TDS Desk:

The net profits of the country’s banking sector have taken a major hit. In 2024, the combined net profit of banks fell by nearly Tk 27 billion (2,700 crore), or 18 per cent, compared to the previous year. However, during the same year, banks’ interest income rose by 24 per cent and investment income by 30 per cent. In this period, three local and foreign banks each recorded net profits of Tk 10 billion (1,000 crore), while one foreign-sector bank set a record with net profit of Tk 30 billion (3,000 crore).

Last year, when close business associates of ousted Prime Minister Sheikh Hasina defaulted on loans and the banks under their control incurred large losses, the overall net profit of the sector came under strain. This scenario of profits and losses in state-owned, private, and multinational banks has been revealed in a Bangladesh Bank report.

Net profit is calculated after setting aside security provisions against loans and paying corporate tax. Banks are now taking eight more months even after the year-end to complete this process, because net profit figures must be approved at the annual general meeting.

It has been learned that this time, while finalising banks’ annual financial statements, Bangladesh Bank intensified its supervision. The regulator conducted on-site inspections of nearly all banks’ various loan projects and determined the amount of nonperforming loans that must be reported. As a result, defaulted loans increased in most banks. Due to the requirement of setting aside provisions accordingly, many banks saw their profits shrink, while several posted losses.

A review of the central bank’s report shows that in 2024, for the first time in five years, the country’s banking sector faced its biggest hit to net profit. In 2023, the combined net profit of the banking sector was around Tk 148.40 billion (14,840 crore), which fell to Tk 121.58 billion (12,158 crore) in 2024. In other words, within a year, net profit dropped by about Tk 26.82 (2682 crore), or 18 per cent.

THREE MAJOR BLOWS TO PROFITS IN 10 YEARS

An analysis of data of the last 10 years shows that during this period, the banking sector stumbled in terms of net profit three times. In 2018, when a liquidity crisis hit the banking sector, loan disbursement slowed down. At that time, businessmen sat the star hotels negotiated a reduction in the cash reserve ratio (CRR). Meanwhile, irregularities occurred in several state-owned and private banks. Consequently, net profit in the banking sector fell to Tk 35.90 billion (3,590 crore) in 2018, down from Tk 95.10 billion (9,510 crore) in 2017. Before that, net profits in 2015 and 2016 had been Tk 79.20 billion (7,920 crore) and Tk 83.10 (8,310 crore) respectively.

Then in 2020, when the Covid-19 pandemic hit, the economy slowed again. That year, the imposition of a 9 per cent interest rate cap on loans had a negative impact on banks’ interest income. As a result, net profit fell to Tk 46.60 billion (4,660 crore) in 2020, compared to Tk 69.80 billion (6,980 crore) in 2019.

From 2021 to 2023, however, net profits consistently grew. They rose to Tk 50.20 billion (5,020 crore) in 2021, Tk 142.30 billion (14,230 crore) in 2022, and Tk 148.40 billion (14,840 crore) in 2023. But most recently in 2024, it dropped again to Tk 121.58 billion (12,158 crore).

LOSS-MAKING BANKS PULLED DOWN NET PROFITS

Although income from loans and investments increased in 2024, overall net profit declined because of heavy losses in some large banks. Among them, state-owned Janata Bank tops the list. With loans to Beximco Group, S Alam Group, AnonTex Group, and several other businesses turning default, Janata Bank posted a loss of Tk 30.66 billion (3,066 crore) in 2024. Previously hidden defaulted loans came to light in AB Bank, leading to a loss of Tk 19.06 billion (1,906 crore), while National Bank reported losses of Tk 17.06 billion (1,706 crore). After re-auditing, Global Islami Bank, which had earlier shown profit, was found to have a loss of Tk 13.08 billion (1,308 crore). In addition, last year Agrani Bank incurred a loss of Tk 9.82 billion (982 crore), BASIC Bank Tk 8.63 billion (863 crore), First Security Islami Bank Tk 4.05 billion (405 crore), and IFIC Bank Tk 1.21 billion (121 crore).

BANKS THAT PERFORMING WELL

While some banks made heavy losses, a few others managed to sustain profits, and some even posted record amounts. Foreign banks led the way. Multinational Standard Chartered Bank alone recorded a profit of Tk 33 billion (3,300 crore) last year, the highest in the entire banking sector. HSBC Bank also recorded a profit of Tk 10.86 billion (1,086 crore). Among private banks, BRAC Bank topped the list with its net profit rising to Tk 14.32 billion (1,432 crore) in 2024, up from Tk 8.28 billion (828 crore) in 2023. City Bank’s profit increased from Tk 6.38 billion (638 crore) in 2023 to Tk 10.14 billion (1,014 crore) in 2024.

Besides these, Pubali, Eastern, and Prime Bank also saw significant profit growth. Pubali Bank’s profit rose from Tk 6.98 billion (698 crore) to Tk 7.80 billion (780 crore), Eastern Bank from Tk 6.11 billion (611 crore) to Tk 7.50 billion (750 crore), and Prime Bank from Tk 4.84 billion (484 crore) to Tk 7.45 billion (745 crore). In addition, state-owned Sonali Bank made Tk 9.88 billion (988 crore), Dutch-Bangla Bank Tk 4.73 billion (473 crore), Trust Bank Tk 3.73 billion (373 crore), Jamuna Bank Tk 2.79 billion (279 crore), Mutual Trust Bank Tk 3.11 billion (311 crore), and NCC Bank Tk 2.32 billion (232 crore) in net profit last year.

When asked about an overall assessment, former chairman of Association of Bankers, Bangladesh (ABB), Selim R.F. Hossain, told that, for many years, banks were handed over to businesspeople and politicians to loot. Except for a handful, most banks used to show lower default loans and fake profits. Not just S Alam’s banks—many others did the same. Now these realities are surfacing. That is why many banks are incurring losses, and some have reduced profits. This is expected.

Selim RF Hossain further said, “Banks should operate according to international rules. If there is a shortfall in provisions and capital, dividends should not be distributed under any circumstances. The reforms needed in the banking sector have only just begun. Unless full reform is achieved, the sector will not be able to play its proper role in the economy.”