Bonik Barta graph Local banks are gradually getting weaker due to default loans,
fragile capital structure and incompetent management. Business of many banks in
the country is shrinking alongside reduction in profit. Taking the advantage of
the failure of the local banks, foreign banks operating in the country are
expanding their business and increasing profit. Almost every foreign bank has
made record profit in 2023 and they are also doing well in the current year.
According to audited report on the activities of the foreign
banks, Standard Chartered Bank has made a record profit of Tk 23.35 billion in
2023. In the history of country’s banking sector, no bank has ever earned such
a net profit. In 2022, the profit of the multinational bank stood at Tk 16.55
billion. That means, the bank registered a 41 percent growth in net profit. The
Hong Kong and Shanghai Banking Corporation Limited (HSBC) recorded over 70
percent in net profit. The multinational bank made a profit of Tk 9.99 billion
in 2023. The net profit of the bank in 2022 stood at Tk 5.87 billion.
Nine foreign banks are operating in the country with the
approval of Bangladesh Bank. Of them, the activities of United Kingdom-based
Standard Chartered and HSBC are most rolling. Apart from these two, Sri Lanka’s
Commercial Bank of Ceylon, Citibank NA, Woori Bank of South Korea and State
Bank of India operate in Bangladesh to a significant extent. Pakistan-based Bank
Alfalah and Habib Bank are lagging behind in this regard. Private bank Bank
Asia has decided to take over the Bangladesh operation of Bank Alfalah. And,
National Bank of Pakistan is about to be bankrupt due to heavy loan burden.
Analyzing the financial report on the foreign banks, it has
been found that profit of all but Woori Bank has gone up. Commercial Bank of
Ceylon has increased its profit by 65 percent as compared to the previous year.
In 2023, the bank’s net profit was Tk 4.38 billion. During the same period,
Citibank NA made a net profit of Tk 2.77 billion while State Bank of India made
Tk 2.34 billion.
Former Deputy Governor of Bangladesh Bank Muhammad A (Rumee)
Ali believes that the profit of the overseas banks are going up because of the
failure of the local banks. He was also the first Bangladeshi chief of Standard
Chartered Bank’s Bangladesh operations. “The cost of deposit collection at the
foreign banks is most minimum. They have adequate liquidity to invest. If the
money is used in safe investment like government treasury bills and bonds there
will be a good profit,” he told Bonik Barta.
But, he said, “The local banks are not able to do that. They
are having to get deposit at higher interest rates. And, the condition of many
first generation banks is now shaky due to lack of good governance and
confidence. They cannot get deposit even after offering high interest rates.”
Continuous loan default has dealt a knockout blow to the
country’s banking sector, feels Ali. “The capital structure of most of the
banks is up to the international standard. Due to increased defaulted loan,
many banks are facing capital shortfall. As a result, these banks cannot invest
significantly and cannot open letters of credit (LC). The foreign banks are
taking full advantage of this. They can open LC at a little commission while
the local banks need third-party confirmation in opening LC.
Among the private banks of the country, National Bank Limited used
to have the highest amount of paid-up capital with Tk 32.19 billion. As its
paid-up capital was high, the first generation bank was more capable of big
investment and opening LC. But, it has now lost its capital due to
irregularities and corruption in last one decade. Following incurring a record net
loss of Tk 32.60 billion in 2022, the bank lost another Tk 14.97 billion in
2023. Due to severe liquidity crisis, it has stopped providing big loan and
opening LC for nearly two years.
In terms of assets and liabilities, Islami Bank PLC is the
largest bank in the country. At the end of 2023, the value of assets and liabilities
of the bank was worth over Tk 2 trillion. With so much assets, it made a net profit
of only Tk 6.35 billion last year.
Like these two first generation banks, the profit made by most
of the private banks is not satisfactory. The state of state-owned banks with
regard to default loan, management standard and profit is even worse.
About the reasons behind the failure of the local banks,
Mutual Trust Bank Managing Director Syed Mahbubur Rahman said, “The quality of
assets of the local banks is inferior. The cost of fund is high, but yield is
low. On the other hand, cost of fund of the foreign banks is very low, but high
yield. Foreign banks operate with a few branches and a modest workforce. This
is why profit of the foreign banks is going up exponentially as compared to the
local ones.”
“More
than 50 banks are competing in a small market like Bangladesh. Therefore, none
could perform as expected. The foreign banks manage assets and liabilities very
well. As a result, good customers opt for the foreign banks while we have to deal
with the rest,” he said.
Multinational Standard Chartered Bank started its operation in
this region through opening a branch in Chittagong in 1948. At present, the
bank has 18 branches and an Islamic banking window. The assets and liabilities
of the bank at the end of 2023 were worth Tk 604 billion. The amount of
distributed loan was less than Tk 300 billion. With such a portfolio, the bank
registered the higest profit among all the banks. It has made large profit for three
years in a row. The net profit in 2021 was Tk 7.58 billion. It increased to Tk
16.55 billion in 2022. The amount went up to record high in 2023 with Tk 23.35
in 2023.
Standard Chartered Bank Chief Executive Officer Naser Ezaz
Bijoy was not immediately available for his comments. But, he told Bonik Barta
earlier, “Three aspects – success of the customers, good governance and enhanced
financial solution – have been the pillars of economic success in 2023. Wise
risk management, good use of liquidity high-quality financing and support of
the consumers, colleagues, regulators and stakeholders have helped us do well
in a challenging year.”
“The deposit increased by Tk 55 billion in 2023 and loan went
up by Tk 5 billion. The capital base of the bank is highest in the banking
sector with more than Tk 110 billion,” he said.
Local banks have been in liquidity crisis for two years.
Standard Chartered and other good foreign banks are free from this trouble. The
interest rates rose from 9 percent to 14 percent owing to the liquidity crisis.
Interest rates on government treasury bills and bonds surpassed 12 percent.
Foreign banks are earning high profit making money investing in these bills and
bonds. Standard Chartered alone invested Tk 212.35 billion in bills and bonds. Commercial
Bank of Ceylon invested Tk 26.34 billion, Citibank NA Tk 17.75 billion while
State Bank of India invested Tk 9.46 billion.
Khondoker Rashed Maqsood has experience of working as chief
executive both at local and foreign banks. He was the Bangladesh chief of
Citibank NA before serving two local banks as the chief executive. About profit
and business of the foreign banks, Maqsood told Bonik Barta, “Clean image is
very important for any bank. The local banks lack in this. No one worries about
their deposit with Standard Chartered. But, in cases of local banks, people do
worry about their deposit.”
“Nowadays, people give priority to safety of their deposit
rather than profit. This is why, deposit has increased in local banks that are
recognized as good. On the other hand, deposit is going down in the
controversial banks. Weak banks are unable to attract deposit even by offering
high interest rates,” he said.
