Most NBFIs incurred losses in July-September

Most listed non-bank financial institutions (NBFIs) incurred losses in July-September of the current year while companies that did make a profit secured very little margins mainly due to the ongoing macroeconomic stress, narrowing of the interest rate spread and fall in income from stock investments.

Of the 23 listed NBFIs in Bangladesh, 17 published their financial reports. Of them, 7 incurred higher losses year-on-year whereas three incurred losses this year only.

Another four logged lower profits and only three saw slightly higher profits, according to data compiled by Sandhani Asset Management Limited.

Bangladesh's overall macroeconomic situation is under stress and it is affecting the overall financial institutions sector, said Mominul Islam, chairman of the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP).

The banking sector has multiple sources of income while the NBFIs have limited options, for which it is having to absorb more of the downturn, he said.

On top of that, Bangladesh Bank's directives for the NBFI sector since last July has turned even more stringent. As a result, profits of the leasing companies have been hit in the short run, he added.

"In the long run, however, these will be helpful in boosting the NBFIs' resilience," said Islam, who is also a former chairman of the Bangladesh Leasing and Finance Companies' Association.

Net interest income declined for the NBFIs for the narrowing of the spread, which is the difference between the interest rates of deposit and lending.

Some irregularities that had been swept under the carpet by several NBFIs have been unearthed by the central bank and this had an impact on the profitability of the whole sector.

The positive takeaway is that whatever bad that had been hidden away has been divulged and so it will be good for the sector in the future, Islam said.

On the other hand, large NBFIs have a big amount of investment in the stock market but the capital market was bearish.

"So, income from these investments dropped," he said.

If there is a rebound in the economy, the NBFIs' profits will also bounce back, added Islam, also managing director and CEO of IPDC Finance.

Among the loss incurring NBFIs, Phoenix Finance suffered the most (Tk 159 crore) followed by Fareast Finance and Investment Limited (Tk 34 crore) and Islamic Finance and Investment Limited (Tk 30 crore).

Others on the list were MIDAS Financing Limited, First Finance Limited, Premier Leasing and Finance Limited, Union Capital Limited, International Leasing and Financial Services Limited, Bay Leasing and Investment Limited and the Investment Corporation of Bangladesh (ICB).

The state-run ICB, in its financial report, said its profits decreased due to a drop in capital gains on securities sales, dividend income, interest income and fees and commission income.

Meanwhile, LankaBangla Finance PLC, Bangladesh Finance Limited and DBH Finance PLC secured a rise in profits.

IDLC Finance saw the highest profit (around Tk 28 crore) among all the listed NBFIs followed by DBH Finance (around Tk 24 crore).

However, IDLC Finance's profit had decreased year-on-year alongside that of United Finance Limited, IPDC Finance Limited and National Housing Finance PLC.

The IDLC, in its financial report, said the primary reason behind its profit decline was a drop in net interest income, investment income and commissions from exchange and brokerage.