National Bank Limited (NBL) showed a loss of Tk 7.66 billion for January-March this year, higher than in the first quarter of previous years, as its expenses far outstripped income for its huge default loan burden.
During the quarter, it could not book interest on loans and advances that turned sour. The NBL has Tk 124 billion worth of classified loans, which is 28.92 per cent of its total outstanding loans, much higher than industry average of 21 percent.
On the other hand, the lender had to offer a higher interest rate than its peers to encourage savers to keep their money in the bank despite the blemished image.
The net interest income was negative, meaning interest income was less than interest expenses. Though the bank earned in the form of brokerage commission and from investments in government securities, the income was not enough to overcome the excess interest expenses borne during the first quarter of this year.
That loss then added with operating costs, including staff salary, rent and legal expenses.
The negative earnings have been reflected on the cash flow and asset value during the quarter through March this year.
The net operating cash flow, a measure to show a company's ability to generate cash from its operations, stood at Tk 7.14 in the negative per share for the three months through March, as against Tk 2.27 in the negative in January-March 2023.
The net asset value plunged to Tk 4.92 per share at the end of March this year from Tk 11.92 a year ago.
Once the NBL had good financial health but it started faltering after the death of its founder Mr. Zainul Haque Sikder in February 2021.
Its yearly profit ranged from Tk 3.7 billion to 4.7 billion between 2017 and 2020. Annual profit fell to Tk 382 million in 2021.
In 2022, National Bank showed a loss for the first time. The negative earnings amounted to Tk 33 billion that year. The loss was reduced to Tk 15 billion the following year but the lender has shown no sign of recovering and coming out of the red.
According to a stock exchange filing on Thursday, the loss per share soared 145 per cent year-on-year to Tk 2.38 in Q1 this year.
The NBL's net interest is negative since 2022.
Currently, it is even unable to keep provision against classified loans. Borrowers failed to repay installments on time and became defaulters. Thus, interest on such loans and advances could not be added in the income segment of the balance sheet.
Meanwhile, the Bangladesh Bank has dissolved and restructured its board twice within a span of just six months.
In December last year, the central bank dissolved the board of NBL for overriding regulations and poor governance that resulted in quick deterioration of the bank's financial health.
The BB appointed Dr Syed Ferhat Anwar, former professor of the Institute of Business Administration (IBA) of the University of Dhaka, as the bank's chairman at the time.
That board rejected the idea of NBL's merger with the United Commercial Bank as part of BB's proposed reform to the banking sector through overtaking of weak banks by strong banks.
In the face of resistance, the Bangladesh Bank again dissolved the board of National Bank a week ago.
This time the banking regulator formed a new board of directors and set the bank's sponsor director Khalilur Rahman as new chairman.
The newly-constituted board of directors of the NBL unanimously elected Prof Md Helal Uddin Nizami as vice-chairman of the bank.
This board too turned down the idea of merger.
However, the new board and the new management claim that they have been putting in highest efforts to improve the bank's financial health by streamlining recovery drives and mobilising low-cost deposits.
Despite losses, the stock price surged 1.59 per cent to Tk 6.40 per share on the Dhaka Stock Exchange on Thursday.
Listed in 1984, the first-generation bank has failed to declare a dividend for the three years through 2023.
farhan.fardaus@gmail.com