Banks' overseas branches see profit plunge amid import slowdown
Their aggregate net profit plummets by nearly 37% in 2024
The aggregate net profit of Bangladeshi banks' overseas branches plummeted by nearly 37% in 2024 compared to the previous year, a direct consequence of a significant slowdown in imports.
According to the Bangladesh Bank's Financial Stability Report 2024, the combined net profit of these overseas branches fell to $5.96 million in 2024, a 36.56% decrease from the $9.40 million achieved in 2023. This sharp decline in profitability also saw the aggregate return on assets (ROA) drop from 1.74% to 1.15%.
Currently, two state-owned commercial banks, Sonali and Janata Bank, along with one private lender, AB Bank, operate a total of seven full-fledged overseas branches in the UAE and India.
Social Islami Bank also has two branches in the UAE, although they were not operational as of the end of December 2024. Additionally, 21 other Bangladeshi banks provide overseas banking services through 21 exchange houses, primarily for collecting remittances.
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Impact of import decline
Syed Mizanur Rahman, managing director and CEO of AB Bank, explained the situation to TBS. "We have a branch in Mumbai, India, where we primarily engage in import bill discounting," he said. "We also manage Vostro accounts for several local banks in Bangladesh.
"Throughout 2024, the opening of import letters of credit (LCs) declined, which in turn reduced the volume of import bills we could discount. Since bill discounting is the main source of income for that branch, its earnings have also fallen."
He added that a recovery in the branches' income is unlikely until Bangladesh's import volume increases.
According to the report, at the end of December 2024, the aggregate assets of the overseas Bangladeshi bank branches recorded a moderate decline compared to the previous year.
The total assets of the seven overseas branches amounted to $519 million in 2024, which was $540 million in 2023, registering a decrease of 3.89%. The major portion of total assets was cash and balances with central banks, which is 61%, followed by loans and advances of 23% at the end of 2024.
Total liabilities of the overseas branches decreased significantly compared to the previous year. In 2024, total liabilities fell by 9.55% and stood at $415 million, which was $459 million in 2023. Customer deposits, which constituted $347 million of total liabilities, increased by 2.27 percentage points in 2024.
As the market shares of overseas branches in their parent banks' portfolio were very low, no significant financial stability threats were observed in 2024. Besides, these overseas branches were also incorporated under the Anti-Money Laundering and Countering the Financing of Terrorism (AML-CFT) framework to enhance regulatory compliance.
