The earnings of foreign banks operating in Bangladesh rocketed in 2022 buoyed by their incomes from the dealings of international currencies.

The income from foreign exchange dealings, particularly sales, surged 151 per cent year-on-year to Tk 1,921 crore for the nine multinational banks that have a presence in the country.

The income was fuelled by the depreciation of the taka against the US dollar that affected import costs but benefitted exporters.

The taka has been under pressure for nearly a year after the  Russia-Ukraine war-induced fallout sent the prices of commodities higher. As a result, import-dependent nations such as  Bangladesh were forced to pay more to clear import bills.

The foreign banks' profit and loss reports were dominated by investment income and income from commissions and charges while interest income grew marginally.

Local banks normally depend on their core business of gaining interest from lending.

The foreign banks disclosed their financial reports recently.

The reports showed that their total profit surged 102 per cent year-on-year to Tk 3,156 crore in 2022.

"The foreign banks' cost of funds and operation is low, so they can log hefty profits every year," said Salehuddin Ahmed, a former governor of the Bangladesh Bank.

"Due to their bright global images and practice of quick delivery of services, the banks are preferred by entrepreneurs for international trade."

Ahmed said people also want to keep funds with the banks even though the deposit rate is low.

"The emphasis on efficiency keeps their operational costs low."

He said businesses rushed to them last year to avail dollars amidst a shortage of the currency. "So, the foreign banks logged a huge income from commissions and fees."

The foreign banks are mainly doing business with corporates, so they can lend easily and it also yields better business, Ahmed said.

"Now the banks prefer giving short-term loans and guarantee instead of lending to businesses for long terms. So, their net lending income is not the biggest compared to the other incomes."

The nine banks' net interest income rose 20 per cent to Tk 2,771 crore.

Their investment income soared 53 per cent to Tk 1,360 crore while the commissions, fees and exchange income surged 74 per cent to Tk 2,912 crore.

Among the foreign banks, Standard Chartered Bangladesh (SCB) logged the highest profit of Tk 1,655 crore, up 118 per cent.

Its interest income rose 14 per cent to Tk 1,277 crore while income from commissions and fees jumped 31 per cent to Tk 1,037 crore.

Of the Tk 1,037 crore, Tk 554 crore was from foreign exchange dealings, up 66 per cent.

"Our income has returned to the pre-Covid level and was up 9 per cent compared to 2019," the multinational bank stated in an email.

"The strength and momentum of the economy, particularly in the first half of the year, is what underpins the performance of Standard Chartered."

SCB benefitted from strong liquidity, exemplified by an advance-to-deposit ratio of around 55 per cent, and one of the highest shareholders' equities in the industry of Tk 8,741 crore, it said.

Thanks to the strength of the bank's balance sheet, almost 50 per cent of the increase in income came from higher returns on investment in government bonds.

The foreign exchange income was an important component of the annual revenue, which was contributed by higher foreign currency volumes driven by higher trade flows, as well as higher forex margin, which increased to Tk 1.

The margin included the risk premium that is usual in a rising exchange rate scenario, SCB added.

The central bank issued an instruction in August 2022, saying the banks were allowed to add a maximum Tk 1 between the weighted average selling and buying rates of foreign currencies.

"The regulator should have been strict earlier and monitored how the banks were making a huge amount of money by dealing foreign exchanges when businesses were struggling for the dollar shortage," Ahmed said.

The Hongkong and Shanghai Banking Corporation Limited, Bangladesh (HSBC Bangladesh) was the second-highest profit-making foreign bank.

Its profits soared 55 per cent to Tk 587.9 crore while net interest income advanced 13.9 per cent to Tk 873 crore.

The bank's income from commissions and fees skyrocketed 75.9 per cent to Tk 811 crore. Of the sum, income from foreign exchange gains amounted to Tk 449 crore, which was 227 per cent higher than that of the previous year.

HSBC Bangladesh declined to make any comments.

Citibank NA also saw a huge rise in its profits owing to a higher income from the foreign exchange business.

Its profits soared 712 per cent to Tk 249 crore. The bank logged a 483 per cent higher income from foreign exchange dealings amounting to Tk 350.33 crore.

The bank was asked about the tremendous rise in its income from the foreign exchange business.

In an email, Citibank NA said the increased profit included substantial growth in client volumes, including export and foreign direct investment flows, handled by Citibank N.A Bangladesh and driven by Citibank's strong global footprint and strategic focus on multinational clients and large local corporates.

Profits of Woori Bank and the State Bank India rose 131 per cent to Tk 146 crore and 76 per cent to Tk 180 crore, respectively.

Habib Bank Limited, Bangladesh logged a profit of Tk 10 crore in 2022 after incurring a loss of Tk 5 crore in the previous year.

The Bank of Ceylon logged a 58 per cent higher profit of Tk 265 crore.

The National Bank of Pakistan saw a 60 per cent higher profit amounting to Tk 48 crore.

However, Bank Alfalah Bangladesh's profits dropped 59 per cent to Tk 13 crore, according to the financial reports.