EBL clarifies its negative cash flow position
Eastern Bank Limited (EBL) clarified its negative cash flow position, responding to a report published in The Business Standard on August 15, 2021 under the headline “Banks are showing high profit, but it’s not real” .
EBL told reporters on Wednesday that ideally the bank finances assets (loans, advances and investments) either by deposit, borrowing, or equity. In the first half of 2021, asset growth was mainly financed by lower cost borrowings.
Since “borrowing” is a component of “financing cash flow” (not operating cash flow), operating cash flow tends to be negative if loan growth is funded. by borrowing instead of a deposit.
The bank says it’s common practice for banks to borrow money in the money market when needed within their wholesale borrowing limit.
EBL also admitted that its (consolidated) net operating cash flow in the first six months of this year was negative Tk 827 crore despite positive Tk 187.3 crore cash flow from items. of profit during this period.
EBL observed that the report published in TBS was based on the Bangladesh Bank report and on the findings of the banks’ financial statements.
Previously, Eastern Bank, one of the best performing banks in the country, reported 55% profit growth in the first half of the current year, despite operating with negative cash flow.
In the first six months of this year, 10 of the 30 listed banks experienced negative cash flow of Tk 4,900 crore.