10 banks report declining profits amid sector strain
Staff Reporter :
Bangladesh’s banking sector is currently facing significant challenges, with rising bad loans and substantial losses overshadowing its once-profitable status.
Recent quarterly financial reports reveal that nine banks collectively suffered losses amounting to Tk1,663.38 crore in the first quarter of the fiscal year 2024-25.
According to economist Professor Abu Ahmed, the crisis stems from unchecked corruption, exploitation of regulatory frameworks, and the appointment of unskilled and dishonest individuals to key positions.
“These banks were profitable before the previous authoritarian government misused the banking system. Large sums of money deposited by ordinary citizens were looted, leading to the present turmoil,” he stated.
Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD), emphasised that significant amounts of money were siphoned off using fraudulent documentation. “This misappropriation has caused massive losses for the banks,” he explained.
In response to the crisis, Bangladesh Bank has established a task force and is engaging international audit firms to assess the assets of various banks. Preliminary findings suggest that after 2017, substantial loans were issued to paper-based companies linked to the S. Alam Group and their affiliates using fake documents.
The misappropriated funds were reportedly laundered to countries such as Singapore, the UK, the USA, Canada, and other European nations. As a result, several banks are struggling to meet client demands and are incurring operational losses.
Among the affected banks, National Bank posted the highest loss, recording a post-tax deficit of Tk699.47 crore in the July-September quarter-a 40 per cent increase from the same period last year.
Exim Bank followed with a post-tax loss of Tk566.3 crore, a sharp downturn from a Tk533.9 crore profit in the same period of 2023. Bank Asia, Islami Bank, and Union Bank also reported significant losses.
The central bank’s report identified other banks, including Al-Arafah Islami Bank, First Security Islami Bank, Social Islami Bank, and ICB Islamic Bank, as having faced similar declines.
In addition, ten other banks, such as AB Bank, Rupali Bank, Dutch-Bangla Bank, and Premier Bank, experienced reduced profits compared to the previous year, reflecting a broader trend of declining financial health across the sector.
Bangladesh Bank’s initiatives to evaluate the banking sector aim to address these issues, but restoring stability and trust will require stronger oversight and systemic reforms.
Meanwhile, total volume of non-performing loans (NPLs) in the country’s banking sector has ballooned at Tk 2,84,977 crore which is about 17 per cent of the total outstanding loan at the end July- September quarter(Q3Y24) this year.
The banking system currently has a total of Tk1,682,800 crore in outstanding loans, according to Bangladesh Bank statistics released on Sunday.
This marks the highest volume of bad loans in the country’s history and NPLs rises by nearly twelve times in last 15 years.
When the Bangladesh Awami League formed the government in 2009, the amount of defaulted loans in the country was Tk 22,481 crore . Since then the bad loan has seen a steep rise in the last 15 and a half years.
Sector insiders, for a long time, have been alleging that under the state patronage, a huge amount of the money has been looted from the banks in the name of defaulted loans and laundered abroad.
There was a consistent failure to adhere to minimum governance standards and credit discipline, both by boards and management, due to political pressure, they expressed.