Banks’ Q4 performance in areas causes concerns

Siddique Islam | Published: September 30, 2016 00:00:00 | Updated: February 01, 2018 00:00:00

Country's banking sector performance caused some concerns in areas including classified loans in the final quarter of the fiscal year (FY) 2015-16 compared to that of the previous quarter, according to the central bank's latest quarterly report.
"Several key indicators such as gross nonperforming loans (NPL), provision shortfall position, return on assets (ROA) and return on equity (ROE) exhibit deteriorations during the quarter compared to the previous one," said the latest Bangladesh Bank Quarterly (BBQ) for April-June, 2016 which was released on Thursday.
The ratio of gross NPL to the total outstanding loans of the banking sector increased to 10.06 per cent at the end of fourth quarter (Q4) of the FY '16 from 9.92 per cent at the end of the Q3 of FY '16.
However, the ratio of net NPL decreased to 2.81 per cent at the end of June '16 from 2.88 per cent at the end of March '16.
The provision shortfall position of the banking sector deteriorated during the April-June period of the FY and stood at Tk 44.5 billion from Tk 41.2 billion at the end of January-March '16.
Besides, the overall capital-to-risk weighted assets ratio (CRAR) of all banks came down to 10.34 per cent in the Q4 of the last fiscal year from 10.62 per cent three months ago under Basel-III calculations.
Among the profitability measures, ROA of the banking industry declined to 0.44 per cent at the end of June '16 from 0.77 per cent at the end of December '15 while ROE also decreased to 6.74 per cent from 10.51 per cent.
Besides, the monthly interest rate spread for all banks, measured as the difference between the monthly weighted average interest rate of advances and deposits, remained below 5.0 per cent during the Q4.
"We've already expedited our monitoring and supervision with aim to improve performance of the country's banking sector," a senior official of the BB told the FE while explaining the central bank's latest position.
The BB, he said, has asked the four state-owned commercial banks (SoCBs) to make vigorous efforts immediately to reduce the volume of classified loans.
The public banks have also been advised to go for small and medium scale loans instead of large ones for minimising their risk, he informed.
"All the scheduled banks have already been advised to be more careful in case of borrower selection and exercise due diligence while sanctioning fresh loans," the BB official noted.
Moreover, the BBQ said real GDP (gross domestic product) grew by 7.05 per cent in the FY compared to 6.55 per cent in the last FY, mainly supported by a stable political environment along with pragmatic fiscal and accommodative monetary policies.
Monetary Policy Statement for first half (H1) and Second half (H2) of the FY '16 was inclusively growth-supportive, it added.
"To keep up growth momentum and maintain tolerable level of inflation, monetary policy for H1FY17 is announced which is supportive for achieving 7.2 per cent real GDP growth and an inflation rate at or below 5.8 per cent for FY 17," the BB said in the BBQ.
However, overall inflation is expected to be softening with agricultural growth stemming from the persistent agricultural production, smooth flow of supply chain in domestic market due to absence of political uncertainty, it observed.
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