Banks’ share in capital market
Mahfuz Emran: In the last two years, the tendency to pay cash dividends has increased among banks offering bonus shares. At the same time, the overall rate of dividend payment has also increased. Even though banks pay good dividends to investors, they are not able to attract capital market investors. As a result, good dividends are not affecting the share price of the bank.
Experts say the country’s share market is now largely item-dependent, citing the bank’s failure to attract investors. Investors are now investing in the hope of making a quick profit, not in the hope of getting a dividend. This behavior of investors is not reasonable. Thus, if you invest in item-based investments, you are more likely to incur losses rather than profits.
They further say that the country’s banking sector is in trouble on various issues including defaulted loans. However, the condition of the bank is not that bad. Most banks are doing well now. Investors should review the financial picture of the organization before investing. One should not invest on the basis of rumors without properly verifying the information.
A review of the data shows that among the listed banks, after reviewing the financial statements for the year ended 2021, it has declared dividends for 15 shareholders. 9 of them have decided to pay more dividend than 2020. In addition to paying higher dividends than last year, six of these banks have declared higher cash dividends than last year. In addition, the amount of cash dividends of a bank which declared a slightly lower dividend than last year has also increased.
On the other hand, Jamuna Bank has decided to pay 17.5 percent cash, Pubali Bank 12.5 percent cash and IFIC Bank 5 percent bonus share dividend as in 2020. Of this, cash dividends of Jamuna Bank and Pubali Bank have increased as compared to 2019. ICB Islami Bank, which is in trouble, has decided not to pay any dividend as usual. Among them, the share price of Jamuna Bank stood at Tk 22.90 and the share price of Pubali Bank stood at Tk 28.50.
Share market stakeholders say that the stock market could not turn around after the 2010 catastrophe. The main reason for this is the poor condition of the banking sector. Information of various irregularities has come up against one bank after another. In addition, the banks have given excess bonus shares as dividends. On the one hand, the number of shares of the bank has increased, on the other hand, the ability to pay cash dividends has decreased. That is why most of the bank dividends have been dependent on bonus shares for a number of years.
They say there has been a growing trend among banks to pay cash dividends over the past two years. But with each passing year, the number of shares in each bank has increased so much that the big investors are not interested in investing in these shares. That is why the share price of most banks is still depreciating even after paying good dividends.
A review of the data shows that the two banks have declared lower dividends for 2021 than for 2020. Of this, Dutch-Bangla Bank has decided to pay 18 percent cash and 10 percent bonus share dividend for 2021. In 2020, the bank pays shareholders 15 percent cash and 15 percent bonus share dividends. In other words, the amount of cash dividend of the bank has increased even though the amount of total dividend has decreased. Earlier, the bank paid 15 per cent cash and 10 per cent bonus shares in 2019 and 15 per cent bonus shares in 2016.
Earlier, the bank paid 15 per cent cash and 10 per cent bonus shares in 2019 and 15 per cent bonus shares in 2016. At present the share price of the bank is Tk 63.10.
The board of directors of Eastern Bank has decided to pay 12.5 percent cash and 12.5 percent bonus shares as dividend for 2021. In the previous year, the bank paid a dividend of 16.5 percent cash and 16.5 percent bonus shares to the shareholders. Earlier, in 2019, the bank paid 15 percent cash dividend. The share price of this bank is Tk 36.
BRAC Bank has decided to pay 15% dividend to the shareholders in 2021 as in 2020. However, this time the amount of cash dividend of the bank has decreased and the amount of bonus dividend has increased. The bank has decided to pay 8.5 percent cash and 8.5 percent bonus share dividend to the shareholders for 2021. The previous year, in 2020, 10 percent cash and 5 percent bonus shares paid dividends. Before that, in 2019, 6 and a half percent cash and 8 and a half percent bonus shares paid dividends. The share price of the bank is Tk 26.50.
Meanwhile, Uttara Bank has declared the highest dividend among the banks which have declared higher dividends than the previous year. The company has decided to pay 14 percent cash and 14 percent bonus share dividend for 2021. In the previous year 2020, the bank paid 12.5 percent cash and 12.5 percent bonus share dividend. Earlier in 2019, the bank paid a dividend of 8 percent cash and 23 percent bonus shares. The current share price of this bank is Tk 23.30.
Citibank, which is in the second place, has decided to pay 12.5 percent cash and 12.5 percent bonus share dividend. Last year, the bank paid a dividend of 16.5 per cent in cash and 5 per cent in bonus shares. Before that, the company paid 15 percent cash dividend in 2019. The current share price of this bank is Tk 26.50.
A member of the DSE said that due to the large number of shares in the bank, large investors are not very interested in this sector. Large investors do not invest in bank shares, so prices do not rise that way. As a result, even ordinary investors are not very interested in bank shares.
Abu Ahmed, a former professor of economics at Dhaka University and a stock market analyst, told that considering the dividend, the bank’s shares are now the most suitable for investment. But the number of real investors in our stock market is very low. Most people in this market want to gamble. That is why banks are not able to attract investors even after paying good dividends.
Selim RF Hossain, chairman of the Association of Bankers, Bangladesh (ABB) and managing director (MD) of BRAC Bank, told that the reason for the increase in cash dividends of banks is that banks are now required to pay cash dividends at a fixed rate. Having to pay. If you pay less cash dividend than this, you will have to pay more tax. This is one of the main reasons for the increase in cash dividends of banks.
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