Stocks of listed banks fail to attract investors

Mohammad Mufazzal The share prices of a couple of listed banks in the stock market have gone down below their face value although the trading prices of some other listed companies, having small capital base and weak fundamentals, have recently observed unusual price hikes amid regulatory vigilance. The stakeholders and analysts have said investors are now lukewarm about investing in the listed stocks of financial institutions, largely because of their fears, on real or perceived grounds, about not getting appropriate returns on their investments. Some recent loan scams, mainly involving state-run banks, and their spill-over effects in the overall financial sector, have further compounded the problems. The shares of the listed banks were earlier considered blue chips in the capital market before the 2010 debacle. But now their stocks are, by and large, spinning around their face values over last one year, observers said. "The overall economic condition is good but the scams in some state-run banks have sapped investors' confidence. That's why the investments in shares of banks remain yet sluggish," said Mihaz Mannan Emon, a director of the Dhaka Stock Exchange (DSE). He said presently the banks have to be very much cautious about compliance with the central bank's directives on investments and disbursement of credits which are also monitored by it more carefully than before. "That's why idle money is piling up in the banking sector. This situation may affect the profitability of the banks. And the investors are running after the companies with small capital," Mr. Emon added. Dr Mahmood Osman Imam, a professor at the Department of Finance of the Dhaka University (DU), said the banks are yet to come out of the woods and this is reflected in disconcerting quarterly performances of some banks and that are also experiencing the overburden of non-performing loans (NPLs). "The performance of most banks has been less than satisfactory as they are now required to provision a large amount of money on account of NPLs. Secondly, their business is now less buoyant than before. Thirdly, some banks are bearing an additional load, because of a large amount of margin loans given to their beneficiary owner (BO) account holders. The fund for such margin loan was given by the banks to their subsidiaries operating in the capital market," Mr. Imam told the FE. Anis A. Khan, managing director and chief executive officer of the Mutual Trust Bank, has also shared identical views, saying that the prices of banks' stocks in the market are yet to be satisfactory under such circumstances. "The banks' profitability has, on the whole, declined because of higher provisioning requirements," Mr. Khan told the FE. He also said the overall politico-economic conditions, prevailing in the country, have also contributed to lacklustre performance of the listed banks. Most of the listed banks observed the lowest price of their shares in the stock market during the last one year. The market prices of shares of 30 listed banks shed up to 65 per cent during this period. The share price of the ICB Islamic Bank and the Premier Bank came down in Tk 6.0 and Tk 9.60 respectively last Thursday, their face value being Tk 10 each. And the market prices of the listed shares of the banks which are now at or near the face value are: Al-Arafah Islami Bank (Tk 14.20), Exim Bank (Tk 11), First Security Islami Bank (Tk 11.40), Jamuna Bank (Tk 13.60), Mercantile Bank (Tk 11.50), National Bank (Tk 10.90), NCC Bank (Tk 11.40), One Bank (Tk 14.30), Shahjalal Islami Bank (Tk 13.60), SIBL (Tk 11.20) and Standard Bank (Tk 13) at the close of trading last week. The market prices of the shares of National Bank Limited (NBL) declined 62.75 per cent or Tk 18.2 at year-end in 2012 to Tk 10.8 last week. During the same period, the market price of the AB Bank shed 45.5 per cent or Tk 18.5, Al Arafa Islami Bank 50.53 per cent or Tk 14.1, Bank Asia 40.07 per cent or Tk 10.5, the BRAC Bank 31.88 per cent or Tk 11.7, the City Bank 54.68 per cent or Tk 18.1, Dhaka Bank 40.49 per cent or Tk 11.5, the Dutch-Bangla Bank 24.69 per cent or Tk 30.3 and Eastern Bank 33.95 per cent or Tk 12.8. Among others, the market price of the shares of Exim Bank dropped by 53.87 per cent or Tk 12.5 each and First Security Bank by 48.83 per cent or Tk 10.5 each during the period under report.