Merchant banking, brokering and remittance fees drive profit growth
Local private banks stand strong against the ongoing global recession because of a substantial increase in their business with merchant banking, brokerage houses, fund and portfolio management, and remittance transaction, bankers said.
Banks, which have merchant banking and brokerage houses, made at least 20 percent more profit during the first half of 2009 compared to the same period of 2008 riding on the growing transaction in stock markets.
According to bankers, income from remittance transaction has also increased significantly during the period.
Currently, the banks have excess liquidity, which reached as high as Tk 27,716 crore in April, mainly for a decline in investment demand.
Mutual Trust Bank (MTB) has marked a whooping 307 percent rise in its operating profit from brokerage house during the January-June period of 2009 compared to the same period a year ago. The bank made a profit of nearly Tk 11 crore this year from Tk 2.73 crore in 2008.
Now MTB has seven brokerage branches that would be raised to 12 at the end of this year to meet the growing demand.
“Diversified groups of people are coming to the capital market. Many of them are educated and sophisticated investors,” said Anis A Khan, managing director of MTB.
Khan said: “These investors generally tend to be aware of the nuances of the markets.”
The largest private commercial bank, Pubali, also made at least 20 percent more profit from its brokerage house during the first half of 2009 compared to 2008, said Rafiqul Islam, consultant, Securities Trading Department of the bank.
“Individual corporate clients are also rising substantially,” said Islam.
There are 31 registered merchant banks and 238 brokerage houses in the country, while 10 banks provide merchant banking services. Some of the banks have both the merchant banking and brokerage businesses. Most of the private banks and leasing and finance companies have their own brokerage divisions.
Three state-owned commercial banks also opened merchant banking divisions this year to grab their share from the growing business.
A bank's brokerage house charges Tk 0.4 to Tk 0.65 for transaction of a share worth Tk 100. Dhaka Stock Exchange traded over Tk 1,000 crore on a single day earlier this month. Brokerage houses got Tk 4 crore at Tk 0.4 for every Tk 100 transaction by buying and selling from Tk 1,000 crore.
Prime Bank, National Credit and Commerce (NCC) Bank and AB Bank have also made significant profits from their brokerage business so far this year, officials of these banks said.
Prime Bank earned over Tk 20 crore from merchant banking during the first half of this year, while the figure was Tk 13 crore in the same period a year ago, said Ehsanul Haque, managing director of the bank.
Haque however said this income is insignificant compared to the bank's total profit portfolio of Tk 250 crore.
Inward remittances have also helped the banks sustain their profit growth this year despite bad impacts on this sector in other countries due to global financial meltdown.
Beating the doomsayers, Bangladesh received $9.68 billion in remittances during the just concluded fiscal year. The growth rate was 22.32 percent higher than that of the previous fiscal year.
“We have transacted $43 million inward remittances during the first half of 2009 and the transaction for the first six days of July reached $2.17 million,” said Anis A Khan of MTB.
The banks having wings like capital market operation, cards, fund and portfolio management and brokerage house earned substantially so far this year, said Nurul Amin, managing director of NCC Bank.
“This growth from non-funded sources has helped the banks offset declining trend in loans and advances -- the main source of a bank's income,” he said.
NCC's income from remittances rose by 50 percent in the first half of this year compared to the same period last year.
Prime Bank's earning from remittance transaction grew nearly by 12 percent so far this year compared to the same period a year ago, said its managing director.
“Currently we deal with $350 million worth of remittances. We are trying to raise it to $600 million in a few years,” said Ehsanul Haque.
> Source: The Daiy Star, July 14, 2009
