The banks could not comply with their licensing condition as their health is not up to the mark for offloading shares
Even six years after coming into operation, the fourth generation banks say they are not yet prepared to offload shares in the capital market, and have asked for a further time extension from the central bank.
Three banks – NRB Commercial Bank, NRB Bank and Midland Bank – have already applied for a second time seeking the deadline extension.
Another five new banks – NRB Global Bank, Meghna Bank, Modhumoti Bank, Padma Bank and Union Bank – are yet to decide on offloading their shares.
Only South Bangla Agriculture and Commerce (SBAC) Bank appointed an issue manager in April last year to complete its share offloading process. But little progress has been made in this regard.
The Bangladesh Bank will soon sit with all nine banks to discuss the issue.
In 2016, the banks were allowed three more years to get listed with the stock market. The latest deadline expired in December last year.
According to licensing conditions, the new banks will have to go to the stock market within three years of operation.
However, the banks could not comply with the conditions as their health is not up to the mark to offload shares, according to industry insiders.
The new generation banks have been struggling from their inception in 2013 to get business in the highly competitive market, said a senior executive of a private bank.
Farmers Bank, one of the new comers, collapsed due to severe irregularities and later reconstituted as Padma Bank.
Scam-hit NRB Commercial Bank, another new comer, has also lost its reputation.
In such a situation, the banks are in fear of not getting the expected price for their shares in the highly volatile stock market.
Meanwhile, the share prices of most of the listed banks remain undervalued since the market debacle in late 2010 due to loan scams and rising non-performing loans.
Tamal SM Parvez, chairman of NRB Commercial Bank, said, “The share prices of many banks with face value of Tk10 have dropped to Tk8.”
He said the stock prices may fall further if new banks offload shares, which is why they sought more time.
Currently, 30 banks remain listed. Of them, share prices of nine banks are being traded below face value, according to the Dhaka Stock Exchange (DSE).
Mehmood Husain, managing director of NRB Bank, told The Business Standard, “We need more time to observe the market. It will be very risky for banks to get listed at this moment because the market is highly volatile.”
If two banks issue IPOs, they have to offload shares worth of Tk800 crore to Tk850 crore but the current market does not have the capacity to absorb this large number of shares, he added.
“If all the nine banks try to get listed at a time, the market may get more volatile,” he added.
Mukhter Hossain, managing director of NRB Commercial Bank, said they also want more time to observe the market.
In April last year, SBAC Bank signed an agreement with ICB Capital Management to appoint it as an issue manager. But the bank is yet to be listed with stock market.
Golam Faruque, managing director of the bank, said, “We are trying to approve our new balance sheet for December 2019 in the upcoming board meeting. Then we will seek permission from the central bank for issuing our initial public offering.”