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UCB adopts special strategy to cut NPLs, increase profit

Mohammad Mufazzal | September 23, 2018 00:00:00

United Commercial Bank (UCB) has adopted special strategy to reduce its non-performing loans (NPLs), which was mainly responsible for comparatively poor net profits registered in the last couple of years than the trend of previous three years.

The strategy is expected to help reduce the extent of NPLs and the impact would be reflected on the bottom line, a senior executive of the bank told the FE.

According to the financial statements, the bank's net profit increased during the period from 2013 to 2015, but started declining in the following years (2016 and 2017) although the gross revenue earnings and operating profit were increasing.

The bank reported its net profit of Tk 3.07 billion in 2013, Tk 3.65 billion in 2014, Tk 3.98 billion in 2015, Tk 2.49 billion in 2016 and Tk 2.31 billion in 2017.

It exhibited a mixed trend in gross revenue earnings during the last five years, amid a steady growth registered in collection of deposits and operating profit.

According to the annual report of 2017, the bank's deposit collection gradually rose from 2013 to 2017.

The deposits stood at Tk 184.89 billion in 2013, Tk 211.07 billion in 2014, Tk 220.86 billion in 2015, Tk 257.70 billion in 2016 and Tk 278.19 billion in 2017.

The bank earned an operating profit of Tk 7.12 billion in 2013, Tk 8.71 billion in 2014, Tk 8.40 billion in 2015, Tk 7.58 billion in 2016 and Tk 7.95 billion in 2017.

ATM Tahmiduzzaman, company secretary at the UCB, said that the bank preferred to maintain substantial amount of provisioning against loans to remain trouble free.

"The provisioning and taxes time to time left an impact on the net profit. That's why the company displayed a mixed trend in net profit and dividend disbursement in last five years," he said.

During the period of 2013-17, the bank witnessed the highest interest rate spread in 2013. The spread was 4.55 per cent in 2013, 3.71 per cent in 2014, 2.57 per cent in 2015, 2.11 per cent in 2016 and 1.74 per cent in 2017.

The spread is a difference between the interest rate that a bank charges a borrower and the interest rate a bank pays to a depositor.

Mr Tahmiduzzaman said that like other banks, their company also kept the spread at a tolerable level following the instruction of the central bank. "That's why the spread of our bank gradually declined."

Senior executives at the bank said the company showed mixed performance in net profits mainly due to increased provisioning against loans.

The bank's NPLs to the total loans and advances gradually rose from 2013 to 2016. In 2017, the ratio declined to some extent compared to the previous year.

The NPL ratio was 4.03 per cent in 2013, 4.62 per cent in 2014, 5.23 per cent in 2015, 8.01 per cent in 2016 and 7.38 per cent in 2017.

Asked about the increased NPLs, the company secretary said the bank avoids window-dressing the balance sheet. "It also presents the actual scenario of the NPLs. We have adopted special policy to reduce the NPLs," he said, without explaining the strategy.

He said the bank's NPLs would decline gradually and the impact of reduced NPL ratio would be reflected in the net profits in the future years.

The UCB reported the consolidated EPS of Tk 2.58, consolidated NAV per share of Tk 25.49 and consolidated NOCFPS of Tk 2.04 for the year ended on December 31, 2017 as against Tk 2.49, Tk 24.50 and Tk 2.25 respectively for the same period of the previous year.

The consolidated EPS was Tk 0.74 for April-June, 2018 as against Tk 1.15 for April-June, 2017, according to DSE website.

"In 2017, we have achieved a total deposit of Tk 278.19 billion, total loans & advances of Tk 261.01 billion and total operating profit of Tk 7.95 billion, showing 7.95 per cent, 16.68 per cent and 4.80 per cent growth respectively over the year 2016. We also have expanded our network of branches to 178," Rukhmila Zaman, chairman of the UCB, said in the annual report.

She also said that the improved digitisation of our operations has been a key feature of our strategy facilitating increased levels of customer convenience, scalability and reliability of our operations.

"This has been undertaken with an understanding of the risks and opportunities involved with the strategy, addressing concerns of stakeholders in a holistic manner," Rukhmila Zaman said.

She also said that their strong financial position, diversified shareholder base and competent team of professionals would enable them to capitalise on the growing demand for exclusive financial management services in the country and contribute to their vision of becoming a leading private bank.

The UCB, presently an 'A' category company, was listed with the stock exchanges in 1986.

The company's sponsor-directors hold 36.67 per cent shares, while the government holds 0.81 per cent, institutions 18.67 per cent, foreigners 1.94 per cent and the general public 41.91 per cent shares.

The company's share price closed at Tk 17.90 each on Thursday last with a marginal loss of 1.66 per cent or Tk 0.30.

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