, National and Prime -- all suffered the same fate.
However, a few banks such as Pubali, Mutual Trust, Al Arafah Islami, Bank Asia and UCBL were an exception.
Most banks could not disburse credit properly due to political instability and their import-export business also suffered, leading to a decrease in their profits, bankers said.
Helal Ahmed Chowdhury, managing director of Pubali Bank, said default loans in many banks rose in 2013 due to various scams in the previous year, which caused a fall in their profits.
Chowdhury said banks usually witness dull business in any election year, but 2013 was an exception as political violence continued throughout the year.
However, he said some banks, whose loan portfolio management was good, fared quite well.
The Pubali Bank MD also said 2014 will be another challenging year for the banks and also a year for showing resilience.
Mohammad Abdul Mannan, managing director of Islami Bank, said profits fell due to a slide in the non-investment income of the banks.
Violent political programmes such as shutdowns and blockades also dealt a blow, he said.
Mannan, also the vice chairman of Association of Bankers-Bangladesh, a platform of chief executives of banks, said the banks could not earn much through foreign currency transaction, which is a major reason behind the fall in profits.
The amount of default loans at banks was Tk 56,720 crore as in September 2013, up from Tk 42,725 crore on December 31, 2012, according to Bangladesh Bank.
The banks had to make provisioning from their incomes due to the huge rise in the amount of default loans -- around Tk 14,000 crore in nine months.
Meanwhile, banks' overall credit growth slowed to 8.01 percent in the first eleven months of 2013, while at least 16 banks saw their credit fall due to political uncertainty. Bank officials said blockades and shutdowns are hindering banking activities as businesspeople cannot carry on their normal business leading to a fall in the demand for loans.

In early December, the central bank published a quarterly report portraying the dull business scenario in 2013.
The report said a number of proxy indicators such as trade financing and bank advance to transport and communication sector reflect slower services sector growth during the first quarter of the current fiscal year.
Data on bank advance shows that the growth of credit to the trade sector declined to 12.93 percent in the first quarter of the current fiscal year, from 24.68 percent in the same period last year.
The BB report said bank credit to the transport and communication sector registered a negative growth of -43.54 percent as against a positive growth of 85.68 percent in the same period of the previous fiscal year.
Retail and wholesale trade, hotel and restaurant business and tourism are facing a sluggish demand due to frequent shutdowns.