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IBBL to prop up investment portfolios

Chairman tells FE

Siddique Islam | October 16, 2017 12:00:00

Arastoo Khan — FE Photo

The reconstituted board of directors of Islami Bank Bangladesh Limited (IBBL) has taken a strategy to achieve higher profit by the end of the ongoing calendar year, the bank chairman has said.

Under the new strategy, the IBBL wants to ramp up its earnings through diversified investment portfolios from Islami bonds to general banking along with slashing operational costs.

"We're now working to boost our profits by the end of this calendar year," Arastoo Khan, chairman of the IBBL, said while sharing his future plans for strengthening financial health of the largest PCB in an exclusive interview with the Financial Express (FE) recently.

The IBBL has already diverted fund amounting to Tk 30 billion out of Tk 55 billion from Bangladesh Government Islami Investment Bonds (BGIIB) into general investment purposes as per the strategy.

Currently, two Islami bonds with tenures of three and six months respectively are traded on the Islamic money market.

"The bank is making higher profit through investing the fund in general banking than the BGIIB," the former secretary of the government explained.

He also said the reconstituted board has already slashed unnecessary operational costs that will help boosting overall profit of the bank by the end of 2017. "We're running our businesses in compliance with 100 per cent Shariah rules and regulations."

The IBBL's credit growth increased slightly in the recent months following diversifying its investment portfolios from Islami bonds to general banking.

The credit growth of the Shariah-based bank rose to 16.76 per cent on a year-on-year basis in June last from 15.53 per cent three months before, according to the central bank's confidential report.

The credit growth was 16.35 per cent in December 2016.

The deposit growth of IBBL, however, came down to 8.58 per cent during the period under review from 9.11 per cent in March 2017. It was 10.05 per cent in December last.

"Not only IBBL, the overall credit growth particularly in private sector increased substantially in the last couple of months mainly due to settlement of higher import payment obligations," Mr. Khan said while replying to a query.

The growth in credit flow to private sector in the country's banking sector rose to 17.84 per cent in August 2017 on a year-on-year basis from 16.94 per cent a month ago. It was 15.66 per cent in June 2017.

Such credit growth has already crossed the target, set by the Bangladesh Bank (BB) in its latest monetary policy statement earlier.

Earlier on July 26 last, the central bank projected in its first half-yearly (H1) monetary-policy statement for the current fiscal year (FY) 2017-18 that the private-sector credit would grow at 16.2 per cent in December 2017 and 16.3 per cent in June 2018 respectively.

The IBBL is planning to seek fund from top financial institutions to enhance its deposit growth.

"The IBBL is still a bigger bank in Bangladesh in terms of deposit. Currently, our deposit rose to Tk 715 billion, which was around Tk 680 billion 9 (Nine) months ago," he noted.

Currently, the number of account holders of the IBBL stood at 120 million, according to the chairman.

Mr. Khan was made the new chairman of the board of directors of the IBBL on January 05 this year. He replaced Engr. Mustafa Anwar.

The board of the IBBL has already liberalised its recruitment policy, allowing people irrespective of their religious beliefs to seek jobs at the Shariah-based bank.

The chairman said the bank is hiring any eligible citizen of Bangladesh if they have the quality and integrity.

Earlier, the Shariah-based PCB did hardly recruit any non-Muslim.

"We've a very strong board. So this is a much better run bank in Bangladesh," the chairman said while replying to a query relating to good governance issue of the bank.

The country's banking industry was marked with stable credit growth, he said, adding that interest rate on loan and advance fell drastically compared to the cost of deposit which in turn squeezed the spread.

The weighted average spread between lending and deposit rates offered by the commercial banks came down to 4.53 per cent in August 2017 from 4.80 per cent in the same period of 2016.

Regarding the rising trend in classified loans, Mr. Khan said the non-performing loan (NPL) volumes are still a major concern for the banking industry.

"We expect that the amount of our NPLs will decrease by the end of December 2017 as the recovery drives have already been expedited across the country," the chairman said while answering to a query relating to the NPLs.

The volume of NPLs in the country's banking system jumped by over 19 per cent to Tk 741.48 billion as on June 30, 2017 from Tk 621.72 billion as on December 31, 2016. The amount of NPLs was Tk 633.65 billion a year before.

The IBBL has already hired a US-based corporate consultant company -Kroll - to overcome the impact on 'De-risking' through improving compliance capacity of existing the Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) rules and regulations.

As part of the moves, the IBBL has already introduced transaction monitoring system (TMS) to identify and protect the bank from any transactions that may lead to money laundering and terrorist financing.

The chairman is hopeful about overcoming the impact on 'De-risking' within the next six months. "We'll be able to re-establish relationship with major foreign commercial banks within the timeframe."

Adverse impact on De-risking increased further in 2016, affecting 60 per cent local banks from 53 per cent a year before. It was 60 per cent in 2014, according to a study, conducted by the Bangladesh Institute of Bank Management (BIBM).

Mr. Khan also said the IBBL is still playing a vital role in industrial development of the country, in addition to its other investments including microfinance activities in the rural areas of Bangladesh.

"The IBBL has already emerged as a symbol of trust of the masses of people by introducing unique deposit products and diversified investments in large industries to small and medium enterprises (SME) along with microfinance activities," the chairman said while explaining the overall situation of the largest PCB.

He also said the IBBL is the bank of all people, regardless of party-ideology-religion-caste-creed-class-profession. "It's the property of the country and its people."

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