Eastern Bank will give big push to SME lending
Sunday, 16 March 2008
A Z M Anas
Eastern Bank Limited plans to scale up loan disbursement for smaller firms and consumers by 2010 in a bid to reduce its reliance on corporate lending, its chief executive said.
Currently, corporate loans constitute nearly 70 per cent of the bank's total lending portfolio.
But, Ali Reza Iftekhar, CEO and managing director of the bank, said his aim is to jack up SME (small and medium enterprises) and consumers lending by 50 per cent in the coming years.
"SME loans may create a revolution in the banking industry in the next five years," Iftekhar told The Financial Express in an interview.
"The SME lending will get a big push. SMEs are vital pillars of larger industries," he said, noting that today's global corporations -- Dell and Caterpillar -- were once smaller enterprises.
Established in 1993, Eastern Bank with a network of 28 branches and 650 employees is one of rapidly-growing private lenders. As of June 2007, the bank's paid up capital stood at Tk 1.3 billion.
In 2007, the bank's lending portfolio totalled Tk 28 billion, but it managed to peg its non-performing loans at less than 4.0 per cent.
Iftekhar said Eastern has identified supply chain, women entrepreneurs, agro-processing and light engineering as priority areas for lending in the near future.
"Non-traditional sectors such as ship-building and software development will also get prominence in lending priority," he added.
The bank's top boss said his bank racked up a robust Tk 1.90 billion in pre-tax profits last year, driven by incomes from corporate loans, trade finance and cost-efficiency.
"It's the highest in the bank's history. Our profits were Tk 2.0 billion in 2007, posting 35 per cent growth over a year ago" Iftekhar said.
In 2006, the bank churned out profits worth Tk 1.06 billion by lending out Tk 24 billion, he said. "We've set a target of Tk 2.15 billion in profits this year."
Despite an economic downturn in the first half of 2007, Iftekhar said the country's private banking sector fared well, so did Eastern, mainly on the back of corporate lending and loans meant for imports of essentials by businesses.
As of 2006, the banking sector's assets were estimated at US$32.74 billion, accounting for around 53 per cent of GDP.
But private banks leapfrogged state-owned lenders, having grabbed 47 per cent of the shares in 2006. The shares of state-owned banks declined to 32 per cent in 2006 from 37 per cent in 2005.
The 46-year-old chief executive insisted that investment in human resources, automation and faster loan processing would bring about "a sea change' in the banking growth.
"Reduction of manual interventions will also lead to lower forgery," he added.
Iftekhar, who started his banking career in mid-80s at BCCI, said improving service standard is the 'biggest' challenge facing the country's banking industry.
"Only rate (lending) cut will not bring about strong health in the banking sector. We've to keep in mind that banking is a service industry. If you invest in human resources, training, make process simpler and automate banking operations, the growth will be an easy thing to come by," Iftekhar, who also worked for Standard Chartered and Credit Agricole banks, said.
He said private investment might pick up steam next year, particularly in new sectors like ship-building.
Already, three local ship manufacturers have grabbed orders worth US$450 million from German, Dutch and Danish companies for supplying medium-size vessels.
Eastern Bank Limited plans to scale up loan disbursement for smaller firms and consumers by 2010 in a bid to reduce its reliance on corporate lending, its chief executive said.
Currently, corporate loans constitute nearly 70 per cent of the bank's total lending portfolio.
But, Ali Reza Iftekhar, CEO and managing director of the bank, said his aim is to jack up SME (small and medium enterprises) and consumers lending by 50 per cent in the coming years.
"SME loans may create a revolution in the banking industry in the next five years," Iftekhar told The Financial Express in an interview.
"The SME lending will get a big push. SMEs are vital pillars of larger industries," he said, noting that today's global corporations -- Dell and Caterpillar -- were once smaller enterprises.
Established in 1993, Eastern Bank with a network of 28 branches and 650 employees is one of rapidly-growing private lenders. As of June 2007, the bank's paid up capital stood at Tk 1.3 billion.
In 2007, the bank's lending portfolio totalled Tk 28 billion, but it managed to peg its non-performing loans at less than 4.0 per cent.
Iftekhar said Eastern has identified supply chain, women entrepreneurs, agro-processing and light engineering as priority areas for lending in the near future.
"Non-traditional sectors such as ship-building and software development will also get prominence in lending priority," he added.
The bank's top boss said his bank racked up a robust Tk 1.90 billion in pre-tax profits last year, driven by incomes from corporate loans, trade finance and cost-efficiency.
"It's the highest in the bank's history. Our profits were Tk 2.0 billion in 2007, posting 35 per cent growth over a year ago" Iftekhar said.
In 2006, the bank churned out profits worth Tk 1.06 billion by lending out Tk 24 billion, he said. "We've set a target of Tk 2.15 billion in profits this year."
Despite an economic downturn in the first half of 2007, Iftekhar said the country's private banking sector fared well, so did Eastern, mainly on the back of corporate lending and loans meant for imports of essentials by businesses.
As of 2006, the banking sector's assets were estimated at US$32.74 billion, accounting for around 53 per cent of GDP.
But private banks leapfrogged state-owned lenders, having grabbed 47 per cent of the shares in 2006. The shares of state-owned banks declined to 32 per cent in 2006 from 37 per cent in 2005.
The 46-year-old chief executive insisted that investment in human resources, automation and faster loan processing would bring about "a sea change' in the banking growth.
"Reduction of manual interventions will also lead to lower forgery," he added.
Iftekhar, who started his banking career in mid-80s at BCCI, said improving service standard is the 'biggest' challenge facing the country's banking industry.
"Only rate (lending) cut will not bring about strong health in the banking sector. We've to keep in mind that banking is a service industry. If you invest in human resources, training, make process simpler and automate banking operations, the growth will be an easy thing to come by," Iftekhar, who also worked for Standard Chartered and Credit Agricole banks, said.
He said private investment might pick up steam next year, particularly in new sectors like ship-building.
Already, three local ship manufacturers have grabbed orders worth US$450 million from German, Dutch and Danish companies for supplying medium-size vessels.