Four private banks join Tk2,000cr operating profit club

Highlights: 

• Islami Bank posted highest operating profit of Tk3,400cr in 2024
• BRAC Bank reported second-highest operating profit of Tk2,400cr
• Pubali Bank posted an operating profit of Tk2,375cr
• City Bank reported an operating profit of Tk2,287cr
• Dutch-Bangla reported an operating profit of Tk2,285cr

Four private banks have joined Islami Bank in the Tk2,000 crore operating profit club for the first time in 2024 – a year marked by unprecedented political uncertainty and crisis, all while the country's banking sector grappled with billions in default loans, liquidity stress, declining deposits, and user distrust.

The four banks are: BRAC Bank, Pubali Bank, City Bank and Dutch-Bangla Bank.

According to the officials of the banks, the increase in loan interest rates played a major role in boosting their operating profits. 

The central bank raised the policy rate multiple times in 2024, leading to high lending rates and widening the interest spread (the difference between lending and deposit rates), which helped increase operating profits.

In addition, the banks' treasury departments earned significant profits from commission income, dollar business, and investments in government treasury bills and bonds.

Senior bank officials, however, told TBS that operating profit does not represent the actual profit, which is determined after deducting corporate tax and other expenses, including provisions for loan defaults.

For instance, in 2023, Islami Bank reported an operating profit of over Tk2,000 crore, but its net profit was only Tk610 crore. In 2024, while the bank also recorded the highest operating profit, concerns remain about the actual profit due to its significant non-performing loans.

In contrast, Dutch-Bangla Bank had the highest net profit of Tk854 crore among domestic banks in 2023, despite an operating profit of less than Tk1,500 crore.

BRAC Bank Managing Director and CEO Selim RF Hussain told TBS, "Operating profit is an unaudited accounting figure which does not reflect a bank's true condition. The audited net profit provides a clearer picture of the bank's overall health."

"Excessive focus or publicity on whether a bank has made more or less operating profit can send the wrong message to stakeholders about that bank," he added.

A policymaking-level official from a bank with strong operating profits said, "Customer distrust in the banking sector has created difficulties for weaker banks while benefiting stronger ones. Many customers have withdrawn deposits from struggling banks, despite higher interest rates, and moved them to more stable banks offering lower rates."

For example, BRAC Bank, one of the largest private commercial banks, saw its net operating cash flow per share double to Tk49.51 for the January-September period of 2024, up from Tk25.10 during the same period the previous year, according to its disclosure on the Dhaka Stock Exchange (DSE) website.

City Bank's net operating cash flow per share rose to Tk42.38 during the same period, reversing a negative cash flow of Tk5.20 in the previous year. Mutual Trust Bank also saw its net operating cash flow per share double to Tk44.27 from Tk22.42.

The significant increase in cash flow is attributed to higher deposit collections and lower investment, according to their disclosures.

Banks with highest operating profits in 2024

Islami Bank reported the highest operating profit of Tk3,400 crore in 2024, up from Tk2,261 crore in 2023. However, its net profit for 2023 was only Tk610 crore. In 2022, the bank made an operating profit of Tk2,215 crore and a net profit of Tk592 crore.

Despite the record operating profit in 2024, the net profit may decrease significantly due to a lack of recovery from loans taken by the controversial S Alam Group. In June 2024, Islami Bank's defaulted loans stood at Tk7,724 crore, which increased to Tk17,751 crore by the end of September.

BRAC Bank reported the second-highest operating profit last year, following Islamic Bank, with Tk2,400 crore. This was a significant increase from Tk1,393 crore in 2023. The net profit for that year was Tk730 crore. With a 72% growth in operating profit in 2024, the bank's net profit is expected to exceed Tk1,000 crore.

Pubali Bank, the oldest bank founded by domestic entrepreneurs, posted an operating profit of Tk2,375 crore in 2024, a 55% increase from the previous year. In 2023, the bank's operating profit was Tk1,535 crore, with a net profit of Tk679 crore.

Pubali Bank MD Mohammad Ali said, "As many banks faced difficulties, we attracted good deposits and gained valuable customers, leading to strong profits by year-end. However, the final profit will depend on the central bank's inspection, and we hope it will exceed thousands of crores."

City Bank leads the private banking sector in consumer loans and serves a strong base of corporate and SME customers. In 2024, the bank reported an operating profit of Tk2,287 crore, a significant increase from Tk1,350 crore in 2023. The net profit for that year was Tk615 crore.

The bank reported that 64% of its total income came from loan interest, 12% from commissions and fees on debentures, and 19% from investments in government treasury bills and bonds. A major contributor to the profit was a Tk12,200 crore increase in deposits.

Mashrur Arefin, managing director of City Bank, said, "Our customers trust us, which is reflected in the increase in deposits. Additionally, our income-expense ratio has dropped from 60% to 42%, resulting in a record operating profit last year."

"We also increased employee salaries by Tk300 crore, which has motivated them and enhanced pride in working at the bank. The dedication and integrity of our board have been key to our success. We are confident that the bank will achieve even greater profits in the future," he added.

In 2024, Dutch-Bangla Bank reported an operating profit of Tk2,285 crore, up from Tk1,431 crore in 2023. The bank's net profit for that year reached Tk854 crore, the highest among domestic banks. It also boasts the lowest cost of funds.

Dutch-Bangla Bank MD Abul Kashem Md Shirin said, "Our non-performing loans have decreased by 1%. We significantly increased SME and consumer loans in the past year, which, combined with our low cost of funds, led to these strong profits. In the new year, we plan to further reduce corporate loans and focus on increasing SME and consumer loans. Additionally, we will expand loans in other sectors alongside the garment sector."