Sonali Bank sees best ever financial performance in 2022

Sonali Bank, the largest state-owned bank of the country, has experienced its best ever year in 2022, excelling in all major financial indicators thanks to an increase in performing loans in small segment businesses. 

Net Interest Margin (NIM), the difference between interest expense and earnings, turned positive for the first time in last year. NIM was negative Tk979 crore in 2021, which turned to positive Tk300 crore in the last year, according to the bank. 

The interest income of the bank increased by nearly Tk1,400 crore in the last year from the year before. At the same time, expenditure on deposits declined by Tk500 crore in the last year from 2021. 

The bank also made the highest profit of Tk371 crore in 2022, up from Tk345 crore a year ago. 

The significant improvement in NIM was because of the growth of performing loans, said Md Afzal Karim, managing director of Sonali bank. 

He said Sonali Bank has reduced its non-performing loans (NPLs) remarkably and improved capital strength. The bank had a meeting with a review team of the International Monetary Fund (IMF) that visited recently over progress for releasing a second tranche of $4.7 billion in loans. 

"The team expressed satisfaction over the performance of the Sonali bank," said Karim. 

The rate of NPLs declined to 14.83% in December last year from 17.32% in the same period of the last year, according to the bank's annual report. 

The agreed MoUs between Bangladesh and the IMF will target a reduction of the average NPL ratios to below 10% for state-owned commercial banks and below 5% for private commercial banks, while increasing the banks' capital adequacy ratios and provisioning coverages to the statutory minimum by 2026.

"We have set a target to reduce non-performing loans to single digits in the next three years. To achieve the target we have introduced a four-tier supervision so that not a single non-performing loan remains untouched. Every branch manager will supervise the top 25 non-performing loans," the managing director further said.  

Sonali Bank experienced significant loan growth in the last year, helping it to reduce interest expenditure on deposits.

Advance Deposit (AD) ratio increased to 60% in the last year, which had dipped to 47% in 2020.

The top executive also said the bank has a huge amount of deposits, which is a liability for the bank. So, they will increase the AD ratio gradually through quality loans as they don't want to keep the funds idle. 

Performing loans increased mostly in the Cottage, Micro, Small and Medium Enterprises (CMSME) sector in the last year, Karim said.

Deposit size of the bank stood at Tk1.42 lakh crore in the last year, 5% higher than that in the previous year, according to the bank's annual report.