Banking sector in dilemma

Foreign investors leaving shares for non-confidence

Golam Mostafa Jibon: Foreign investors are leaving huge amount of bank shares due to lack of confidence as the country’s banking sector has been going through a multi-faceted crisis for a long time.
Although, various benefits are being provided to the defaulters to reduce the defaulted debt, it is not coming to help. On the contrary, the amount of defaulted loans is increasing day by day. It has grown to exceed one trillion of Taka. Overall, the bank’s situation has had a negative impact on investor confidence in the stock market. As a result, foreign investors have sold huge shares of the bank for non-confidence.
A review of the data shows that, about 27 out of the 33 banks listed in the capital market have foreign investment in their shares. Of them, foreigners have sold large shares of 21 banks in 2021. Foreigners have also bought again four out of the remaining six shares. The shareholding of the two remains unchanged.
Experts said, the reason for selling bank shares to foreigners is that the overall banking sector is in a dilemma on various issues, including defaulted loans. As a result, investors’ confidence in the bank has declined. Besides, investing in bank shares is not getting good returns. For these reasons, foreigners are selling bank shares.
Private BRAC Bank is currently the largest investor in the banking sector. In 2021, foreigners sold about 2 percent of the bank’s shares.
As of December 2020, the bank had 39.57 percent stake held by foreigners, which has come down to 37.88 percent at the end of 2021. However, in the first month of this year, foreigners bought some shares of this bank. As of the end of January, the bank has 38.26 percent shares held by foreigners.
Islami Bank is in the second place in terms of foreign investment. Foreigners have also sold shares of the bank. As of December 2020, 20.56 percent of the bank’s shares were held by foreigners, which declined to 20.19 percent at the end of December 2021.
In the first month of January this year, foreign investment in the bank increased slightly. At the end of January, foreigners owned 20.46 percent of the bank’s shares. Other banks that have been sold by foreigners including AB Bank, Al-Arafah Islami Bank, Bank Asia, Citi Bank, Eastern Bank, Exim Bank, First Security Islami Bank, Jamuna Bank, Mercantile Bank, National Bank, One Bank, Premier Bank, Prime Bank, Pubali Bank, Social Islami Bank, Southeast Bank, Trust Bank, UCB and Uttara Bank.
Although, foreigners sold most of the bank’s shares, in 2021 they bought shares of IFIC, Mutual Trust, NCC Bank and Standard Bank. Of this, foreigners currently hold 41 percent stake in Standard Bank, up from 33 percent in December 2020. Foreigners hold 50 per cent stake in NCC Bank, up from 44 percent in December 2020. As of December 2020, no shares of Mutual Trust Bank were held by foreigners. However, in December 2021, foreigners took possession of 16 percent of the bank. At the end of January, the first month of the current year, the bank still owns 16 percent of the bank’s shares. At the end of January this year, IFIC Bank held 1.7 percent of the shares held by foreigners, up from 97 percent in December last year and 79 percent at the end of December 2020. On the other hand, there has been no change in the image of foreigners holding shares in the two banks. Of this, foreigners have zero point one percent shares of Dutch-Bangla Bank. Besides, Shahjalal Islami Bank has 15 percent shares with foreigners. Meanwhile, according to the latest data of Bangladesh Bank, the amount of non-performing loans in the banking sector stood at Tk 1,1,150 crore till September last year. The amount of this defaulted loan is 14 percent more than 9 months ago. Besides, the default debt is more than 7 percent in a year.
Former caretaker government adviser AB Mirza Azizul Islam told the Daily Industry that “The condition of the banking sector as a whole was not satisfactory as the reason for selling the bank’s shares to foreigners. So, people cannot trust the banks. That is why, foreigners are selling their bank shares.”
The eminent economist said that, those, who are in default, are getting various benefits. Banks are being directed not to default. Thus, the financial report does not show the defaulter. Besides, it is being shown as income without charging interest on the loan. There are all kinds of problems.”
Regarding this, BRAC Bank Chairman Ahsan H Mansur told the Daily Industry that, “Foreigners do not have any confidence in some banks. Thus, there is a lack of confidence in the banking sector. Besides, there is a lack of transparency in the banking sector. It leads to distrust. There is a lack of good governance. Alongside, the bank’s investment income is declining. For these reasons, foreigners are selling most of their bank shares.”