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UCB to widen retail, SME lending
SOHEL PARVEZ
On June 29, United Commercial Bank PLC completed 40 years of its operation. Marking the anniversary, Arif Qaudri, managing director and chief executive officer of UCB, talked about the bank’s achievements and future plans as well as the challenges confronting the banking sector, among other issues, during an interview with The Daily Star recently.
DS: It was heartening to see UCB celebrate its 40th anniversary recently. How was the journey?
Quadri: UCB is one of the largest banks in Bangladesh and has a presence across the country. We have a strong network. This presence has allowed us to serve a diverse range of customers and contribute to the growth and development of the communities we operate in.
We have consistently focused on adopting advanced technologies and modern banking practices to make our services more convenient and accessible to our customers.
UCB has not been affected much by the dollar crisis, which started last year. And we have not failed to keep our word when it comes to settling letters of credit (LCs). It was possible as we started rationing LC opening in line with the projected inflows of foreign currencies. We reached a comfortable position in March.
At this point, we are not opening the LCs as much as we did earlier. But we are trying to keep our all clients satisfied.
Going forward, we will increase focus on our retail and SMEs segment. At present, corporate clients account for 70 per cent of our exposure, while it is 25 per cent for SMEs and 5 per cent for retail and Shariah-based finance.
We will increase the pie of retail and SME financing to 40 per cent and keep corporate financing at 60 per cent.
We are educating SMEs and trying to reduce documentation procedures for them without compromising compliance requirements. We are providing a portion of loans to SMEs without collateral.
DS: UCB showed a good performance in 2022 in terms of profit. What were the reasons and which sectors drove the earnings?
Quadri: UCB demonstrated impressive resilience and growth potential in terms of revenue and profitability in both 2021 and 2022. The implementation of a 6 per cent and a 9 per cent interest cap on borrowing and lending presented a significant challenge to the industry’s profitability.
However, we managed to achieve positive growth, building on the previous year’s success. In 2022, UCB experienced an 18 per cent revenue growth and a 27 per cent increase in net profit-after-tax to Tk 402 crore.
Loans and advances witnessed a 16 per cent growth to Tk 46,860 crore.
As was the case for most banks, UCB’s major source of income comes from interest earned on loans and advances. In 2022, our income from loans and advances grew 15 per cent, accompanied by satisfactory growth in interest income on government securities and commissions or fees.
Over the years, we have established a strong customer base in the garment sector and the service industry, which contribute a significant portion to our portfolio. Additionally, we have a large customer base in the SME sector, which also contributes to our profitability.
However, the current year has been tough because of the impact of the war in Ukraine and the drastic fall in imports. Besides, the tendency of some borrowers to repay loans has reduced this year. I think the overall situation in the banking sector was not good in the first six months of 2023.
DS: We see that the NPL ratio of UCB rose in 2021 and 2022 after a massive fall in the previous two years. What were the reasons?
Quadri: In 2020, Bangladesh Bank advised scheduled banks to suspend adverse classification of loans and advances till December 31 of the same year in order to facilitate business activities following the coronavirus outbreak.
Complying the same, UCB did not make any new classification in 2020. This temporary relief negatively impacted the NPL position in the later part of the following The rise in production