Bank Asia has reported a loss of Tk 1.03 billion for July-September this year, owing to higher provisions against loans and advances.
The loss per share amounts to Tk 0.89 for the quarter, as opposed to a profit of Tk 0.18 earned in the same quarter a year earlier.
The lender plunged into the red in the third quarter to September mainly for the higher provisions, said the bank in its earnings note.
Interest income against bad loans that accrue on paper but have not been received in reality needs to be excluded from the profit and loss accounts.
According to the rules, every lender has to set aside a certain amount of its income in proportion to the non-performing loans and the amount is called provision.
Following the Bangladesh Bank's strict instructions to maintain adequate provisions against non-performing loans, the bank's provisions almost doubled in the latest quarter for high classified loans.
Recently, the central bank said lenders would have to treat a loan as overdue if a borrower did not make an installment payment within three months after the passing of the due date, which was earlier six months.
Bank Asia also dealt with a faster growth of interest payments to depositors and lenders, compared to the growth of interest income, leading to losses during the quarter to September.
Interest income jumped 35 per cent year-on-year to Tk 8.10 billion in the quarter through September, while interest payment to depositors and lenders soared 57 per cent to Tk 6.50 billion.
Hence, its net interest income fell 14 per cent year-on-year to Tk 1.60 billion in the third quarter.
Meanwhile, income from investment, particularly from government securities, escalated 114 per cent year-on-year during the quarter.
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 this year.
The financial sector returned to a market-driven interest rate after four years at the prescription of the International Monetary Fund (IMF) in order to step up its fight against inflation.
The overall volume of non-performing loans in the banking sector reached a record high of more than Tk 2.11 trillion by June this year, according to the Bangladesh Bank.
Provision burden also eroded Bank Asia's nine-month consolidated profit by 46 per cent year-on-year to Tk 2.05 billion through September this year.
© 2024 - All Rights with The Financial Express
