Banks, NBFIs fade in capital market in last two years

Mohammad Mufazzal | Published: July 08, 2014 00:00:00 | Updated: November 30, 2024 06:01:00

The capital market has witnessed a drastic change in the sectoral turnover in the last couple of fiscal years (FYs) with banks and NBFIs losing their dominating edge, experts and stakeholders said. Â
The turnover value of the heavyweight banking sector was reduced by 88.41 per cent to Tk 105.19 billion in last four FYs.
Experts said strict provisioning rules, continuous reductions in dividends, limited exposure to capital market and huge idle money reduced the banks' profits which were subsequently reflected in the market prices of the listed banks. Â
Due to radical change in the sectoral turnover, in the FY 2013-14 and FY 2012-13 fuel and power and textile sectors replaced the banking and the non-banking financial institutions (NBFIs), whose shares were considered as blue chips before the 2010-11 debacle.
As per the data found in the Dhaka Stock Exchange (DSE), in the FY 2013-14, fuel and power topped the list of sectoral turnovers with a value of above Tk 154.78 billion and textiles secured second position with a value of above Tk 154.27 billion.
In the FY 2010-10 and FY 2011-12, the banking sector topped the list of sectoral turnovers with a value of Tk 908.34 billion and Tk 262.93 billion respectively.
Â "In the FY 2009-10 and FY 2010-11, the banks made sufficient profits due to bullish trend observed in the capital market. Then the banks' exposure to capital market was also high," said Faruq Ahmad Siddiqi, former chairman of the securities regulator.
He said in the FY 2009-10 and FY 2010-11, the banks' shares were very lucrative to investors as those issued huge bonus dividends to boost their capital base for the sake of implementing the Basel-II.
Â "In the FY 2012-13 and FY 2013-14, the market prices of the listed banks went down significantly due to reduction in profits and dividend disbursements," said Mr. Siddiqi.
He said banks' profits also decreased due to reduced exposure limits, coupled with strict provisioning rules and mountains of idle money.
The engineering sector also surpassed the banking sector in the FY 2013-14 as the trading prices of some companies having small capital base and weak fundamentals observed unusual price hikes amid regulatory vigilance, the market insiders said.
Md. Moniruzzaman, managing director of the IDLC Investments, said the shares of the banking sector lost prices as their earnings dropped significantly.
"The banks are yet to show their better positions to restore investors' confidence. On the other hand, textile and engineering sectors secured good positions in terms of turnover due to speculative trading," Mr Moniruzzaman said.Â Â Â Â
In the FY 2013-14, due to lower market prices, the banking sector became fifth in the ranking of sectoral turnovers with a value of above Tk 105.19 billion despite the highest number of shares traded.
Still now, of 30 listed banks, the market prices of 19 are spinning around the face value. The market prices of the Premier Bank and the ICB Islamic Bank went below face value in September, 2013 and the last one is yet to go above face value.
Above 5.92 billion shares of the listed banks were traded on the DSE in the FY 2010-11 and the number of traded shares came down to above 5.41 billion and above 4.13 billion in the FY 2011-12 and FY 2012-13 respectively.
The number of traded shares of listed banks was much higher than that of fuel and power and textiles in the FY 2013-14, FY 2012-13, 2011-12 and 2010-11.
But the banking sector lost its number one position in terms of turnover value in the FY 2012-13 and FY 2013-14 as market prices of the banks came down heavily compared to the prices of fuel and power and textile sectors.
In the FY 2010-11, the banking sector topped the list of 20 sectors of the listed securities with a turnover worth above Tk 908.34 billion which was 27.87 per cent of the market turnover value.
In FY 2010-11, the NBFIs secured the second position with a turnover value of above Tk 489.98 billion which was 15.28 per cent of total market turnover value.
But in the FY 2013-14, the NBFIs sector was shifted to position number eight with a turnover value of above Tk 52.87 billion.