Banks come out of subdued business on market-based interest rate

Despite economic challenges amid high inflation and prevailing dollar crisis, six listed banks achieved good profits in the second quarter (Q2) through June this year, driven by higher interest spread.
The lenders reaped the benefit of their wise move investing in Treasury bills and bonds. They also got the advantage of higher interest income. The gap between interest rates fixed by banks on loans and interest rates against deposits widened, leading to higher net interest income.
In May this year, the average interest rate spread jumped by nearly 3 percentage points to 5.86 per cent, according to the Bangladesh Bank. So, banks are earning more in interest this year.
Last year in May, scheduled banks' weighted average deposit rate was 4.41 per cent whereas the landing rate was 7.32 per cent. A year later, the landing rate jumped to 11.28 per cent and the deposit rate 5.42 per cent, BB data shows.
Interest rate has been in an upward momentum since the government removed the ceiling on lending rate in July last year. The rate further rose when the government stopped controlling it and left it to the market in May.
The banking sector in Bangladesh returned to a market-driven interest rate regime after four years at the prescription of the International Monetary Fund (IMF) in order to step up its fight against inflation.
Among the banks, which published second quarter financial statements until Sunday, ONE Bank posted the highest surge in profit year-on-year for April-June this year.
Its income soared 245 per cent to Tk 0.81 billion in the second quarter of this year and half-yearly profit jumped 137 per cent to Tk 1.24 billion up to June this year.
Standard Bank has shown 183 per cent increase in net profit to Tk 0.19 billion in the second quarter while H1 profit grew 146 per cent to Tk 0.36 billion through June this year. The private lender's cash flow turned positive this year.
"The cash flow has increased compared to the same period last year due to an increase in deposits, placement from banks and financial institutions, other operating income, fee, commission and other income receipts, profit on investment and decrease in operating expenses," said the bank.
Meanwhile, NRBC Bank returned to profit in April-June this year.
Its half-yearly profit surged 43 per cent to Tk 0.61 billion in January to June 2024, while net operating cash flow soared from Tk 8.75 per share to Tk 12.52 per share during the time.
NRB Bank, a fourth generation private commercial bank, also returned to profit in April-June this year. The company's foreign exchange gain and operating efficiency played a role behind the turnaround.
The half-yearly results are positive too. The bank has reported a profit of Tk 100 million in January-June this year against a loss of Tk 420 million in the same period of the previous year.
Chief Financial Officer (CFO) Sujan Barua told the FE recently that the bank had already used up the IPO fund raised in February this year. As per the IPO prospectus, the bank injected Tk 40 million into the capital market and invested Tk 930 million in fixed income securities.
The utilisation of the IPO fund will be translated into profits in the next quarter, said Mr Barua.

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