8 banks face losses in Jul-Sep as provision against bad loans rises 

Infographics: TBS

Eight banks reported losses in the July-September quarter of this year, following the central bank's tightened measures to maintain adequate provisions for classified loans.

Among the loss-making banks, National Bank reported Tk698 crore loss, followed by Exim Bank with Tk566 crore, Bank Asia with Tk103 crore, Islami Bank with Tk89 crore, Al-Arafah Islami Bank with Tk47 crore, SIBL with Tk29 crore, First Security Islami Bank with Tk31 crore and ICB Islamic Bank with Tk19 crore.

Among these, National Bank has been incurring losses since 2022, while ICB Islamic Bank has faced prolonged losses over an extended period.

Of the 36 listed banks, 32 have released their unaudited financial statements for the July-September quarter, while three have yet to publish theirs. Of the banks releasing financial statements, 15 achieved profit growth, whereas profits declined for 9 banks compared to the same period last year.

According to officials, these banks incurred losses due to corrupt lending practices by their directors, which were exposed in the media under the interim government following the ouster of the Hasina-led administration.

In August and September, the new governor of Bangladesh Bank dissolved the boards of these banks. The real financial condition of these institutions has now been revealed in the recently published financial statements, they added.

Exim Bank's newly elected chairman Nazrul Islam Swapan told The Business Standard on 28 October that the previous chairman left a substantial amount of toxic debt—loans and other debts with a low likelihood of repayment. 

"We wrote off loans that were deemed unrecoverable, leading to a significant increase in provisioning, which contributed to our losses," he explained.

Addressing the situation of the bank, he said, "The bank has suffered a lot under the previous board. We are trying to fix the issues but we need time for this."

"We are actively working to recover irregular and defaulted loans left by the former board, and recovery is progressing well," he added.

On 29 August, the Bangladesh Bank dissolved Exim Bank's board, appointing five new members and removing former chairman Md Nazrul Islam Mazumder and his wife Nasreen Islam from their positions.

Islami Bank said in the statement that it incurred loss as total provision against investment — loans and advance — increased compared to the previous corresponding period.

A senior officer who joined the bank in 1993 told TBS that he had never seen the bank encountering such losses since starting his tenure.

Islami Bank was freed from the grip of the controversial S Alam Group after nearly seven years since 2018 when the group took control of the bank. The Bangladesh Bank appointed a new five-member board of directors to oversee the bank's operations on 22 August.

"During the quarter, the bank could not record interest on loans and advances due to non-recovery from defaulters," National Bank stated in its first disclosure since the board's reconstitution in August.

"Furthermore, the bank incurred higher interest expenses on deposits and borrowings," it added.

Top profit-making banks

Pubali Bank emerged as the top profit maker during the quarter, reporting a profit of Tk445 crore. It was followed by BRAC Bank with Tk419 crore, City Bank with Tk201 crore, NCC Bank with Tk201 crore, and Prime Bank with Tk184 crore.

This growth was largely driven by a significant rise in investment income from the government securities, commissions, exchange, and brokerage, as well as an increase in interest income, according to their disclosures published on the stock exchange.

Saiful Islam, president of the DSE Brokers Association, stated that banks have heavily invested in treasury bonds due to high interest rates. As a result, the growth of bank investments in the private sector has declined, indicating a shift away from their core business. He emphasised that this trend is detrimental to the country's economy.