Bank profits and recession
May 2, 2009
MOST of the banks in Bangladesh posted ‘record profits’ in 2008 despite the global financial crisis. Operating income of the banks in general rose by 20 to 40 per cent last year from a year ago, the media reported. Despite a deteriorating macroeconomic environment, the banking sector did better in 2008 because of their innovative planning and strategy, one private bank chief executive remarked. EXIM Bank’s operating income rose by more than 25 per cent to Tk 355 crore from Tk 282 crore in 2007 while AB Bank’s operating income jumped 29 per cent to Tk 430 crore.
The state-owned banks – Sonali, Janata and Agrani – also showed significant rise in operating income between 20 and 30 per cent.
As in the preceding years, the driver of the growth was not interest income. Corporate and retail customers’ base was also up significantly in the previous year. Banks are developing various products to cater to the customers. Income from interest rates accounts for 60 per cent of Agrani Bank’s Tk 633 crore in operating income in 2008 and the remaining 40 per cent came from ‘fees and commissions’. The income growth can rightly be attributed to the sudden huge price hike of commodities in the first nine months of 2008, as one banker pointed out.
Bangladesh was largely immune from the global financial crisis in 2008, but took an initial hit at the beginning of 2009 with growth slowing in exports and remittances. The banks will feel the pinch of the global financial crisis this year as one banking expert apprehends. However, Bangladesh Bank’s latest move to limit the lending rate at 13 per cent may pare down banks’ profit in 2009. All these factors contribute to ‘a more complex and unpredictable’ operating environment this year.
Source: The New Nation
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