BRAC Bank, our only recommended bank in Bangladesh, reported BDT 1,590mn NPAT (excluding minority interest) in Q3 CY22 against BDT 1,417mn reported in Q3 CY21, implying c12% YoY growth. However, the 9M CY22 earnings is down by c5% YoY (EPS BDT 2.53 in 9M CY22 vs EPS of BDT 2.67 in 9M CY21).
bKash’s positive bottom-line after a hiatus of 13 quarters, 67% YoY increase in commission, exchange and brokerage income and c38% YoY growth in consolidated lending portfolio helped BRAC boost its earnings in the latest quarter.
The lending portfolio of the core banking business increased by c37% YoY and c23% YTD. This is more than the Bangladesh’s private sector credit of 13.9% reported in September 2022. BRAC’s lending activities outperformed the industry average and maintained double digit growth for the past four quarters consecutively. The regained growth momentum in economic activities and depreciation of local currency (which made the foreign loans expensive) aided BRAC BANK expand its loan portfolio at this rate.
The commission, brokerage and exchange income of the banking business has doubled in Q3 CY22. While the commission and fee income swelled by 27%, the other income increased by three times in 9M CY22.
bKash’s net revenue increased by c28% YoY and gross margin improved by 537bps YoY in Q3 CY22. bKash's gross revenue in Q3 CY22 was BDT 9.75bn. The gross margin of the company also increased by 279bps QoQ.
bKash’s reported positive operating profit after 14 quarters and positive bottom line after a long hiatus of 13 quarters. The 27.7% net revenue growth, c537bps improvement in gross margin YoY and 235bps YoY decline in opex to net revenue were the main drivers of BDT 276mn quarter operating profit.
Another BDT 285mn net interest income earned ( driven by BDT c16bn fixed deposit made from Softbank’s investment in bKash) led to BDT 465mn net profit of the mobile financial service provider in Q3 CY22.
BRAC Bank’s (core banking business) interest rate spread (calculated) contracted by 81bps to 4.2%. While the lending rate (calculated) dropped by 12bps YoY to 7.2%, the deposit rate (calculated) increased by 69bps YoY to 3.0% as the bank has to offer inflation adjusted interest on fixed deposits during the increasing inflationary period.
BRAC Bank’s (core banking business) cost to income ratio increased by 690bps to 58.7% in 9M CY22. The human resource related cost has experience a 24% increase YoY during the period, while other operating expenses increased by 29%.
The consolidated investment income declined to BDT 1,163mn in Q3 CY22 from BDT 1,492mn reported in Q3 CY21, implying c22% YoY decline. However, it is attributable to a higher base of last year's investment income and the significant increase in treasury bond yields in the span of a year.
The contribution of capital market subsidiaries in the group earnings has also declined. These two subsidiaries in total reported BDT 16mn net loss in Q3 CY22 vs the net profit of BDT 325mn reported in Q3 CY21