Banking stocks lose grace for high defaulted loans
Once known to many for their attractive stocks, banks are a long way from raising adequate interest among stock market investors as confidence has been sunk by high amounts of non-performing loans and low asset value.Among the listed 31 banks, 21 are witnessing their stocks of a face value of Tk 10 being traded at less than Tk 20.Stocks of AB Bank, First Security Islami Bank, ICB Islamic Bank, National Bank and Standard Bank even traded below the face value. Expert says that Investors are not buying banking shares for mainly two reasons. One is for the vulnerability of the sector. Someone also said that the non-performing loans are the main reasons for the vulnerability. Default loans stood at Tk 88,734 crore last year, which was 7.66 per cent of the outstanding loans at that time, showed data from Bangladesh Bank.
Moreover, considering the low price-to-earnings (P/E) ratio, investors can invest in some banks, the analyst added. The P/E ratio refers to a company’s share price compared to its earnings per share.The P/E ratio of banks is much lower than that of other listed companies. Of the 31 listed banks, 22 have had their P/E ratio in the past 12 months ranging from 4 to 8, according to the DSE data.The P/E ratio of most companies range from 15 to 25, shows the data. If the P/E ratio is lower than 15, the stocks are considered to be much lucrative.The DSE data shows that the average P/E ratio for the banking sector is 8.13, the lowest among all the sectors. Ratios closest to it are of the fuel and power and textile sectors, 11.93 per cent and 17.93 per cent respectively.
Mir Ariful Islam, head of research of Prime Finance Asset Management Company, said investors have very little confidence on the banking sector due to their high amounts of non-performing loans and low asset quality.So they are not buying bank shares although those come to provide handsome dividends, he said.Almost all the listed banks are paying over 10 per cent dividend every year.For 2020, 15 banks have declared dividends. Of them, two declared less than 10 per cent, four 10 per cent to 14 per cent, four from 15 per cent to 19 per cent and three from 20 per cent to 29 per cent. Two are going to provide over 29 per cent.Ali Reza Iftekhar, chairman of the Association of Bankers, Bangladesh (ABB), acknowledged that the share prices of many banks were low because of high non-performing loans or high deferral of provision or low cash reserve ratio in the banks.High deferral of provision comes about for banks which, facing a shortage of provision, secure permission from the central bank to declare a dividend on condition of keeping that provision for the next few years, he said.But there are also some banks with good performance records which are paying high amounts of dividends and with no deferral of provision, for which their stock prices also remain high, said Iftekhar, also managing director of Eastern Bank.
Brac Bank registers Tk 454cr net profit
Brac Bank registered a net profit of Tk 454 crore last year, sidestepping the business slowdown caused by the coronavirus pandemic.The net profit, however, stood at Tk 403 crore on a consolidated basis given the performance of all its subsidiary companies, according to a press release issued by the bank.The net profit has been reached upon deduction of tax paid to the government.The private lender disclosed its annual performance for last year through a virtual earning disclosure programme on April 19.
Earnings per share (EPS) of the bank stood at Tk 3.42 on a standalone basis and Tk 3.33 on a consolidated basis.The lender said it was able to successfully reorganise its operations very early on to embrace new health and safety measures, roll out a virtual operations platform and significantly expand its digital customer solutions.Customer deposits grew by 9 per cent year-on-year while the current account and savings account (CASA) improved from 43 per cent to 55 per cent, which the bank sees as a reflection of a successful deposit mobilisation and interest rate management strategy.The bank said to have adopted a cautious stance in growing its customer loan portfolio in 2020 with a 3 per cent annual net growth.
Premier Bank reappoints CEO
Premier Bank recently witnessed the reappointment of its managing director and CEO, M Reazul Karim, for the next three years.Karim has been in office since April 23, 2018, says a press release.He started his banking career with National Bank in 1984. Before joining Premier Bank as an additional managing director, he served Prime Bank for 17 years.Karim obtained his honours and master’s degrees in accounting from the University of Dhaka.He is a fellow of the Institute of Cost and Management Accountants of Bangladesh.
Construction work of first private hi-tech park begins
The construction of the Korean EPZ Hi-Tech Park in Anwaraupazila of Chattogram began yesterday as its owner looks to set up Bangladesh’s first private enclave for information technology firms and startups. The ground-breaking ceremony was virtually attended by Zunaid Ahmed Palak, state minister for ICT, and LEE Jang-keun, ambassador of the Republic of Korea to Bangladesh, with the physical presence of Kihak Sung, chairman & CEO of Youngone Corp and the KEPZ, according to a press release.