Non-fund income boosts banks’ profit, dividend

Infograph: TBS

Despite the slow growth in private sector investment amid the pandemic and less than expected loan recovery pace, most banks have posted growth in earnings per share (EPS) in 2021 riding on a record rise in the country's exports and imports.

Based on this growth, most banks have paid more dividends to their shareholders in 2021 than in 2020.

Of the 33 banks listed on the Dhaka Stock Exchange (DSE), 13 have released their audited annual accounts for last year.

According to the disclosures, the EPS of 10 out of these 13 banks has increased. IFIC Bank saw the highest growth of 122%, followed by Prime Bank, Mercantile Bank and Premier Bank.

On the other hand, the EPS of United Commercial Bank and Jamuna Bank decreased. ICB Islamic Bank has been in losses for a long time, although the losses in 2021 have decreased.

"In 2021, we have received more support from the apparel sector. Because at this time the apparel sector has seen record exports. Imports have also increased. This has increased our non-funded income," M Reazul Karim, managing director of Premier Bank, told The Business Standard.

"Due to the deferral facility of the Bangladesh Bank, the bank did not have to go through such complications with defaulted loans. However, we are careful about what will happen in the days to come. And we are keeping the provisions accordingly. We have reduced the defaulted loan to 2% which has boosted the financial health of our bank," he added.

According to the Export Promotion Bureau (EPB), the country's apparel export witnessed around 30% growth to $35.57 billion in 2021. The growth trend is still going on in 2022.

Commenting on the financial results of 2021, Brac Bank Managing Director Selim RF Hussain said, "Brac Bank's 2021 results show that the bank is agile and resilient and has already stepped onto a strong growth path. Our sustainable banking and customer experience-based business strategies have served us well."

"Our 2021 performance, despite the unprecedented environmental challenges, indicates that the bank is much stronger today than it was two years ago when the pandemic started," he added.

The banking sector also earned a significant amount from its stock market investment. In 2021, the Dhaka Stock Exchange's (DSE) broad index DSEX jumped 19%.

South Bangla Agriculture and Commerce Bank's Managing Director Mosleh Uddin said in an interview with TBS that at present, the rate of return from the capital market is good. If the market is not manipulated by any vested quarter, like in 1996 or 2010, it is now possible to make a good profit from the stock markets.

Meanwhile, seven banks have paid more dividends to shareholders in 2021 than in 2020.

In 2020, the Bangladesh Bank had set a limit of 30% dividend, including 15% cash and 15% stock, in the pandemic which has been increased to 35% in 2021, including 17.5% cash and 17.5% stock.

Out of these seven banks, Uttara Bank has paid a maximum of 28% dividend, followed by Eastern Bank and Dutch Bangla Bank.

However, dividends have not made any impact on the share prices of banks. The share price of most of the banks fell the day after the announcement of the dividend.

However, stock market analysts say banks' shares are the most attractive for investment. This is because the price-earnings ratio in the banking sector is below 8% and the dividend yield is in a good condition.

A top official at a brokerage firm said investors wanted to double, triple or quadruple their profits in a matter of days. That's why they just run after capital gains. In doing so, they also lose their capital.

"This is a big problem in the stock market. However, the rate at which banks are declaring dividends cannot be obtained from FDR even after waiting for the whole year," he added.