Most of banks post higher profits but declare poor dividends

Mostafizur Rahman | Published: 00:00, May 11,2019

 
 

Despite increase in profits in 2018 compared with the previous year, most of the banks listed with the stock exchanges declared poor dividends for their shareholders.
Out of the 30 listed banks, 16 banks witnessed profit growth, 13 banks posted profit fall and one bank made loss in the year ending December 2018, according to the banks financial disclosures.
However, most of the banks declared lower than expected dividends for their shareholders for the year 2018.
Out of the 30 listed banks, 16 banks declared only bonus dividends, two banks gave no dividends, only four gave just cash dividends and eight provide both stock and cash dividends for 2018.
Financial market experts said that a number of banks were able to make profits as the banking sector had been given various facilities in the second half of the financial year 2018 after the sector had struggled with liquidity crisis, huge volume of bad loans, rising current account deficit and exchange pressure in the first half of 2018.
The central bank had reduced banks’ cash reserve ratio to 5.5 per cent from 6.5 per cent, releasing Tk 10,000 crore in favour of the banks from central bank.
The central bank had also cut the interest rate on repurchase agreement [repo] by 75 basis points on the same day, they added.
According to the decision, the existing repo interest rate of the central bank would come down to 6.00 per cent from the existing level of 6.75 per cent.
The reduced CRR and repo rate became effective on April 15, 2018.
In the same month, finance ministry issued a notification allowing private banks and non-bank financial institutions to get up to 50 per cent of the government, semi-government and autonomous bodies’ fund.
Besides, the government cut corporate income tax of listed banks, NBFIs and insurance companies to 37.5 per cent from 40 per cent.
But, bankers said that despite the bailouts, the financial sector remained mostly volatile amid huge non-performing loans, pressure on exchange rate, rising current account deficit, and major liquidity stress.
A number of banks could not stand against these challenges and declared profit falls and poor dividends for 2018.
United International University professor Mohammad Musa told New Age that the banking sector has been struggling for funds that provoked them to declare stock dividends more than the cash ones.
He also said that banks in the country provided large loans to politically influential businesses that became classified and became burden for them. The increased bad loans reduced profit making capacity of the banks that must be addressed.
Lack of governance and monitoring, presence of political influence and absence of proper regulatory policy were the main reasons for the crisis in the banking sector, he said.
Banking sector of the country has been going through huge irregularities with the total classified loan standing at Tk 93,911 crore on December 31, 2018, up from Tk 74,303 crore a year ago, say the central bank data.
Experts said the banks had to keep 100 per cent provision against their classified loans, worsening liquidity condition.
They also said that the situation got worse as huge funds continued to flow to the national savings certificates as the depositors got double digit interest rate from the tools.
Bankers said that the liquidity stress and volatility in interest rate in this period has created pressure on their profits. Therefore, most banks prefer bonus dividends to keep cash in reserve to mitigate unforeseen crisis.
Of the banks, Pubali Bank reported highest profit growth in the year 2018 of Tk 357 crroe compared with that in the previous year.
In the period, Pubali Bank profit after tax soared to Tk 362.70 crore from Tk 5.71 crore in the previous year.
Dutch Bangla Bank, Islami Bank, Southeast Bank and Prime Bank increased profit by Tk 174.62 crore, Tk 139 crore, Tk 130.46 crore, and Tk 103.89 crore respectively.
On the other hand, profits of The City Bank plunged by Tk 123.39 crore to Tk 222.47 crore in 2018 from that of Tk 345.86 crore in the previous year.
Profits of One Bank, EXIM Bank and IFIC Bank declined by Tk 122.29 crore, 96.59 crore and Tk 74.71 crore respectively.
ICB Islamic Bank was the only bank which incurred losses in the first nine months of this year.
The bank showed Tk 48.52 crore in losses against losses of Tk 40.50 crore in the same period of 2017.

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