Net profit of United Commercial Bank grew 19.66 percent year-on-year in 2014, led by fourth quarter’s healthy earnings thanks to the simplification of loan provisioning rules by the central bank.
The first generation bank’s net profit stood at Tk 367.27 crore at the end of 2014, up from Tk 306.93 crore in the previous year.
In a meeting on Sunday, the listed bank also announced higher dividends—10 percent cash and 20 percent bonus— in 2014, up from 20 percent dividend in 2013.
The bank’s earnings per share in the last quarter were significantly higher than expectations, said BRAC-EPL, a securities analyst firm. UCB announced EPS of Tk 4.39 for last year. But the bank’s first nine months’ EPS was
Tk 2.83, which implies that the fourth quarter’s EPS was Tk 1.56.
“The even bigger difference came with our projections where we had anticipated heavy provisioning in the final quarter and an annual EPS of Tk 1.92,” said BRAC-EPL.
“Our annual projections were based on the assumption that the non-performing loans rescheduled in December 2013 will come back into the books following the end of the relaxation guideline in June 2014.”
But the central bank gave a new guideline, targeting large borrowers having exposure of Tk 500 crore in various banks.
As per the guideline, default borrowers with large loans were allowed to restructure the loans for 12 years at very concessionary interest rates.
“Even though financial statements are not out yet we are inclined to believe that this guideline to restructure large loans played a key role in the fourth quarter results of UCB,” BRAC-EPL said.
By and large, other banks will also likely show strong profits by restructuring large loans, it said.
The financial disclosures and the announced dividends, however, failed to meet investors’ expectations, and the bank’s share prices declined by 1.91 percent yesterday compared with its prices on Sunday.
On the Dhaka Stock Exchange yesterday, each UCB share was traded at between Tk 30.70 and Tk 32.50, before closing at Tk 30.80.