Banks Overseas Foreign Exchange Drop Impacts Revenue

Banks' Foreign Exchange Earnings Drop Impacts Income My News Bangladesh

Bangladesh banks’ Foreign Exchange earnings dropped by 9% impacting income; the majority report higher earnings but slower growth.

The mixed earnings of 35 listed banks in Bangladesh dropped 9 p.c year-on-year to Tk 4,160 crore through the first half of 2023 as volatility within the nation’s international change market has curbed their commissions from foreign exchange dealings.

As per their monetary statements for the January-June interval of the present calendar yr, a majority of those lenders logged increased earnings with simply 13 registering lowered earnings.

Nevertheless, the profit-making banks noticed comparatively gradual progress, permitting the loss-making ones to outpace the mixed-good points of the revenue makers.

For instance, earnings of Financial Institution Asia soared 52 p.c to Tk 354 crore through the six-month interval whereas losses of Nationwide Financial Institution sank additional by some 262 p.c to Tk 626 crore.

“The banks noticed their earnings fall this yr attributable to decrease revenue from commissions and brokerage charges,” mentioned Ali Imam, managing director and CEO of Edge Asset Administration.

“The quantity of tax evasion is estimated to be eight occasions the social security web and welfare expenditures.”

— Khondaker Golam Moazzem Analysis director of CPD
The corporate manages belongings value about Tk 140 crore, most of which is invested in shares, together with banking scrips.

Their fee revenue fell as Bangladesh Financial institution had squeezed the unfold on the acquisition and sale of US {dollars} in a bid to reign in foreign exchange market volatility ensuing from a scarcity of the dollar.

In August 2022, the central financial institution instructed all lenders within the nation to take care of a margin of Tk 1 when shopping for and promoting the US greenback.

Imam mentioned the brokerage charges paid to banks additionally got here down this yr as actions within the inventory market have been gradual because of the implications of the floor-price mechanism.

As well as commissions from opening letters of credit score (LCs) have been hit as the federal government imposed stringent situations for non-essential imports to stem the persisting international change disaster.

Apart from, curiosity revenue, the primary supply of revenue for banks didn’t compensate for decreased commissions because the ceiling on rates of interest stymied progress on this phase, he added.

The mixed curiosity revenue grew 7 p.c year-on-year to Tk 11,711 crore through the January-June interval whereas funding revenue edged up 18 p.c to Tk 7,987 crore on a similar time.

“Extra importantly, the federal government relaxed the foundations for accounting non-performing loans [NPLs],” Imam mentioned.

However, regardless of the transfer, the overall worth of reported NPLs has reached a big stage.

“So, NPLs are appearing as a scientific risk to the entire banking sector,” he added.

Foreign Exchange: Bank Profits Rise in Bangladesh’s Financial Sector

The second high profit-maker after Financial Institution Asia was Islami Financial Institution, which noticed its good points for the January-June interval drop 1 p.c year-on-year to Tk 343 crore.

However, earnings of Pubali Financial Institution, Shahjalal Islami Financial Institution, and Jamuna Financial Institution rose to Tk 278 crore, Tk 272 crore, and Tk 256 crore respectively.

ICB Islamic Financial Institution was the second greatest loss-maker because the lender registered losses of Tk 26 crore in comparison with earnings of Tk 1 crore throughout the identical interval of the earlier yr.

Mirza Elias Uddin Ahmed, managing director and CEO of Jamuna Financial Institution mentioned the banking sector is in a barely harassed place attributable to excessive NPLs, and the gloomy enterprise local weather ensuing from inflationary stress and political rigidity.

NPLs within the general banking sector stood at Tk 131,621 crore as of March 31, up 9 p.c from three months again and 16 p.c year-on-year, reveals up to date knowledge of Bangladesh Financial institutions.

And because of the excessive NPLs, banks are being denied correct revenue from these loans.

Non-public sector credit score progress additionally slowed as entrepreneurs are being cautious about investing for now contemplating the present political rigidity and stress on international change reserves, he added. Challenges in Private Sector Credit Growth Amid Political Tension and Foreign Exchange Reserves

Non-public sector credit score progress hit a 15-month low of 11.1 percent in Might, the info reveals.

It’s because many good purchasers are already overburdened and don’t want contemporary loans as they’re already dealing with challenges in repaying the present ones, Ahmed mentioned.

Concerning the decreased fee revenue, Ahmed mentioned that lowered LC opening is accountable.

Non-public and public entities opened LCs amounting to $69.36 billion in fiscal 2022-23, down 26 p.c year-on-year, as per central financial institution knowledge.

However, regardless of the state of affairs, some banks which have low NPLs managed to log increased earnings.

“The banking enterprise will do higher as soon as the political rigidity is worn out,” Ahmed added.

Foreign exchange drops are a reality in the global financial landscape. They can have wide-ranging implications on economies, affecting inflation, trade balances, and investment.

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