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SoCBs see profit drop or count loss

Analysis for 2016 shows such setback, attributes it to inefficiencies, lack of accountability

Jasim Uddin Haroon | December 02, 2017 00:00:00

Six state-owned commercial banks (SoCBs) saw their combined net profit erode in the last calendar year, largely for their own shortcomings, sources said.

Of them, two scam-hit SoCBs -- Sonali and BASIC -- incurred substantial losses during the year.

Many believe the public financial institutions remained inefficient and lacked accountability and competitiveness for years.

Such lacking, they said, led to abuse of public money as the banks require, almost every year, recapitalisation with money doled out from the national exchequer to make up for their fund shortfalls.

A recent publication styled 'financial institutions report 2016-17', prepared by Financial Institutions Division under the Ministry of Finance (MoF), laid the banks inside out that revealed such a situation.

The aggregate net profit of the state-owned banks -- Sonali, Rupali, Janata, Agrani, BASIC and BDBL -- dropped more than 14 per cent to Tk 27.25 billion at the end of December 2016, according to the report.

Of the banks in the public sector, the net profit of two -- Sonali and BASIC -- in the past year was negative. The four others were in the profit domains, with BDBL profit shrinking more than in 2015.

On the other hand, the combined net profit of the private commercial banks rose by nearly 18.7 per cent to Tk 73.11 billion in the year under review.

Some former bank chief executives, talking to the Financial Express (FE), pointed out an operational mismatch in terms of deposit and disbursement that leaves lower returns for these banks. The state-owned banks have low loan disbursement in comparison with their deposits, leaving substantial amounts of "idle money" in their vaults.

They also noted that many working with the banks do not go for aggressive marketing for fear of losing their jobs.

Furthermore, the chief bankers of the yesteryear said there a number of 'directors' loans from the state-owned commercial banks which mostly do not go in favour of genuine investors.

Prodip Kumar Dutt, a former managing director & CEO at the country's biggest state-owned bank in terms of paid-up capital, said they lacked quality loans and that many dodge instalments.

"Even those who are paying instalments for the private banks' loans do not repay loans from state-owned banks regularly, leading to rise in the classified loans," he told the FE.

If there are huge classified loans and for this reason banks have to maintain provisioning, a large part of their profitability is eaten up.

The report mentioned that the BASIC Bank had nearly 54 per cent classified loans in 2016. The BDBL had more than 40 per cent, Sonali nearly 27 per cent, Agrani over 17 per cent, Rupali just 16 per cent and Janata over 10 per cent in 2016.

Mr Dutt also said the government banks were now opting for investment in government's fixed-income securities like the treasury bills and bonds.

Dr Zaid Bakht, chairman at the state-owned Agrani Bank, told the FE that the long-entrenched culture of bad loans with the state-owned banks cannot be overcome overnight.

"We need time and supports from the central bank."

Dr Bakht, also a renowned economist, said the government has now identified the reasons behind the poor performances of the banks. "Now boards of the banks have been strengthened, and there are some signs of competitiveness."

Eunusur Rahman, secretary at the Financial Institutions Division under the finance ministry, told the FE that the government was working hard to minimise losses and give the banks a strong footing.

"We've have been working and completed workshops to find out reasons and prepare effective devices to minimise losses," Mr Rahman said.

The official, however, said none should compare public banks with private banks as the former do many state services which actually do not accrue profits.

"Look, public banks handle social-safety-net programmes and other government services with no or very little charges."

Citing another instance of welfare activities in banking, he said: "We are giving loans to people in the flood-affected Haor areas but the loan-realisation picture will emerge different…"

However, economists familiar with financial market said this is very sad that the government has been feeding the "inefficient" banks for years. They lack accountability and, so far, none is interested about their meaningful reforms.

Dr Ahsan H Mansur, executive Director at the private think-tank Policy Research Institute of Bangladesh (PRI), said: "They lack accountability and loans are usually sanctioned on political considerations."

He remarked that public money is pouring into recapitalisation which, in true sense, does not change its overall picture.

"Financial statement remains some kind of 'sound' after getting government funds, and after a certain period, they become again the same hole they had been before," Dr Mansur told the FE.

He said the banks cannot earn much so, again, their contributions to the consolidated fund have been squeezing as non-tax revenue.

The Sonali Bank, with Tk 38.3 billion as paid-up capital, made a net profit negative worth Tk 15742 million while BASIC negative Tk 14930.4 million in the calendar year 2016.

On the other hand, Bangladesh Development Bank Limited (BDBL), established in 2009 through merger of two state-owned financial institutions - Bangladesh Shilpa Bank and Bangladesh Shilpa Rin Sangstha -- made a net profit of Tk 382.4 million -- much lower than its previous years. The BDBL fetched net profit in 2015 worth Tk 809.4 million, according to the report.

And Agrani made a net profit of Tk 3505.5 million in 2016, Janata Tk 2536 million and Rupali Tk 1258.6 million in the year under review.

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