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Political turmoil eats into NBFIs' profits

Gazi Towhid Ahmed
Listed non-bank financial institutions saw their profits drop 7.7 percent in the January-September period from a year ago owing to political uncertainty.
In the first nine months of the year, the sector's net profits stood at Tk 249 crore, down from Tk 269 crore recorded for the corresponding period of 2012.
The political uncertainty, which has been shrinking investment opportunities, hit the NBFIs hard, Selim RF Hussain, managing director of IDLC Finance, said.
Private sector credit growth, which reflects the investment opportunities available to businesses, has been on a downward trend since July. It stood at 11.61 percent, 11.33 percent and 11.07 percent in July, August and September, respectively.
Majority of the NBFIs
Investment, added.
Bangladesh Securities and Exchange Commission has given merchant banks until March, 2014 to make provisions for bad loans, but the IDLC Finance MD called for the deadline to be extended.
However, some NBFIs saw increase in profits. One such company is LankaBangla Finance, whose profits jumped 13.1 percent to Tk 43 crore in the July-September period.
Mohammed Nasir Uddin Chowdhury, managing director of LankaBankla Finance, credits the diversity in its portfolio for the profit growth.
Of the 20 NBFIs that have published their unaudited financial reports, 12 saw decline in profits and eight experienced increases in profits.
Net profits of Prime Finance and Investment surged 151 percent year-on-year to Tk 15 crore in the first nine months of
also registered losses on their stockmarket investments, as the market was in a "bad shape" throughout the period due to political turmoil, Asad Khan, chairman of Bangladesh Leasing and Finance Companies Association, said.
Between January and September, the stockmarket averaged 3,946 points, way below the psychological 4,000-point mark. In contrast, the market averaged 4,628 points in the same period a year ago.
The higher provisioning requirements for nonperforming loans account for the drop in profits as well, Khan, also the managing director of Prime Finance and
the year, while IDLC Finance saw its profits drop 35.5 percent toTk 36 crore.
Among the companies, IPDC saw the highest profit at Tk 7.13 crore during the period, a surge by 386.3 percent from the same period a year ago, while Fareast Finance recorded the highest loss, by 500.7 percent toTk 9.63 crore in the period.
The 23 listed NBFIs account for 13 percent of the total market capitalisation, according to Dhaka Stock Exchange.
gazitowhid@gmail.com