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Banks' earnings per share saw fall in Q3

  • Published at 08:40 pm October 31st, 2018
Taka
Share prices in the banking sector have been on a down trend due to negative growth in earning per share, leading investors away from putting more money in the sector Mahmud Hossain Opu/Dhaka Tribune

According to banks’ disclosure posted on the website of Dhaka Stock Exchange (DSE), of the 30 listed banks, 18 banks have registered negative growth in their earning per share (EPS) in January-September period compared to the same period last year

Most of the publicly traded banks have reported negative growth in their Earnings Per Share (EPS) in January-September period of the year 2018 compared to same period last year. 

According to banks’ disclosure posted on the website of Dhaka Stock Exchange (DSE), of the 30 listed banks, 18 banks have registered negative growth in their earning per share (EPS) in January-September period compared to the same period last year.

The other 12 banks registered a healthy EPS growth.

Talking to the Dhaka Tribune, experts blamed the rise of nonperforming loans as well as irregularities in loan disbursement for this regressive trend. As of June 30, nonperforming loans in the country’s banking sector stood at Tk89,340 crore.

As per its unaudited financial statement, AB Bank has seen the highest fall in EPS by 91% to Tk0.11, which was Tk1.24 in the same period last year. 

Mutual Trust Bank on the other hand registered the highest growth by 139% and the EPS stood at Tk2.01, which was Tk0.84 in the same period a year ago. 

“Banks’ private credit growth went down, export import 

also is declining, which has caused downtrend in the earnings. In addition, default loans have also cast a shadow in earnings as the banks have to keep funds for provisioning,” former Bangladesh Bank governor Salehuddin Ahmed told the Dhaka Tribune.

 On the other hand, non-interest earnings of banks has declined, while the operational cost remains high. As a result, the earning per share of bank did not increase, said the economist. 

The performance of banks is not satisfactory in terms of services as well as earnings, which caused the negative growth in earning per share, he added. 

“Due rise in NPL in the last couple of years, banks have to keep provisioning, which hit their earnings. But it has came down sharply in the current year, which helped us earn better,” Abdul Halim Chowdhury, managing director and CEO of Pubali Bank told the Dhaka Tribune. Pubali Bank EPS rose by 76% to Tk2.69, which was Tk1.53 last year.

“On the other hand, we have diversified our loan portfolio instead of single sector focus, which also reduced the NPL and pushed the earnings up,” said Halim. 

“At the end of the current year, earnings will see a sound growth as we are trying to manage funds efficiently,” he added. 

City Bank Managing Director Sohail Reza Khaled Hussain said: “We made huge investments in developing agent banking network, in establishing micro credit centre and infrastructural development especially in IT. But we are not getting returns from these investments yet.” 

The bank has seen negative growth in EPS by 17% to Tk2.32, which was Tk2.79 last year.

“On top of that, we have to increase deposit rate to attract more funds as there was liquidity crisis in the beginning of the year to meet the Advanced Deposit Ration (ADR) of the central bank,” said Sohail.

“Next year, we will get the benefits of the investment and hopefully the earning will see improvement,” he added.

Share prices in the banking sector have been on a down trend due to negative growth in earning per share, leading investors away from putting more money in the sector.

Meanwhile, the contribution of banking sector to the overall turnover has also shrunk in the last couple of months. In August, the contribution of banking sector was 13.76%, which came down to 5.36% in September.

On Wednesday, sectoral turnover of banking sector was Tk51.5 crore, which is 18.3% of the total turnover of Tk514.71 crore.

Out of 30 banks, share prices of 16 banks ended in the red, while five banks saw positive gain in prices and nine banks showed no change.

Anis A Khan, managing director and CEO of Mutual Trust Bank Limited told the Dhaka Tribune: “Increase of business volume and consequent profitability have helped the bank register a better EPS compared to the previous year. Reduction of the corporate tax rate from 40% to 37.5% also expedited the earnings.”

As per the unaudited financial report of January-September period of 2018, EPS of MTB increased from Tk0.84 to Tk 2.01 compared to the same period last year.

Bankers also blamed the cutting of the lending rate to single digit for the negative trend, as it has reduced the earnings of banks to some extent. The deposit rate also cannot be reduced as people are unwilling to  keep money for a 6% rate, stakeholders said.

In June, the government told private commercial banks to bring down the interest rate on lending to 9% and that on deposits to 6% from the existing levels. This came to effect from July 1. 

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