The capital market watchdog has permitted Shahjalal Islami Bank to collect Tk 5 billion by issuing bonds to strengthen its capital base.
In a stock exchange filing on Thursday, the private commercial bank said it had taken the decision to issue bonds to strengthen its capital structure last year but got the regulator's permission this year.
Now, the listed bank will issue 5,000 unit subordinated bonds of Tk 1 million each.
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 placement, with a maturity period of seven years. 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 debt. It is considered less secure than Tier 1 capital.
The lender will issue the redeemable, floating rate, non-convertible, unsecured subordinated 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 international banking sector.
The name of the bond will be "SJIBL 3rd Mudaraba Subordinated Bond".
Earlier, the bank issued subordinated bonds worth Tk 4 billion in 2017 and Tk 6 billion in 2018.This is the third issue of Mudaraba Subordinated Bond.
The listed commercial bank showed a profit of Tk 3.58 billion in 2022. It declared 12 per cent cash and 3 per cent stock dividends for the year.
Shahjalal Islami Bank's profit dropped 6 per cent year-on-year to Tk 962.44 million in the nine months through September this year.
Meanwhile, the stock has been trading at Tk 18.40 on the Dhaka Stock Exchange.
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