Bangladesh banks' nine-month profits rise on Treasury returns

A sector split in two

Nine-month results from Bangladesh's listed banks show a sector moving in two directions. Most listed lenders earned more in January–September 2026 than a year earlier, and much of that gain came from income on government securities. Meanwhile, a group of troubled banks reported losses large enough to outweigh the gains at the healthy ones. Leaving aside five banks going through mergers, 17 of 31 listed lenders grew their profits year on year. Seven saw profits fall, two narrowed their losses, four lost more than before, and one moved from profit into loss.1

The gap between the two groups shows up clearly in the July–September quarter alone. Dhaka Stock Exchange data show the 31 listed banks together lost Tk1,424 crore in the quarter. Nine loss-making banks lost a combined Tk5,126 crore, while the other 22 earned Tk3,702 crore.3 Another count, covering 30 banks that had reported by November 1, finds the same pattern over nine months. Profits at the 22 profitable banks rose 29.4% to Tk93.18 billion, but losses at the other eight jumped 83.9% to Tk134.09 billion.4

The outlets count slightly different sets of banks and report somewhat different figures for some of them. They all reach the same conclusion, though: the banking system as a whole lost money, even as its strongest members posted records.

The Treasury trade

The winners did well mainly because they put spare cash into government paper instead of new loans. Akramul Alam, head of research at Royal Capital, said banks with extra liquidity moved those funds into Treasury bills and bonds because companies were borrowing little amid economic uncertainty.1 Private-sector credit grew just 4.75% in August, a sign that business confidence is weak and lending conditions are tight.14

The figures for individual banks make this concrete. Prime Bank's net interest income fell 64% to Tk1.36 billion over nine months, yet its profit still rose 9% because investment income climbed 34% to Tk16.32 billion.1 Investment income made up about 72% of City Bank's operating income, compared with less than 8% from net interest income.4 City Bank earned Tk3,002 crore from Treasury bills and bonds over the nine months, about 8% more than a year earlier.9 Pubali Bank had the biggest quarterly profit in the sector, a record Tk900 crore, even though its core lending business lost Tk150 crore.3

The trend did not start this year. By late 2025, government securities were already producing six to eight of every ten taka some banks earned. At that point, investment income made up about 77% of one lender's operating income, and treasury returns had overtaken loan spreads as the main source of profit across much of the industry.15 Half-year results in July showed the same thing, with Dutch-Bangla Bank's profit up 321% on a 52% rise in investment income even as its net interest income fell.18

Deposits follow trust

A second advantage gets less attention: depositors are moving their money from weak banks to strong ones. Alam said trusted banks have gained deposits that left weaker lenders.1 BRAC Bank had the highest nine-month profit, Tk21.21 billion, up 38%. Its customer deposits passed Tk1.03 trillion, and its non-performing loan ratio was 2.27%.1 Pubali Bank's deposits went above Tk1 trillion for the first time and reached Tk1.10 trillion.1 City Bank's deposits grew from Tk63,170 crore in December to Tk77,404 crore at the end of September.9

The same movement is visible from the losing side. Islami Bank Bangladesh said its operating cash flow worsened sharply because of "deposit withdrawals under unusual circumstances" in the third quarter, which left it with cash flow per share of negative Tk36.54.2 In effect, the healthy banks are being paid twice: once through cheap deposits that their reputation attracts, and again by putting those deposits into risk-free securities that need no loan-loss provisions. A senior banker made this point after the half-year results. Banks with few bad loans have room to buy Treasuries, he said, while banks with many bad loans earn nothing on them and still have to set money aside against them.18

Where the losses are piling up

The losses are concentrated in a few banks. Islami Bank lost Tk32.86 billion over nine months, after a profit of Tk998 million a year earlier. Its net interest income fell to negative Tk18.28 billion.1 The bank lost Tk1,970 crore in the third quarter alone, and its core interest-earning business lost Tk1,499 crore.3 The bank linked the decline to classified investments tied to alleged embezzlement by connected parties against large legacy exposures, along with higher profit payments to depositors.2

National Bank lost Tk3,016.89 crore over nine months, almost twice its loss of a year earlier. It said it cannot book interest on classified loans while its funding costs keep rising.2 Its total losses since 2022 have reached Tk11,914.17 crore.10 IFIC Bank lost Tk25 billion, with net interest income of negative Tk22.88 billion.1 In the third quarter, AB Bank lost Tk880 crore, though that was less than a year earlier. Rupali Bank's loss more than doubled to Tk355 crore, and Standard Islami Bank moved into a loss of Tk159 crore.3

The weakness in lending goes well beyond these banks. Sixteen listed banks lost money on lending in the third quarter, and only three increased their interest income.3 Many of the profitable banks look much less healthy once their bond income is set aside.

The regulator's balance sheet

The results also matter for regulators. Bangladesh Bank told a parliamentary committee that 22 of the country's 61 banks had accumulated losses of about Tk2.54 trillion as of March. The banking sector made an operating profit of Tk789 crore but a net loss of Tk8,417 crore after provisions.68 Defaulted loans reached Tk6.07 trillion by June, roughly a third of all loans.8 The World Bank put the non-performing loan ratio at 33.2%.10 By late September, the central bank had given about Tk85,000 crore in emergency liquidity to 12 distressed banks.5 National Bank separately received Tk7,000 crore from state-owned Sonali Bank, backed by a central bank guarantee.7

On policy, Bangladesh Bank has said it will cap how much any one borrower can owe across the whole banking system and will go after each bank's largest defaulters. It has also said banks with negative or below-minimum capital need recapitalisation and restructuring.6 Some lawmakers have gone further. One said the country has too many banks for the size of its economy and called for consolidation.5

The crisis has also made the central bank very profitable. Bangladesh Bank earned about Tk26,000 crore in net profit in FY26, largely from interest on emergency loans to weak banks and from returns on its reserves.1416 Some commentators argue that this profit reflects strain in the system rather than strength. They warn that if some of the emergency loans cannot be repaid in full, the central bank's earnings are overstated, and they note that the IMF has raised the question of provisioning against these loans.16

Why the windfall may not last

The main risk for bank stocks is that the Treasury income may not continue. Government securities yielded 12–13% across maturities in mid-2024, the highest in a decade, as the central bank tightened policy.15 Recent auctions have been well below that. Late October cut-off yields were about 8.56% on 91-day bills, about 8.79% on 364-day bills, and about 8.25% on a reissued 10-year bond.12 Banks still earn coupons on older, higher-yielding bonds, and falling rates can produce gains on bonds they already hold.11 But each new taka invested now earns less than it did, and at some point those older bonds will mature.

In our reading, these results are less healthy than the headline profit growth suggests. Banks with clean balance sheets and strong deposit bases deserve their high valuations. Still, much of their growth comes from lending to a government that has had to borrow more, while private borrowers are pulling back.1315 Treasury returns cannot keep carrying earnings indefinitely. If yields keep falling, the strong banks will have to grow profits through lending, and lending demand is weak while the World Bank expects growth of just 3.4% this fiscal year and next.10 For the weak banks, the outlook depends far more on how the regulator handles recapitalisation, mergers, or closures than on interest rates. Unless the restructuring that Bangladesh Bank has described actually happens, losses at those banks are likely to keep offsetting the gains at the healthy ones.