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Depressed stock market pushes down LankaBangla Securities' profit by 56pc

The brokerage firm declares 10pc cash dividend for shareholders

FE REPORT | March 20, 2023 00:00:00

LankaBangla Securities, which started trading at the newly-introduced alternative trading board (ATB) early January this year, reported a 56 per cent plunge in profit for 2022, compared to the previous year.

The first-ever brokerage firm in Bangladesh that offloaded shares in the stock market logged a net profit of Tk 329.53 million for 2022, according to a regulatory filing.

Its consolidated net profit also fell 35 per cent year-on-year to Tk 338.36 million in 2022.

LankaBangla Securities is a subsidiary of LankaBangla Finance listed on the DSE's main board in 2006. LankaBangla Finance holds 92.31 per cent shares of the brokerage firm.

Despite the decline in profit, the board of directors of the brokerage firm recommended a 10 per cent cash dividend for its shareholders, excluding sponsor-directors, subject to regulatory approval.

Meanwhile, the share price of the ATB-listed firm rose 2.13 per cent to close at Tk 19.20 on Sunday.

Khandoker Saffat Reza, director & CEO of LankaBangla Securities, blamed the downward trend in the stock market for the plunge in profit.

"The stock market was bearish and trading also sluggish in 2022, which impacted the profits," said Mr Reza.

The firm has a strong client base but many investors could not participate in trading after a certain period due to the price restriction, said Mr Reza.

The market's movement relied mostly on a handful of stocks, he added.

The main sources of income of brokerage firms are trading commission, interest against margin loans, BO (beneficiary owners') accounts' fees etc.

Income from marginal loans slumped as the market remained almost stagnant, said Mr Reza.

The stock market had a tough ride in 2022 due to the war in Ukraine that ushered in economic uncertainties. Adding to that, the floor price mechanism made the market mostly illiquid and shattered investors' confidence.

The key index of the Dhaka Stock Exchange slumped 576 points while daily average turnover decreased by 35 per cent to Tk 9.61 billion in 2022.

LankaBangla Securities is the leader in terms of customer transactions. The brokerage firm ranked as the country's top broker for 16 years out of its 25 years in operation.

It is equipped with a strong IT infrastructure and a strong research base covering equities equivalent to 40 per cent of the market value. LankaBangla is engaged in research publications and reports for investors at home and abroad.

As per the rules, the company has to offload 10 per cent of its shares on the ATB. It has almost reached its target sale of 10 per cent, said Mr Reza.

The company's paid-up capital is Tk 2.69 billion, authorised capital is Tk 5 billion and the total number of securities 269.03 million.

Alternative Trading Board

Trading on the ATB debuted on January 4 this year with LankaBangla Securities and PRAN Agro guaranteed bonds. No other securities could be added to the list since then.

The platform started its journey at a time when the country's stock market is going through a massive liquidity crunch.

The Bangladesh Securities and Exchange Commission (BSEC) approved the ATB rules at the end of 2019 to facilitate trading of non-listed securities such as equity securities, debt securities, open-end mutual funds and alternative investment funds.

In March 2021, the DSE completed all the technical preparations to launch the ATB, paving the way for diversification of the country's stock market along with a boost in the exchange's revenue income.

The alternative trading platform has 76 open-end mutual funds, 18 equity-based securities, and 15 debt securities ready for listing, according to sources.

To participate in the ATB, securities must be converted into electronic form and deposited to the Central Depository Bangladesh Ltd. Companies must also publish regular financial reports and hold annual general meetings.

Investors can purchase securities from the ATB through their beneficiary owner's (BO) accounts or through brokerage firms of the Dhaka bourse.

The ATB's trading and settlement is similar to the process followed for the scrips on the main board.

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