Bankers have expressed concern about their ability to retain the trend in 2020 in the face of the government’s move to cap interest rates at single digit
Banks have made satisfactory operating profit in the outgoing year amid a slower growth both in foreign trade as well as in private sector credit.
Tuesday was the last day of 2019 and all banks calculated their operating profit that day.
Sources at Islami Bank Bangladesh Ltd, the country's leading private bank, said their bank made the highest operating profit of Tk2,875 crore last year, up from Tk1,978 crore in 2018.
Official data on the operating profit were not available due to restrictions by regulators. However, the data was collected through sources among bank officials.
The operating profit is a bank's profit before deducting taxes and provisioning for loan classification and other liabilities.
Despite being happy with profits in the outgoing year, bankers have expressed concern about their ability to retain the trend in 2020 in the face of the government's move to cap interest rates at single digit.
Faruq Mainuddin Ahmed, managing director of Trust Bank Ltd, told The Business Standard, "Banks did not have good business in the last few months of 2019. Despite that, overall, we have done well in the year."
"However, we expect a tougher situation in 2020," he added.
Faruq Mainuddin mentioned that banks have to lend at 9 percent interest for all sectors from April as declared by the finance minister, and cannot take deposits at more than 6 percent interest.
"How come? We took deposits for one year at 9.5 percent interest in November last year. They will mature in the coming November. How will we adjust the interest rates in the middle of the tenure?"
He expressed apprehension by saying, "The banking business may collapse in 2020. Banks will lose their deposits. Loans will decline. Profit will fall. And ultimately the government will lose revenue."
Last year the country's foreign trade had negative growth. That is why banks had to miss a handsome business from this sector.
The July-October import growth dropped by 3.17 percent while the July-November export growth plunged by 7.59 percent.
Bankers say that there has been a rise in operating profit because they are putting emphasis on loan recovery.
Motiul Hasan, additional managing director of Mercantile Bank, said the bank has made a significant operating profit as they performed well both in lending and recovery.
Moreover, the operating profit of a few large banks including National Bank Ltd and One Bank fell last year compared to their earnings in previous year.
The liquidity position of banks was good in 2019. However, lenders witnessed an increase in classified loans in the first nine months of the year. Loan recovery by banks was Tk12,234 crore during that period. Private sector credit growth in November was the lowest in 15 years.
Dr Mohammed Haider Ali Miah, vice-chairman of the Association of Bankers, Bangladesh and managing director of Exim Bank, told The Business Standard, "There is a challenge ahead but banks have the capability of facing it. We will feel comfortable if we get the government deposits as per declaration."
Finance Minister AHM Mustafa Kamal on Monday declared that private banks will get deposits from the government at 6 percent interest while state-owned lenders will get it at 5.50 percent interest from April this year.