The share prices of the listed banks have come close to the face value amid free fall due to their very poor performance in terms of profit deepening the frustration of the investors.
Banks’ poor performance, their lower exposure to the share market and frequent scandals in the banking sector, including Hall-Mark scam, took heavy toll on their shares, according to market analysts.
They said once the investors who did not dare to take the risk in investing share market used to buy bank shares for certain gains with little risk, but the investors these days are unwilling to buy bank shares fearing further fall in the coming days as pre-election political instability looms large.
“Banks’ performance has been very poor. Most of the banks suffered losses or saw a sharp fall in profit. Besides, indiscipline in the banking sector has demoralised the investors,” Dr Mohammad Saleh Jahur, Chairman, Department of Finance and Banking, Chittagong University told UNB on Tuesday.
On top of it, he said, there was a liquidity crisis in the capital market though it is going to be resolved.
The banks’ exposure to the stockmarket has been well below the legal limit due to a guarded stance taken by the banks. Banks’ total exposure to the market, as of January 31, stood at Tk 17,219 crore, which is 2.89 percent of their total liabilities.
On February 1, 2012, the banks’ investment in the share market was Tk 15,548 crore. After the current government assumed power in 2009, the stockmarket had showed a bullish trend, and many banks invested beyond their limits.
The International Monetary Fund and the Asian Development Bank recommended that the banks’ investment in the capital market should be 25 percent of their capital instead of deposits (liabilities).
“More importantly, the capital market has not been corrected properly after the price debacle in early 2011,” said the analyst.
Responding to a question, Dr Jahur said the government has a big responsibility and it should fulfill all the commitments it made to stabilise the market. “If the investors can’t be brought into confidence, the market won’t be vibrant.”
Asked about possible political violence after Eid ahead of the next elections, he said, “Yes, political violence might intensify. It’ll have an impact on the market. But the investors’ confidence is the most important thing. We’ve political instability almost round the year. So, we first need to restore confidence.”
Responding to another question, Dr Jahur said the new monetary policy is a balanced one and it will work in the desired way if the government does not interfere in it.
Investors’ Reaction
“I never want to take high risk while investing in the capital market. I always had confidence on banking shares as the banks give good returns. My hope this time has shattered with big losses. It’s because of sharp fall in bank share prices,” said Touhid Alam, a small investor, who bought shares of National Bank Limited, United Commercial Bank Limited, Jamuna Bank Limited and Shahjalal Islami Bank Limited.
“The prices of these shares are now close to the face value (Tk 10). NBL price has come down to Tk 11.9 while UCB is now Tk 18.5 and Jamuna Bank Tk 14.1,” he added.
Nur Uddin, another small investor, said the share of NBL was very popular as it used to give high dividend every year. “But this year it gave only 6 percent cash dividend bringing a big loss for me.”
The bank gave 95 percent dividend in 2010 while 65 percent in 2011 while 55 percent dividend in 2009, he added.
Latest Prices
Of the 30 listed banks, the share price of the ICB Islamic Bank Limited has gone below the face value price. The last trading price of the share was Tk 6.20 on Monday against Tk 10 face below.
The share prices of Exim Bank, First Security Islami Bank Limited, Mercantile Bank Limited, NCC Bank Limited, NBL, One Bank Limited, Premier Bank Limited, Shahjalal Islami Bank Limited, Social Islami Bank Limited, Standard Bank Limited, Trust Bank Limited, UCBL, Mutual Trust Bank Limited, Southeast Bank Limited, Bank Asia, City Bank and Al Arafah Islami Bank Limited are now below Tk 20 against the face value of Tk 10 each share.
Source: UNBConnect