Why SBAC Bank sponsors are heading for massive share sales?

Just a year after the capital market listing, sponsors-directors of South Bangla Agriculture & Commerce (SBAC) Bank Limited are increasingly heading for offloading their stakes on a massive scale.

The publicly-traded lender’s many sponsors and directors announced the offloading of around nine crore shares worth Tk 95 crore in the last three months, of which around 2 crore shares have already been sold out, according to Dhaka Stock Exchange (DSE) data.

The private commercial lender’s shares, however, remained stuck at the floor price of Tk 10.6 per share for a long time.

Sources at the bank said its directors were going for massive share sales to repay their bank loans to void the loan defaulter status as many of them took loans on behalf of their other respective business entities.

If they are declared defaulters, they might lose the directorships at the SBAC bank and that’s why they were now offloading the bank’s shares to retain their seats on the bank’s board, they added.

When contacted, Mokaddess Ali, company secretary of SBAC Bank said sponsors-directors could sell their shares for various reasons. They were mostly selling shares for their business needs.

Meanwhile, the bank decided to sell shares on behalf of its three entrepreneurs, but two of them wished to sell their entire stake— one person and another institution.

The bank’s Sponsor Tahmina Afroz announced to sell off her entire stake of 3.48 through block transactions on Thursday last which would be implemented in the next 30 working days after the sale declaration, according to DSE data.

Earlier, the bank’s Sponsor Director Hazi Shakhawat Anwara Eye Hospital Limited declared to sell the entire 3.48 crore shares from the bank on December 7.

Before in August, Maksudur Rahman, another sponsor of the private commercial lender, sold out more than 2.04 crore shares out of his holding of 2.58 crore in the bank.

His share sale was completed on September 12, according to the DSE.

Commenting on the selling spree of shares by the bank’s sponsors, capital market analyst Abu Ahmed told The Business Post that the negative impact of the fragile situation of the country’s banking sector was hurting the capital market as well.

The ongoing hardship of many banks is also a reason for the constant fall of the country’s stock market, he added.

SBAC Bank got listed on the stock exchanges just a year back (2021).

The announcement of massive share sales by the bank’s sponsors just after one year of listing would significantly hurt investors’ confidence in the bank, Abu Ahmed said.

The bank’s earnings per share (EPS) in the third quarter (July-September) of the current fiscal year (2022–23) also fell significantly.

Its consolidated earnings per share (EPS) stood at Tk 0.4 for the July-September period of 2022 versus Tk 0.52 for the same period of 2021.

Moreover, the lender’s consolidated net asset value (NAV) per share stood at Tk 13.41 till September this year which was Tk 13.02 as on December 2021.

The bank stated that its EPS fell in Q1 of FY23 due to an increase in the weighted average number of ordinary shares as well as the increasing income tax provision and provision against loans and advances.

Besides, the net interest income dropped owing to the increase in the cost of deposits and cost of borrowings, it added. Incorporated in 2013, SBAC Bank got the IPO approval on 9 May 2021 and started stock trading on August 11, 2021. With an authorised capital of Tk 1000 crore, the bank has a paid-up capital of Tk 816 crore, while its total number of securities stands at 81.6 crore.

Sponsor-directors own a 75.14 per cent stake in the company, while institutional investors held 9.82 per cent and the general public represents a 15.04 per cent stake as on November 30, 2022.