Brac Bank to cement capital base by issuing Tk700cr bond

In a bid to cement its Tier-II capital base, private commercial lender Brac Bank Ltd decided to issue a bond worth Tk 700 crore, subject to regulatory approvals.

The lender’s board of directors decided to issue the subordinated, non-convertible, fully redeemable, coupon-bearing, floating rate subordinate bond for seven years through private placements, as per a disclosure filed with the Dhaka Stock Exchange (DSE).

The listed company requires achieving approvals from the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) to issue the bond.

The proceeds will be treated as capital, and it will help the bank grow its investment and loan portfolio.

A subordinated bond is an unsecured loan or bond that ranks below other, more senior loans or securities with respect to claims on assets or earnings.

Subordinated bonds are thus also known as junior securities.

Subordinated bonds that are mostly issued by banks are dominating the local bond market. These help lenders construct their mandatory Tier II capital base within a specific timeframe.

Earlier, in October 2021, Brac Bank had received approval from the BSEC to issue a Tk600 crore non-convertible, fixed coupon senior bond.

The lender used the bond proceedings as a home loan for the lower and middle-class people of the country. The bond was redeemed in five years.

The bond was fully subscribed to by the International Finance Corporation (IFC). The raised fund was designed for providing affordable housing loans to lower and middle income groups at a maximum interest rate of 7.50 per cent or as revised by Bangladesh Bank from time to time.

Listed in 2007, Brac Bank currently has a paid-up capital of Tk1,608 crore.

The bank was established in 2001 as a private commercial bank with a vision to provide banking services to the country’s small and medium enterprises (SMEs) and retail customers.

The publicly traded company’s profit jumped by 25 per cent year-on-year in the January–March quarter of 2023. Its earnings per share (EPS) was Tk 0.96 for Q1 this year, against Tk 0.77 for the same quarter a year ago.

Besides, it also secured the BSEC consent for raising its paid-up capital base through the issuance of a 7.50 per cent stock dividend for the year ending December 31, 2022.

The bank and its subsidiaries jointly recorded a profit of Tk 612 crore in the year 2022, up from Tk 465 crore in 2021. The lender’s standalone net profit was Tk 576 crore last year, representing a 3.90 per cent increase over the the previous year.

Despite the stressed industry conditions, the bank delivered a strong balance sheet growth, with customer deposits growing 24 per cent, while loans and advances increasing 28 per cent, the bank said.

Brac Bank shares closed at Tk 35.80 each on the DSE trading floor Thursday.

Sponsors and directors jointly held a 46.24 per cent stake in the company, while institutions owned 13.32 per cent, foreign investors 33.33 per cent, and general investors 7.11 per cent till May this year.