Listed banks bleed in H1. But the market is not too fussed. | The Daily Star
12:00 AM, July 03, 2020 / LAST MODIFIED: 03:09 AM, July 03, 2020

Listed banks bleed in H1. But the market is not too fussed.

Most banks' operating profits declined 20 to 30 per cent in the first half of 2020 because of the paralysed economy but the fall did not reflect properly in their stock prices owing to the floor price.

The Bangladesh Securities and Exchange Commission set the floor price for all stocks on March 19 based on previous five-days' average prices to stop the freefall in share prices seen across the world amid the fast-spreading coronavirus.

The operating profits of the lenders dropped in the January to June period because of the lending rate cap and the depressed economy, according to bankers.

The ceiling on the lending and deposit interest rates at 9 and 6 per cent respectively came into effect from April. And they were implemented almost in tandem with the government-announced months-long general holiday to contain the contagion.

The shutdown brought the economy to a screeching halt, with the movement of people largely suspended and all establishments, factories and shops closed for a good two months until partial easing of restrictions on May 31, offering very thin business to the banking sector.

Banks' lending rate dropped to 9 per cent from 11 to 12 per cent and this impacted their business, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

In the first half, export and import also dropped, so banks' commission business took a beating as well.

"All types of incomes for banks plummet during the time. We still don't know when the pandemic will peter out, so we are worried that banks' incomes would fall further in the second half of the year," he added.

It was expected the banking sector was going to announce lower profits. As a result, banking stocks were supposed to fall, said a merchant banker requesting anonymity.

The floor price averted the slump, he said, adding that investors tried to sell the banking stocks that made lower profits but they failed to find any buyers.

"Whenever someone found buyers, they sold shares. We bought some banking stocks whose performance was better despite the pandemic," the merchant banker added.

The banking sector was the top-traded sector on the Dhaka Stock Exchange (DSE) yesterday, as investors rearranged their portfolio following the disappointing performance of finance shares.

The turnover in the banking sector was Tk 16.72 crore, accounting for 21 per cent of the total turnover in the country's premier bourse, which is higher than the 3 per cent registered in the previous session.

Banks announced their profit scenario through newspapers yesterday and this prompted investors to sell or buy the stocks depending on the performance, said a stockbroker. Among the listed 30 banks, Social Islami Bank, Pubali Bank and AB Bank rose, seven fell and the rest were unchanged.

"Investors did not find buyers, so many of them failed to sell. They think that banks' performance would worsen further in the upcoming months due to the lingering pandemic," the stockbroker added.

Investors are waiting for an improvement to the coronavirus situation, said UCB Capital in its daily market analysis.

The floor price mechanism remains a bottleneck for the market liquidity as buyers are not willing to purchase most of the shares at the artificially-set rates.

DSEX, the benchmark index of the DSE, dropped 2.35 points, or 0.06 per cent, to close the day at 3,986.74.

Turnover, another important indicator of the market, fell 85.39 per cent to Tk 81.2 crore.

Pubali Bank was the top gainer closing 7.7 per cent higher, followed by Dacca Dyeing, Keya Cosmetics, Tallu Spinning and AB Bank.

Beximco Synthetics was the top loser shedding 7.46 per cent, followed by C&A Textile, Familytex BD, Islami Bank and Beximco Pharmaceuticals.

 

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