City Bank has set an example of how to make profits by reducing costs at a time when the whole economy has been rocked by the coronavirus pandemic.
After paying taxes in the third quarter of this year, at the end of September, the bank made a profit of Tk308.6 crore. The profit during the same period last year was Tk262.2 crore.
In other words, profits increased by 17.7%.
The bank's earnings per share (EPS) also increased as profits rose. The EPS rose to Tk3.04 at the end of September this year. During the same period last year, the EPS was Tk2.58.
The bank released its third quarter financial performance at an online event on Monday.
Managing Director and Chief Executive Officer of the bank Mashrur Arefin said, "We try to make investors' investments profitable through sound financial management."
"Despite the economic downturn due to the pandemic, we were able to make profits by reducing costs because of our timely management and policy planning. We have shown how to reduce deposit costs. Investors will get a share of this profit. Their reliance on us is one of our great achievements."
Compared to the end of September last year, the bank's expenses in the same period this year decreased by 2.4%. Staff costs came down from Tk151 crore to around Tk129 crore.
At the same time, other expenditures declined by more than 10%, reaching Tk145 crore from Tk154.2 crore. Moreover, operating profits fell by 17.6% to Tk512 crore.
Deputy Managing Director and Chief Financial Officer Md Mahbubur Rahman revealed the bank's financial performance during Monday's event.
He said deposits stood at Tk28,043 crore at the end of September, down 13% from the same period last year.
On the other hand, debt reached Tk29,749 crore at the end of September, up 15.7% from the same period last year.
The loan-to-deposit ratio was 79.3% at the end of September. As a result of proper management, it was possible to keep the ratio below 80%, the bank authorities said.
From April 15 this year, the Bangladesh Bank increased the loan-to-deposit ratio from 2% to 87% for general banks, and to 92% for Islamic banks.
The amount of default loans decreased by Tk39.8 crore in the third quarter. At the end of September last year, default loans fell from Tk1,291 crore to Tk1,251 crore.
Provisioning against loans also declined. It was Tk124.8 crore at the end of September last year, which came down to Tk2.89 crore during the same period this year.
In the first quarter of this year, the cost of deposit fell from 5.6% to 4.4%. Although the cost of borrowing increased by 3.4%, debt income fell by 4.3%.
Explaining the reason, Mahbubur said the government's move to fix interest rates of loans had had an impact. "However, we were able to maintain profits by reducing the cost of deposit."
Although international trade has declined due to the pandemic, City Bank's income has increased in this sector. Compared to the end of September last year, earnings from exports grew by 12%, while that from imports and remittances increased by 13% and 4.2% respectively. In addition, earnings from commission exchange and brokerage rose by 8.9%.
Return on equity also increased in the third quarter of this year. Although the capital adequacy ratio dropped slightly to 8.3%, Mahbubur said there are plans to issue bonds worth Tk400 crore in the future.
He is hopeful that the capital adequacy ratio will increase to 8.5% once bond is issued.
During the question and answer session after financial performance was revealed, Mashrur said the bank's share of corporate debt would fall from 60% to 50% after three years.
The 10% reduction will go to small and medium enterprises, he said.
The chief executive officer also said the bank would focus more on extending digital services in the coming days, adding a connection would be established between mobile banking and debit/credit cards.
This will allow customers to easily make transactions without carrying cards, he said.
"We are also working on introducing QR codes with all types of businesses," he added.