Staff Correspondent:

How did the first half of this year treat the banking sector? The answer depends on whom the listed banks lent to over the past 15 years.

In the January-June period of 2025, six listed commercial lenders posted record profits, buoyed by low levels of bad loans and sizeable, secure returns from treasury bonds.

But in the same period, five others incurred a combined loss of Tk 6,000 crore after their exposure to toxic assets came to light after the 2024 political changeover, forcing them to set aside far more in provisions.

Financial reports show BRAC Bank, Pubali Bank, Prime Bank, Eastern Bank, Jamuna Bank and Bank Asia all achieved record profits in the first half of the year, with their combined earnings increasing by 80 percent.

By contrast, AB Bank, First Security Islami Bank, IFIC Bank, National Bank and Social Islami Bank recorded the sector’s biggest losses, together totalling Tk 6,000 crore.

“Non-performing loans (NPLs) were the decisive factor,” said Md Main Uddin, professor of banking and insurance at Dhaka University.

“If a bank has high bad loans, it cannot earn interest income from those. Moreover, it has to keep provisions on that bad loan from their profit,” he said. “So, it hits profit directly.”

Prof Uddin said banks with low NPLs could invest more in treasury bonds, which recently offered historically high interest rates. These returns were both risk-free and fully secured, requiring no provisions, which helped their profits soar.

Among listed lenders, BRAC Bank posted the highest profit of Tk 708 crore, followed by Pubali Bank with Tk 578 crore and Prime Bank with Tk 415 crore. Jamuna Bank and Eastern Bank also each reported profit above Tk 300 crore.

Other lenders enjoying strong growth in the first half of 2025 included City Bank, Bank Asia, Dhaka Bank, Mercantile Bank, Shahjalal Islami Bank and Southeast Bank.

At the other end of the scale, AB Bank posted the largest loss of Tk 1,758 crore in the first six months. First Security Islami Bank lost Tk 1,691 crore, IFIC Bank Tk 1,128 crore, and National Bank Tk 985 crore.

In its financial report, AB Bank said its profits dropped mainly due to a fall in net interest income, which dropped by Tk 1,473 crore compared with the same period last year.

The bank said interest income fell as non-performing loans rose, and spreads narrowed amid high interest rates. Its bad loans jumped 33 percent to Tk 25,765 crore.

A similar story played out across most of the major loss-makers.

IFIC Bank cited “deterioration in asset quality” as the main cause, noting its net interest income fell into the red at negative Tk 970 crore, down from a positive Tk 443 crore a year earlier.

First Security Islami Bank said an increase in classified investments led to a Tk 1,977 crore drop in net investment income year-on-year.

National Bank reported it could not book interest on loans and advances because of poor recovery from defaulters, while also facing higher interest expenses on deposits and borrowings.

Despite these setbacks, National Bank in its financial report said its new board and management were working to improve financial health by stepping up recovery efforts and mobilising low-cost deposits.

Speaking on condition of anonymity, a senior official of a leading bank said depositors were moving funds to banks with strong corporate governance during the period, even if the lenders offered lower interest rates, because of the perceived safety of their assets.

As a result, well-run banks were flush with deposits, while others were struggling to attract any.

“In the coming years, this tendency may continue. So, well-governed banks will do better,” he added.