Bank shares neglected even good dividends

Mahfuz Emran: At one time, the banking sector was considered as the lifeblood of the country’s stock market. Most of the transactions were held by the bank. However, the financial condition of many banks deteriorated due to various irregularities. At the same time, most of the listed banks become dependent on bonus shares in terms of dividends. As a result, the sector lost its grip on the stock market.
The trend of paying cash dividends among banks has increased over the past three years. At the same time, the overall dividend payout rate has also increased. However, the lost confidence of the investors did not return. As a result, despite the good dividend, the share price of the bank is in a neglected state.
Experts say that the country’s banking sector is in trouble due to various issues including defaulted loans. However, overall the condition of the bank is not too bad. Most of the banks are in good condition now. Apart from regular good profits it is also giving good dividends to the investors. But the investors in the stock market are interested in investing not in the hope of getting dividends, but in the hope of getting overnight profits.
They say, such behavior of investors is not reasonable. Investors should carefully review the financial picture of the company before investing. Investing without a proper review of the financial picture is more likely to result in loss than profit. And investing in companies with good financial capability may not yield immediate profits, but it is possible to make good profits in the long run.
A review of the data shows that among the listed banks, 9 have declared dividend for the shareholders after reviewing the financial report for the year ended 2022. The dividend of one of them has decreased slightly compared to last year. Dividends for seven were the same as the previous year. And ICB Islami Bank has decided not to give any kind of dividend to the investors this time as always.
A review of the data shows that the share prices of three banks are stuck at the floor price despite the announcement of good dividend. Apart from this, the share prices of 20 other banks which have not declared dividend are stuck at the floor price. And the share price of seven banks is below the face value.
Among the banks that declared dividend, Uttara Bank has declared the highest dividend this time. The bank has decided to pay 14 percent cash and 14 percent bonus share dividend to the investors. The bank gives the same dividend in 2021 as well. Before that, the bank gave 12.5 percent cash and 12.5 percent bonus shares in 2020, 7 percent cash and 23 percent bonus shares in 2019, 20 percent cash and 2 percent bonus shares in 2018 and 20 percent cash dividends in 2017.
Despite regularly paying such huge dividends, the bank’s share price has fallen to Tk 25.
Secondly, Eastern Bank declared 12.5 percent cash and 12.5 percent bonus share dividend. The bank paid the same dividend in 2021 as well. Before that, the bank gave 17.5 percent cash and 17 percent bonus shares in 2020, 15 percent cash in 2019, 20 percent cash and 10 percent bonus shares in 2018 and 20 percent cash dividend in 2017. The share price of the bank, which has paid good dividends regularly, is now (April 15) at Tk 32.20.
Prime Bank is in third place with 17.5 percent cash dividend. In 2021 as well, the bank paid 17.5 percent cash dividend to investors. Before that Prime Bank gave 15 percent cash in 2020, 13.5 percent cash in 2019, 12.5 percent cash in 2018 and 7 percent cash and 10 percent bonus shares in 2017. Currently the share price of the bank is Tk 20.40.
Shahjalal Islami Bank’s cash dividend has increased this time despite paying the same dividend as last year. The bank has declared 12 percent cash and 3 percent bonus share dividend this time. In 2021, the company pays 10 percent cash and 5 percent bonus share dividend. Before that Shahjalal Islami Bank gave 7 percent cash and 5 percent bonus shares in 2020, 5 percent cash and 5 percent bonus shares in 2019 and 10 percent bonus shares in 2018 and 2017.
The remaining three banks also announced big dividends for investors. However, the share price of the three banks stuck at the floor price. Among them, Bank Asia has declared 15 percent cash dividend like last year. 10 percent cash dividend in 2020 and 2019. Besides, the bank gave 5 percent cash and 5 percent bonus shares in 2018 and 12.5 percent bonus shares in 2017. Currently, the share price of Bank Asia is stuck at the floor price or Tk 20.20.
BRAC Bank, another institution whose share price is stuck at the floor price, has announced 7.5 percent cash and 7.5 percent bonus share dividend. In 2021 also, the bank pays dividend at the same rate. Before that, the bank gave 10 percent cash and 5 percent bonus shares in 2020, 7 and a half percent cash and 7 and a half percent bonus shares in 2019, 15 percent bonus shares in 2018 and 25 percent bonus shares in 2017. Currently the share price of the company is Tk 38.50.
City Bank has declared 10 percent cash and 2 percent bonus share dividend this time. In 2021, the bank declared 12.5 percent cash and 12.5 percent bonus share dividends. As a result, the bank’s dividend has decreased compared to last year. Earlier, the bank paid 17.5 percent cash and 5 percent bonus shares in 2020, 15 percent cash in 2019, 6 percent cash and 5 percent bonus shares in 2018 and 19 percent cash and 5 percent bonus shares in 2017.
Currently, the share price of the bank is stuck at floor price or Tk 21.80.
Pubali Bank has declared 12.5 percent cash dividend this time. In 2021 and 2020, the bank also pays 12.5 percent cash dividend. Before that, the bank gave 10 percent cash dividend in 2019, 10 percent cash and 3 percent bonus shares in 2018 and 5 percent cash and 5 percent bonus shares in 2017.
A member of DSE said that considering the dividend, the bank’s shares are suitable for investment in the current market. But our investors do not invest with the expectation of dividends. They want capital gain. Want to get quick profit. That’s why you run behind the item. And those who play with stock market items are more inclined towards small capital shares. Item oriented investors are not interested in investing in bank shares due to high share of banks.
That is why the share price of the bank is falling despite the good dividend. While itemized shares offer quick profits, they carry a high degree of risk.
AB Mirza Azizul Islam, former caretaker government advisor and prominent economist, told that there are some problems in the overall banking sector, including defaulted loans. But not all banks are bad. Some banks are doing well in this too. Investors should invest in shares of companies that pay good dividends regularly. A greedy investment in a company with weak fundamentals carries a high risk of loss.
Former chairman of Bangladesh Securities and Exchange Commission (BSEC) and stock market analyst Farooq Ahmed Siddiqui told that if the share price of the bank increases, it will have a positive effect on the overall stock market. However, in the current situation, I do not think that the share price of the bank is likely to increase much. Because there are many problems in the banking sector including defaulted loans. Many banks are not even keeping the necessary provision with discounts. Overall, the banking sector is not in a very good condition. But some banks are doing well.