Written by The Banking Post
Mercantile Bank PLC has posted an 8% year-on-year decline in its consolidated net profit for the first half of 2025, weighed down by a sharp increase in non-performing loans (NPLs) and a significant shortfall in loan-loss provisioning.
According to the bank’s audited financial statements, published Thursday following board approval, earnings per share (EPS) fell to Tk1.82 in the January–June period, down from Tk1.98 during the same period in 2024.
In the second quarter alone (April–June), the consolidated EPS dropped 22% year-on-year to Tk0.98, reflecting the ongoing strain on the bank’s bottom line.
As of 30 June 2025, Mercantile Bank’s consolidated net asset value (NAV) per share stood at Tk25.11. On the day of the disclosure, the bank’s share price on the Dhaka Stock Exchange declined by 1.20%, closing at Tk8.20.
Provision Shortfall Pressures Dividend Policy
The bank’s financial performance has been under pressure since it reported a provision shortfall of Tk1,700 crore as of 31 December 2024, prompting its board in June to forgo dividend declaration for the year.
As per the audited annual report, Bangladesh Bank’s assessment had identified a total provision requirement of Tk2,121.19 crore, against which the bank had maintained only Tk220.33 crore, leaving a deficit of Tk1,900.86 crore at the close of 2024.
In response to regulatory instructions issued on 22 May, the bank allocated Tk200 crore from its 2024 pre-provision operating profit, bringing the shortfall down to Tk1,700.86 crore.
Due to capital adequacy constraints and profitability limitations, Bangladesh Bank allowed the bank to finalise its 2024 financials without fully adjusting the shortfall—resulting in no dividend payout for shareholders.
Soaring Classified Loans Deepen Losses
The financial strain stems from a 199% year-on-year surge in classified loans, which reached Tk5,176 crore by the end of 2024—accounting for 17.25% of the bank’s total loan portfolio.
This deterioration in asset quality led to a net loss of Tk272 crore in Q4 of 2024 and dragged down full-year consolidated net profit by 68% to Tk64.95 crore, from Tk204.77 crore in the previous year. Consequently, EPS for 2024 plunged to Tk0.58, compared to Tk1.86 in 2023.
Mercantile Bank now faces heightened scrutiny over its risk management practices, with analysts urging stronger provisioning discipline, improved recovery efforts, and cautious lending policies to restore investor confidence and regulatory compliance.
