Midland Bank to debut stock trading amid non-compliance

Fourth-generation private commercial lender Midland Bank is set to begin its share trading in the capital market on Monday. But the lender still lacks regulatory compliance with regard to having the minimum individual shareholding position of directors or sponsors.

Each of the directors, according to securities laws, of a publicly traded company must hold a minimum of 2 per cent stake of the company’s total paid-up capital. But, at least 12 of its directors do not have the required shareholding positions, according to the company’s latest shareholding data.

Of them, 11 are sponsors, while the remaining one is a corporate director.

According to the bank’s latest shareholding data till February, among its sponsors and directors, Kazi Zafarullah, Kazi Shahidullah, Late Kazi Ekramullah, Sabiha Mahboob, Nazib Ahmed, Ishrat Ahmed, Fahmida Haque, Late Niranjan Chandra Shaha, Salina Maksuda, Basudev Saka, Garment Export Village, and Al-Haj Mohammed Issa Badsha still owned less than 2 per cent stake each in the company.

The matter has also come under the radar of the stock regulator Bangladesh Securities and Exchange Commission.

Commenting on the issue, a BSEC high official said this is a clear violation of the 2011 Bangladesh Securities and Exchange Commission (BSEC) directive.

Speaking to The Business Post, Mohammad Rezaul Karim, executive director and spokesperson for the BSEC said any director or sponsor of a listed company cannot hold less than a two per cent stake in the company.

Meanwhile, all sponsors and directors of a listed company must jointly hold a 30 per cent stake in the company, as per securities laws. Currently, the bank’s sponsors and directors collectively hold an 88.29 per cent stake in the company.

The bank’s authorities, according to sources, were now taking initiatives to ensure compliance with the individual shareholding position.

The bank called an initial public offering (IPO) to raise a fund worth Tk 70 crore from the capital market from February 16 to 23 this year.

However, 26 per cent of the shares floated were unsold during that period due to the lack of interest from investors in the bank’s shares. According to the IPO subscription of Midland Bank ending on February 28 last, its primary shares worth more than Tk 18 crore remained unsold against its IPO size of Tk 70 crore

According to the IPO fund proposal, its shares worth Tk 5 crore were allotted for its employees, while Tk 16.25 crore worth of shares for the eligible institutional investors, and Tk 48.75 crore worth of shares were opened for the general public.

This was the first time since 2006 that the initial public offering of a bank remained unsubscribed.

Underwriters, however, guaranteed that issuer companies would take all unsold shares offered, and for the first time in nearly two decades, equity IPO underwriting proved its worth.

The bank reviewed its financial reports on Thursday and said its net profit in the July–September quarter of the fiscal year 2022-23 fell by 10 per cent year-on-year. Besides, its net profit plunged by 58 per cent during the January–September period of FY23 on a year-on-year basis.

The lender’s earnings per share (EPS) stood at Tk 0.16 for July–September quarter against Tk 0.18 for the same period last fiscal.

On September 21, 2022, the Bangladesh Securities and Exchange Commission (BSEC), the securities regulator, approved the company’s IPO proposal.

According to the draft prospectus’ financial statements, the bank’s classified loan stood at Tk 145.50 crore as on December 31, 2021, which was 221.35 per cent higher than the figure of Tk 45.28 crore till 2020.