Performance of state-run banks improves

Bad loan still a big challenge

Jannatul Islam

9 January, 2018 12:00 AM printer

The performance of state-run banks has improved as the banks’ year-on-year operating profits rose by 68 percent in 2017 although the recovery of bad loans is the biggest challenge for the financial institutions run with public money.

The combined un-audited operating profit of the state-run commercial banks soared to Tk 3,999 crore at the end of 2017 from Tk 2,376 crore a year ago.

There are eight state-run banks in Bangladesh, including Sonali Bank, Rupali Bank, Agrani Bank, Janata Bank, Basic Bank, Bangladesh Development, Bangladesh Krishi Bank and Rajshahi Krishi Unnayan Bank.

In 2017, both Sonali and Janata bank posted an operating profit of more than Tk 1,000 crore. Sonali Bank’s operating profit increased to Tk 1,178 crore in 2017 from Tk 424 crore in 2016. Janata Bank earned Tk 1,171 crore in 2017, up from Tk 1,006 crore in 2016.

Rupali Bank faced a loss of Tk 87 crore in 2016 but rebounded with an operating profit of Tk 540 crore in the just-concluded calendar year. Of other state-owned banks, Agrani posted Tk 951 crore in operating profit in 2017 from Tk 555 crore in 2016, scam-hit Basic Bank’s operating profit soared to Tk 43 crore in 2017 from Tk 9 crore a year ago while Bangladesh Development Bank fetched Tk 108 crore in operating profit from Tk 65 crore a year ago.

Officials of the banks claimed that recovery of bad loans and lower interest rates helped them earn higher operating profits in 2017.

The state-owned banks were also able to reduce the ratio of non-performing loans to an average 21 percent by 2016 from previous 32.84 percent of the total outstanding loans. This is a significant takeaway for banks like Sonali Bank that had been maintaining average NPL figure of 30.12 percent in last 10 years.

Economists said the rebound of the state-run banks is a positive sign for the country’s economy. They, however, said a major portion of the operating profit will be used for provisioning of bad loans.

Former Bangladesh Bank Deputy Governor Khondkar Ibrahim Khaled said the performance of the public banks has slightly improved, but the recovery of bad loans will remain a big challenge.

“The state-run banks performed well after some managing directors were replaced. A large amount of money remains stuck in default loans. So the rise in operating profit will not make any big difference in the sector,” Khondkar Ibrahim Khaled said while talking to the daily sun on Monday.

Officials attributed the state banks’ increased operating profits to the falling cost of funds and higher recovery of bad loans.

Janata Bank Managing Director Mohammad Abdus Salam said, “This was the highest annual operating profits we made in last four years. We have been working to get rid of classified loans. Managers are now directly accountable to the audit committee. We declared some 115 branches free from classified loans.”