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Banks Struggle with Lower Profits Due to Expensive Deposits

Industry: Bank, Financial

A majority of Bangladesh’s listed banks failed to record year-on-year growth in profits during the first quarter of 2023 due to lower net interest income caused by higher deposit rates. Last year, foreign currency exchange gains had helped most banks absorb inflationary pressure and post higher profits, but this year the exchange gain was not as overwhelming.

Deposits have become more expensive as the Bangladesh Bank has fixed banks’ deposit rates in line with inflation. Out of the 25 banks that disclosed their unaudited reports for the January to March quarter of 2023, 10 saw declines in profits and two incurred losses. The banking sector is facing a decrease in net interest income due to the ceiling on lending rates, a decline in exports, and an inability to issue letters of credit. While the share prices of most banks are stuck at floor prices, the price-earnings ratio in the banking sector is below 8%, making bank shares an attractive investment.

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