City Bank is planning to invest Tk 130 crore in its subsidiary, City Brokerage Ltd, aiming to expand brokerage business with the anticipation of good prospects of the country's stock market in the coming days.
The board of directors has decided to invest in share capital, according to a posting at the Dhaka Stock Exchange (DSE) website yesterday.
The investment will be made after taking approval from Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC), said Md Mahbubur Rahman, chief financial officer of the bank.
The bank will make the investment to raise capital of the brokerage house to improve its business capacity, he said.
Currently, the paid-up capital of the brokerage house is Tk 340 crore, he said.
Rahman said the brokerage house has been witnessing negative equity since the share market debacle in 2010. However, it recovered from the loss and came into the profit zone in the last two years.
The parent bank projected that the share market business would become vibrant in the coming days due to inclusion of an international partner from China. In view of this, the bank is increasing the business capacity of the brokerage house, he added.
The net profit of the brokerage house surged sixfold to Tk 32 crore last year from Tk 5.48 crore the previous year, according to the subsidiary's balance sheet.
However, retained earnings of the subsidiary still remained Tk 58 crore in the negative last year; it was Tk 89 crore in the negative in the previous year.
City Bank shares closed at Tk 34.80 yesterday at the DSE, gaining Tk 1.5 from the previous session.