State-owned banks project Tk7,717cr losses amid pandemic

The onslaught of the deadly Covid-19 pandemic is severely affecting the state-owned banks in Bangladesh.

Eleven state-owned commercial, specialised and non-scheduled banks are losing a staggering Tk3,239 crore due to the suspension of interest on all loans for April and May amid the ongoing pandemic.

The banks will additionally lose almost the same amount because payment of instalments against disbursed loans will remain suspended till June. The collection of commissions and fees for providing various services has also dropped at an alarming rate.

As transaction in the stock market remains halted due to the shutdown, income from this sector has dipped. Earnings have also dwindled from cash, fund transfers and treasury activities, while costs associated with bank operations and foreign exchange transactions have gone up.

The Financial Institutions Division (FID) of the finance ministry has projected that state-owned banks will lose Tk7,717.15 crore due to the impact of the pandemic, and also while implementing various incentive packages and circulars to tackle the crisis.

The banks have informed the FID about the losses in writing last week, and sought capital support from the finance ministry.

To cover those banks' losses, the FID had sent a proposal to the Finance Division seeking either bond facility or capital support for state-owned banks in the budget for the 2020-21 fiscal year.

Rupali Bank Managing Director and CEO Obayed Ullah Al Masud told The Business Standard, "The central bank has issued more than 90 circulars since the coronavirus crisis struck Bangladesh. While implementing those circulars, the bank will lose earnings, and its operating costs will also increase.

"Meanwhile, the flow of remittance has dropped, which has slashed bank earnings from this sector. We will also have to buy US dollars for a relatively higher price to pay import bills, which will increase the bank's costs. We have informed the ministry in writing about the financial losses in various areas caused by the pandemic."

According to the FID report, Sonali Bank – the largest state-owned commercial bank in the country – is projecting losses amounting to Tk1,600 crore. Of the amount, Tk120 crore will be from increase in operating costs, Tk400 crore from a drop in interest earnings and Tk800 crore from the suspension of interest.

Besides, the bank is projecting losses of Tk100 crore due to decreasing earnings from commission, fees, exchange and brokerage, Tk150 crore from cash, fund transfer and treasury sectors and Tk30 crore from the capital market.

Janata Bank is projecting loses amounting to Tk1,593 crore due to decreasing interest earnings, Tk720 crore from suspension of interest payments for two months, and Tk70 crore because of operating costs.

The bank will also suffer losses of Tk150 crore due to decreasing earnings from commission, fees, exchange and brokerage.

Agrani Bank projected losses amounting to Tk1,015 crore. Of the amount, Tk50 crore is from increasing operating costs, Tk128 crore from decreasing interest earnings and Tk424 crore from suspension of interest for two months.

The bank will lose Tk148 crore due to decreasing earnings from commission, fee, exchange and brokerage, Tk199 crore from cash, fund transfer and treasury activities and Tk66 crore from foreign exchange transactions.

Rupali Bank will lose Tk50 crore due to operating costs, Tk401.90 crore from decreasing interest earnings, Tk380 crore from suspension of interest payments for two months and Tk25 crore from foreign exchange transactions.

According to the FID report, Basic Bank – an institution already mired in a loan scandal – will lose Tk319 crore. The bank will lose Tk4 crore from increasing operating costs, Tk185 crore from decreasing interest earnings, Tk70 crore from suspension of interest payments for two months, Tk15 crore from fee and commission sector and Tk45 crore from foreign exchange transactions.

The Bangladesh Development Bank has projected a loss of Tk150 crore.  

Of that amount, the bank will lose Tk1.50 crore due to operating costs, Tk83 crore from decreasing interest earnings, Tk13.90 crore from suspension of interest payments, Tk60 lakh from fees and commissions, Tk17 crore from cash and fund transfer sector, and Tk34 crore from decreasing earnings at the capital market.

Bangladesh Krishi Bank is projected to lose Tk440 crore. Of the amount, Tk15 crore will be from increasing operational costs, Tk30 crore from decreasing interest earnings, Tk390 crore from suspension of interest payments for two months and Tk5 crore from commissions and fees.

Rajshahi Krishi Unnayan Bank will lose Tk89 crore due to operating costs, Tk14 crore from decreasing interest earnings and Tk76 crore from suspension of interest payments for two months.

Probashi Kallyan Bank is expected to lose Tk142 crore due to decreasing interest earnings and Tk105 crore from suspension of interest payments for two months.

Besides, Karmasangsthan Bank will lose Tk4 crore due to operating costs, Tk14 crore from decreasing interest earnings, and Tk105 crore from suspension of interest payments for two months.

Ansar-VDP Unnayan Bank projected losses of Tk316.25 crore. Of that amount, Tk32.64 crore will be from operating costs, Tk60 crore from decreasing interest earnings, and Tk223.61 crore from suspension of interest payments for two months.

State-owned Banks suffer amid Covid-19 Crisis

Source: Financial Institutions Division, Ministry of Finance