IFIC to issue zero coupon bonds

Private sector commercial bank, IFIC decided to issue zero-coupon bonds worth Tk 6 billion to raise regulatory capital, moving away from its decision to float coupon-bearing subordinated bonds.
Its board of directors approved the issuance of fully redeemable, non-convertible, unsecured, subordinated zero-coupon bonds, according to a stock market filing on Thursday.
Zero-coupon bonds don't need interest payment. Instead, the debt instruments are issued at heavy discounts and redeemed with the full face value at maturity.
Subordinated debt (debenture) is a loan or security that ranks below other loans or securities when it comes to settling claims on assets or earnings.
The lender will sell the bonds through private placements. The debt securities are intended to strengthen the bank's Tier - II capital base.
The term Tier-2 capital refers to one of the components of a bank's required reserves. It is designated as the second or supplementary layer of a bank's capital and is composed of items, such as revaluation reserves, hybrid instruments, and subordinated term debts. It is considered less secure than Tier 1 capital.
The lender will issue the bonds to fulfill the requirement of Basel III.
Basel III is a set of reform measures intended to improve regulation, supervision, and risk management in the global banking sector.
The Issuance of the bonds is subject to approval of the Bangladesh Bank and the Bangladesh Securities & Exchange Commission (BSEC).
The bank's total outstanding balance under the head of subordinated debts stood at Tk 10 billion at the end of 2023.
The listed commercial bank showed a profit of Tk 3.44 billion in 2022. It paid 2.5 per cent cash and 2.5 per cent stock dividends for the year.
IFIC profit dropped 13 per cent year-on-year to Tk 3 billion in 2023 and declared 5 per cent stock dividends for the year.
Meanwhile, the stock traded at Tk 8.60 per share on the Dhaka Stock Exchange on Thursday, 2.38 per cent higher than the day before.

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