Banks’ income hit by decrease earnings from foreign exchange market

The mixed income of 35 listed banks in Bangladesh dropped 9 % 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 12 months, a majority of those lenders logged increased income with simply 13 registering diminished earnings.

Nonetheless, the profit-making banks noticed comparatively sluggish progress, permitting the loss-making ones to outpace the mixed positive factors of the revenue makers.

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

“The banks noticed their income fall this 12 months attributable to decrease earnings 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 internet and welfare expenditures.”

— Khondaker Golam Moazzem Analysis director of CPD

The corporate manages belongings price about Tk 140 crore, most of which is invested in shares, together with banking scrips.

Their fee earnings 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 buck.

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 12 months as actions within the inventory market have been sluggish as a result of 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 circumstances for non-essential imports to stem the persisting international change disaster.

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

The mixed curiosity earnings grew 7 % year-on-year to Tk 11,711 crore through the January-June interval whereas funding earnings edged up 18 % to Tk 7,987 crore on the identical time.

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

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

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

The second high profit-maker after Financial institution Asia was Islami Financial institution, which noticed its positive factors for the January-June interval drop 1 % year-on-year to Tk 343 crore.

Alternatively, income 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 largest loss-maker because the lender registered losses of Tk 26 crore in comparison with income of Tk 1 crore throughout the identical interval of the earlier 12 months.

Mirza Elias Uddin Ahmed, managing director and CEO of Jamuna Financial institution, mentioned the banking sector is in a barely burdened place attributable to high 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 % from three months again and 16 % year-on-year, reveals up to date knowledge of Bangladesh Financial institution.

And as a result of excessive NPLs, banks are being denied a correct earnings 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.

Non-public sector credit score progress hit a 15-month low of 11.1 per cent in Could, the information reveals.

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

Concerning the decrease fee earnings, Ahmed mentioned diminished LC opening is guilty.

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

However regardless of the scenario, some banks which have low NPLs manged to log increased income.

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