In the second quarter of this year, Uttara Bank's profit grew by 320% as National Credit and Commerce (NCC) Bank reported a 151% growth in profit thanks to lenient policy support from the Bangladesh Bank.
The two banks could register such whopping growths due to the amplified bank spread and lower provision against defaulted loans owing to the postponed loan classification, said bank officials.
Preferring anonymity, the managing director of a private bank told The Business Standard that bank interest rates on deposits had been higher after lowering the lending rate to the single-digit last year.
This decreased the bank spread – the difference between the interest rate that a bank charges a borrower and the interest rate a bank pays a depositor – and put the profit of the banks under a strain, said the official.
But the bank spread edged up as interests on deposits were also lowered this year – leading to higher profit growths for the banks, he added.
According to the Bangladesh Bank, the average interest rate on bank deposits was around 5.5-6% in the first six months of last year. But the rate fell below 4.5% in January-April this year – ticking up the bank spread by 1.5-2% with the 9% lending rate.
Bankers say most of the banks have invested their excess liquidity in treasury bonds due to low demand for loans, and the investments have been generating handsome profits.
In addition, banks have had to keep fewer provisions against loans than usual since the loan classification was suspended in the Covid pandemic, they noted.
In the April-June quarter, Uttara Bank posted 320% growth in consolidated earnings per share to Tk1.05, while NCC Bank's consolidated earnings per share grew by 151% to Tk0.88 compared to the corresponding period of the last year.
At the end of the first half of this year, Uttara Bank's consolidated earnings per share grew by 24% to Tk1.79, while NCC Bank's profit rose by 22% to Tk1.43 compared to the corresponding period of the last year.
However, in the first quarter of this financial year, NCC Bank's consolidated earnings per share dropped by 33% as Uttara Bank's profit plunged by 37%.
Uttara Bank has paid 12.50% cash and 12.50% stock dividends to the shareholders, while NCC Bank has declared 7.50% cash and 7.50% stock dividend for the last financial year.
Uttara Bank's shares were traded at Tk23.90 each, while NCC Bank's share price was Tk15.10 at the end of Monday trading session at the Dhaka Stock Exchange.