Seven banks post negative credit growth - Share market analysis of dhaka stock exchange, Bangladesh

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26 October, 2015 10:18 AM Source: The Daily Star Bangladesh

Seven banks out of the total of 56 posted negative year-on-year credit growth in August -- a manifestation of the central bank's growing compliance requirements.

“We don't want to go for aggressive lending. Rather, we have emphasised recovery to make the bank strong,” said Ahmed Kamal Khan Chowdhury, managing director of Prime Bank, the only local private financial institution to have registered negative credit growth.

Its credit growth in August from a year earlier was a negative 4.92 percent, according to data from Bangladesh Bank. Yet, Prime Bank is not worried as it has become extremely cautious about its lending activities.

State-owned BASIC is the other local bank with negative credit growth.

The remaining five banks that have posted negative credit growth are foreign commercial banks: Bank of Ceylon, Citibank, HSBC, National Bank of Pakistan and State Bank of India.

The average credit growth of the industry was positive, 11.62 percent. The local private banks' credit grew nearly 15 percent and the state banks' 4.48 percent.

Prime Bank is focusing on corporate banking, which is going through challenging conditions for the past two years, according to Chowdhury.

The unpredictable fall in prices of commodities in international markets has hit hard some local conglomerates and halted their business expansion plans, according to Chowdhury.

The rising compliance issue in the readymade garment industry and the BB's increasing regulations on the banking industry have further tightened the banks' hands for lending.

“It is time to become compliant and Prime Bank will benefit from these moves next year,” Chowdhury added.

Rashed Maqsood, country officer of Citi, which posted 18 percent negative credit growth year-on-year in August, echoed Chowdhury's words on the sluggish corporate banking scenario. Citi lends only to corporates in Bangladesh.

“The segment where we do business is not expanding. We have little to do with the small and medium enterprises, where lending is increasing slowly,” Maqsood said.

Earlier, many companies expanded their businesses by diverting the working capital they took from banks, but it is not possible now, he said.

As a result, the demand for working capital has also come down, he said.

“Things are monitored closely now. In fact, the banking industry is coming back from indiscipline,” Maqsood added.

Alauddin A Majid, chairman of the troubled BASIC Bank, identified two major reasons behind his bank's negative loan growth.

Some of BASIC's accounts are blocked and it cannot show the figure in the outstanding loans, he said.

The other reason is the employees' failure to net prospective new customers, particularly small and medium enterprises, which, he said, are the niche market for his bank.

HSBC Bangladesh, which has posted 1.29 percent negative credit growth, declined to comment on the issue.

State Bank of India registered highest 22.63 percent negative credit growth and the National Bank of Pakistan 1.98 percent negative growth.

Standard Chartered Bank, which is the largest foreign bank operating in Bangladesh, has posted 8.25 percent credit growth in August. 

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