Operating profits of a number of private commercial banks (PCBs) dropped significantly in the first half of the current calendar year.
The decline in profit is largely attributed to the fixation of single-digit interest rate from April 1 last.
The Covid-19 pandemic has also partly pushed down the private lenders' bottom line, according to senior bankers.
Of 41 PCBs, operating profits of 11 fell, while only two fourth generation banks managed to turn profit, according to provisional data of January- June period. The data of the rest banks were not immediately available.
Among the banks, the operating profit of Pubali Bank Ltd came down to Tk 5.05 billion in the first six months of this year from Tk 5.40 billion in the same period of 2019.
Al-Arafah Islami Bank Ltd earned Tk 3.05 billion as operating profit against Tk 4.05 billion, while operating profit of First Security Islami Bank Ltd came down to Tk 2.30 billion from Tk 2.81 billion.
Bank Asia Ltd and Mercantile Bank Ltd earned Tk 3.51 billion and Tk 2.44 billion in the first half as operating profit against Tk 4.65 billion and Tk 3.31 billion respectively.
The operating profit of EXIM Bank Ltd fell to Tk 3.17 billion in the period from Tk 3.30 billion in the same period last year.
Jamuna Bank Ltd made an operating profit of Tk 2.78 billion in H1 of 2020 against Tk 3.09 billion in the same period last year.
The operating profit of Shahjalal Islami Bank Ltd declined to Tk 2.47 billion in H1 of 2020 against Tk 3.25 billion in the same period last year, while that of Social Islami Bank Ltd dropped to Tk 1.75 billion from Tk 2.78 billion.
Meghna Bank Ltd made an operating profit of Tk 120 million in H1 of 2020 against Tk 450 million in the corresponding period, while South Bangla Agriculture and Commerce Bank Ltd earned Tk 700 million against Tk 900 million.
Modhumoti Bank Ltd also earned Tk 1.25 billion as operating profit in Jan-June period of this calendar year compared to Tk 960 million in the same period of 2019, while the profit of NRB Bank Ltd rose to Tk 420 million from Tk 390 million.
The un-audited operating profits, however, do not indicate the actual financial position of the banks, as they have to set aside funds for provisioning bad debts and pay taxes to the government.
Talking to the FE, M A Halim Chowdhury, managing director and chief executive officer of Pubali Bank Limited, said the operating profit of private banks fell mainly due to lower interest rate spread.
"Lower foreign trade covering export and import, caused by the pandemic, has also driven down the banks' operating profits," the senior banker explained.
The interest rate spread dropped significantly in April following implementation of the single-digit interest rate in the country's banking sector.
The weighted average spread between lending and deposit rates offered by the banks came down to 2.92 per cent in April 2020 from 4.07 per cent in the previous month, according to the latest official figures. It was 4.09 per cent in February this year.
The banks brought down the interest rate on lending at 9.0 per cent on April 01 to comply with the Bangladesh Bank instructions while the cost of deposit remained almost unchanged.
The weighted average rate on deposits fell to 5.37 per cent in April from 5.51 per cent a month before, and the interest on lending dropped to 8.29 per cent from 9.58 per cent, the BB's latest data showed.
"The profitability of banks might fall further proportionately by the end of this calendar year if the existing trend in the spread continues," the senior private banker predicted.
He also said the sluggish trend in the country's capital market along with lower private sector credit growth had a negative impact on the profits of the banks.
DSEX, the key index of the Dhaka Stock Exchange, lost 463 points or 10.40 per cent in the last six months to close at 3,989 on Tuesday.