Dhaka Bank looks to issue bonds to strengthen shield against shocks

Dhaka Bank Ltd wants to raise Tk 6 billion by issuing 4th subordinated bonds to enhance its Tier-II capital base in line with Bangladesh Bank's guidelines on risk-based capital adequacy.
The decision was taken at a meeting of the board of directors of the bank on Monday, according to a regulatory filing published on Tuesday.
The bond issuance is subject to approval of the regulatory authorities, including Bangladesh Bank and Bangladesh Securities and Exchange Commission.
The proceeds will be treated as capital and it will help the bank expand its investment and loan portfolio.
Subordinated bonds are unsecured ranking below other, more senior loans or securities with respect to claims on assets or earnings. Subordinated bonds are thus known as junior securities.
Such debt securities are mostly issued by banks and are dominating the local bond market.
Dhaka Bank has stepped in the regime of Basel-III compliance since January 2015.
Basel III reforms are the outcome of Basel Committee on Banking Supervision (BCBS) trying to improve the banking sector's ability to absorb shocks arising from financial and economic stress.
Dhaka Bank's capital to risk weighted assets ratio (CRAR) was 14.12 per cent under Basel-III as of December 2022, against the central bank's capital requirement of 12.50 per cent.
In terms of asset quality, the bank's non-performing loan (NPL) stood at 5.08 per cent in 2022, up from 3.32 per cent a year earlier while the market average rate is 8.16 per cent.
The loan book recorded a growth of 11.24 per cent to reach an outstanding total of Tk 239.68 billion at the year end, mainly contributed by the corporate loan portfolio.
Deposits grew 5.65 per cent to Tk 243.43 billion at the end of 2022.
The bank recorded a commendable business growth, as reflected by 19.68 per cent increase in gross income, supported by the rise in interest income and earnings in foreign exchange.
However, the first quarter (Q1) consolidated earnings per share dropped 14 per cent year-on-year to Tk 0.63.
The bank declared 6 per cent cash and 6 per cent stock dividends for 2022. The securities regulator already allowed the bank to disburse stock dividends.

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