Midland Bank jumped 20.35 per cent in the outgoing week to Tk 13.60 on Wednesday as its earnings disclosure for 2022 held out hope for good returns on investment in the stock.
Five weeks after the debut trading on the Dhaka Stock Exchange, it broke the trend set by two other banks -- Global Islami Bank and Union Bank -- that were listed last year. They failed to draw investors and are now trading at a discount to the face value of Tk 10.
The banking sector overall has been suffering from an image crisis due to scams making headlines one after another and rising non-performing loans, the fallout of which is visible on stocks' performance. Most of the 35 listed banks have endured price erosion on the bourses while seven of them trade at prices below the face value.
Thus, Midland Bank's stock price surge stands out, thanks to its consistent profit growth in the last three years.
The fourth-generation bank secured 10 per cent year-on-year profit growth to Tk 562 million in 2022, driven by higher income in export-import business. Its board of directors recommended 5 per cent cash dividend for the year.
The lender's gross interest income also rose 13 per cent year-on-year to Tk 3.67 billion in 2022.
The improvement in business performance encouraged investors to bet their money on the stock and so Midland Bank became the second highest weekly gainer on the DSE in the outgoing week.
A significant gain in foreign exchange in export and import was the main driver of the profit growth, said a top official of the bank, on condition of anonymity.
The lender's earnings from foreign currency transactions jumped 405 per cent year-on-year to Tk 636 million in 2022, according to its financial statements.
Though the bank's core business suffered due to the sluggish economy, incomes from foreign currency transactions rose for the surge in the US dollar price against the local currency.
The US dollar has become 25 per cent costlier against the taka since the beginning of the Russia-Ukraine war in February last year.
The local foreign exchange market turned volatile as a severe shortage of the greenback emerged following an unprecedented jump in import bills fuelled by the war.
Apart from the profit in foreign exchange, Midland Bank also enjoyed tax benefit after the listing.
Presently, publicly-traded banks and insurance and non-bank financial institutions have to pay 37.5 per cent corporate tax while non-listed ones pay 40 per cent.
Midland Bank's net asset value (NAV) per share was Tk 13.42 and net operating cash flow per share (NOCFPS) was Tk 4.22 in 2022, up from Tk 13 and Tk 2.52 the year before.
Investors' lack of faith in the banking sector had a toll on the IPO subscription of Midland Bank, causing 26 per cent of IPO shares to remain unsold.
Global Islami Bank and Union Bank
Earnings per share of Global Islami Bank that made debut trading in November last year dropped 27 per cent year-on-year to Tk 1.02 in 2022 on the back of a liquidity crunch.
Despite the profit decline, the board declared 5 per cent cash and 5 per cent stock dividends for 2022. The stock dividend is subject to approval of the securities regulator.
"The stock dividend has been declared to strengthen the capital base of the bank and to support business growth," said the bank in a disclosure.
Due to its weak financial performance, Global Islami Bank dropped below the face value on the day of its debut trading. Since then, it is stuck at Tk 9 per share.
Union Bank's earnings per share edged up by 0.64 per cent year-on-year to Tk 1.57 in 2022. Its board declared 5 per cent cash dividend for 2022.
The stock has been trading at Tk 8.90 per share.
Union Bank raised Tk 4.28 billion and Global Islami Bank Tk 4.25 billion from the primary market, the highest and second highest amounts among the listed banks.
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