Incomes and Expenses Scenarios of Banking Sector of Bangladesh

Other day I was checking the “Monthly Economic Trend” May 2016 Issue published by Bangladesh Bank. I found some interesting data there and thought about writing a blog about those. And, here, it is. This is basically a general discussion on the income and expenses of Banking Sector of Bangladesh.  I’ve observed that, after 2002, banking sector has experienced single digit growth in 2013 and 2014. Individually, only the State Owned Commercial Banks (SOCBs) have reported double digit growth in 2014 while Foreign Commercial Banks (FCBs) have reported negative growth. But, if we dig deep to the SOCBs, then the double digit growth doesn’t look pleasing.

Figure 01: Total income and growth rate of income of Bangladesh Banking Sector

In table 01 the scenario of our banking sector through four performance measures is shown. The values are calculated by averaging 22 years (1993-2014) performances. It can be seen that SOCBs has the highest total expenditure to total income ratio (TE/TI) of 87.23% which means that for every Tk. 100 income SOCBs has expenditure of Tk. 87.23. This is Tk. 7.98 higher than the industry average of Tk. 79.24 and respectively Tk. 37.73 and Tk. 9.69 higher comparing to FCBs and PCBs. It indicates that SOCBs has an inefficient income-cost management practice than the FCBs and Private Commercial Banks (PCBs).

If manpower is taken into account, it can be found that on average an employee of SOCBs generates an income of Tk. 1,128,491.93 per year where the amount is Tk. 8,659,602.95 for FCBs and Tk. 2,020,144.92 for PCBs. And, considering the total industry, this is Tk. 2,068,242.38 indicating deficiency of Tk. 939,750.44 per employee for SOCBs. On the other hand, in terms of expenditures, SOCBs has the lowest average expenditure per employee of Tk. 911,536.80 which is Tk.  609,076.77 lower than industry average. Overall, FCBs have the highest income and expenditure per employee than others.

Particulars	SOCBs	FCBs	PCBs	Industry
TE/TI	87.23%	49.49%	77.54%	79.24%
Income Per Employee (Tk.)	1,128,491.93	8,659,602.95	2,752,471.76	2,068,242.38
Expenditure Per Employee (Tk.)	911,536.80	4,257,966.65	2,020,144.92	1,520,613.57
Profit Per Employee (Tk.)	(48,330.25)	2,303,844.29	306,167.31	169,182.87

Table 01: Some Performance Measures of Banking Sector of Bangladesh

If we look at the average of profit per employee, it is evident that SOCBs has a negative profit of Tk. 48,330.25 which is way lower than the positive profit per employee of FCBs, PCBs, and Overall Industry. PCBs have the highest profit per employee of Tk. 306,167.31. Therefore, above findings highlights the necessity of SOCBs to work on developing efficient income and expense management system so that they can be more competitive in the industry, thus, can play effective role in progress of Bangladesh.