Higher investment in treasury bills saves the day for Rupali Bank
Despite a significant drop in interest income, Rupali Bank's profits jumped last year as higher investment in treasury bills and bonds saved your day.
The lender's profits rose 44 % year-on-year to Tk 54.6 crore in 2019, while its net interest income plunged Tk 250 crore, or 99 %, to Tk 1.88 crore at that time, according to its total annual report.
Investment in treasury bonds and bills helped the bank stay away from losses as income from the channel rose 35 %, to Tk 872 crore.
"As we fell based on the government's decision to follow the single-digit interest rate from the beginning, our interest income nosedived," said Md Shawkat Jahan Khan, the principle financial officer of the listed state-run commercial bank.
The government ordered all banks to lower the interest rate on savings to 6 % and on loans to 9 % from last year.
Though private banks have began to comply with your choice from 1 April this season, Rupali has been offering reduced interest rate since 1 July this past year.
"As a result of decision, our interest income plummeted about Tk 400 crore," Khan added.
To handle the low-interest regime, the bank made a decision to increase its investment into treasury bills, bonds and corporate subordinated bonds, and such investment will be 25 to 30 % of total lending and investment, said another official of the lender preferring anonymity.
Last year, the lender increased its investment in government securities and other sectors by 26 per cent to Tk 10,364 crore.
"The investment will jack up our profits as the interest in these investments is just about 8-9 % and they are risk-free. Along with it, the investment can help us keep up with the statutory liquidity reserve," he added.
Thanks to the lower deposit rate, the state-run bank's deposit growth fell to 6.44 per cent in 2019, that was 21.8 per cent in the last year, according to the annual report.
Although bank logged profits in 2019, it had been not allowed to supply a dividend to its shareholders due to a provision shortfall.
Previously 28 June, the board of directors of the lending company had declared 5 % stock dividend because of its shareholders for the entire year that ended on 31 December 2019. The lender provided 10 per cent stock dividend in the last year.
But the central bank did not approve the dividend, the company said yesterday in a piece of price-sensitive information posted on the site of the Dhaka STOCK MARKET.
The bank's provision shortfall was Tk 1,168 crore in 2019, that was Tk 1,136 crore in the last year, in line with the annual report of the business.
"Our board declared the dividend taking into consideration the situation of stock investors though they knew it could not be approved by the Bangladesh Bank," the official said.
"The stock market was bearish and if we don't pay any dividend then the company will be downgraded to Z category," he said.
When a company will not provide a dividend, it is downgraded to Z category shares as per listing regulations.
Rupali Bank, where the government has 90 per cent shares, closed at Tk 30.8 on the DSE yesterday, up 6.21 per cent from the previous day.
