Bangladeshi banks’ weak profitability to continue in 2025: analyst

Asset quality will be challenged by weak lending standards and foreclosure laws.

Bangladeshi banks’ weak profitability will continue in 2025, although the expected slowdown in credit growth should help ease the tight liquidity situation of the banking industry, said Varghese.

“As the central bank tries to tame inflation, interest rates are anticipated to stay high in 2025, potentially slowing loan growth,” Varghese said in S&P’s 2025 Country-By-Country outlook.

Bangladeshi banks’ asset quality will be challenged by weak lending standards and foreclosure laws. “We project [the] reported NPL ratio for the banking system to increase to about 14% in 2025,” he said.

Varghese however said that the expiry of forbearance measures in September 2024, whilst pushing up the NPL ratio, will improve transparency in line with international standards.

The Prompt Corrective Action framework, which takes effect on 31 March 2025, will compel banks to enhance focus on capital adequacy, stressed assets, and weak corporate governance. The proposed merger of five banks will also help address the problems of overcapacity in the sector.

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