AKM Zamir Uddin

Operating profits of most banks in the just concluded year have shrunk on the back of a business slowdown caused by the ongoing coronavirus pandemic.

However, top executives are finding the sector’s profits quite satisfactory, given the gravity of the economic hardship.

The Daily Star talked to at least seven managing directors who came clean on having apprehensions beforehand of a year-on-year profit decline.

Pubali Bank witnessed a fall from Tk 1,025 crore to Tk 935 crore, Eastern Bank Tk 885 crore to Tk 850 crore and Southeast Bank of 22 per cent, down to Tk 770 crore.

Although a good number of banks did not declare operating profits until 8:00pm last night, officials of most banks might end up having to digest such a downing.

Branches of some banks in 64 municipalities had remained opened yesterday to facilitate election candidates in making deposits of their security money, creating a roadblock in finalising profit statements.

A major portion of the profit will have to be maintained in the form of provisioning against both defaulted and unclassified loans, which will ultimately erode the profit base.

A good number of banks have transferred their accrued interest, which is yet to be realised, to their income segment, which has also helped them inflate their profit for the time being.

The central bank has declared a loan moratorium facility for all borrowers throughout last year in order to come to the aid of clients affected by the financial meltdown.

This has helped banks bring down their defaulted loans as well reduced the amount of money required to be kept as provision. Non-performing loans stood at Tk 94,440 crore as of September last year, down 1.74 per cent from that three months earlier and 18.73 per cent year-on-year, showed data from Bangladesh Bank.

Against this backdrop, the central bank recently asked banks to keep an additional 1 per cent provision against all types of unclassified loans of theirs to absorb the downside risks posed by any business slowdown in the days ahead.

The banks have to set aside around Tk 10,000 crore to comply with this central bank instruction.

Net profit will finally undergo a massive decrease after the provisions are secured and taxes paid.

The interest rate on lending nosedived last year, putting an adverse impact on the profit, said M Kamal Hossain, managing director of Southeast Bank.

The majority of businesses have adopted a go-slow policy in setting up new industrial units and expanding existing ones due to the ongoing crisis, he said.

This has had an adverse impact on the need of businesses to borrow money, Hossain said.