Dividend from 17 banks unlikely

The Bangladesh Bank has issued new regulations for dividend disbursement to keep the financial conditions strong of banks in the country.

Most of the banks have the capability to announce dividend as per their unaudited financial reports of 2019. But 17 banks cannot announce dividend of which 7 are state owned. If the banks don’t disburse dividend after announcement then they will have 5 to 6 thousand crore taka as liquid money. This information was learnt after examining the unaudited financial statements of the said banks.

Bangladesh Bank (BB) restricted banks on distributing dividend before September 30 this year through issuance of a circular on Monday.

The circular said that the banks can declare highest 30 percent dividend including a 15 percent cash as per their ability. 

Banks have been put in four groups by the central bank as per the new regulation based on their capital base. Banks will have to announce dividend as per their category. But any deferral facility availed from the BB will be discounted from the capital base in this regard and it has to be taken into consideration while calculating bank’s capital. The banks that would fail to maintain 10 percent capital, including 2.5 percent conservation buffer upon adjustment, would not be allowed to issue any dividend. 12 banks had provision deficit in 2019 while 12 others had capital deficit. For this reason 17 banks will not be able to announce dividend at all. The banks are state-owned Sonali, Agrani, Rupali, Janata, Basic, Rajshahi Krishi Unnayan Bank and Bangladesh Krishi Bank.  The private banks in the list include AB Bank, National Bank, Standard, Social Islami, Dhaka, Mutual Trust, Bangladesh Commerce, ICB Islami, Padma and Trust Bank.

9 out of 30 banks listed in the stock market will not be able to announce dividend. Apart from First Security Islami Bank, the other 20 banks in the list has a capital 12.5 per cent or above. These banks will be able to announce up to 30 percent dividends, including maximum 15 per cent in cash. But some of these banks have already showed profit in their statements after taking facilities from the BB in 2019. These facilities now have to be discounted in calculating profit. Nine banks that are not listed yet are also in the race. Eight of them will be able to announce dividend for their shareholders. But the cash dividend cannot be distributed before September 30 in 2020. The decision has been taken to strengthen banks financially in the coronavirus fallout. The decision has however drawn some mixed criticism.

Former finance adviser to caretaker government and economist Dr AB Miza Azizul Islam said he has no clue on what argument BB has done something like this. He said different banks are under different financial situations. It is not logical to set a ground or ceiling for dividend announcement by the BB, he said. This can have adverse impact on the stock market of the country, he opined.

Executive director of Centre for Policy Dialogue (CPD) Dr Fahmida Khatun said to strengthen financial condition of banks, many countries have already suspended dividend payment. The financial conditions of banks in Bangladesh are already weak and there is a need for improving the condition, she added.

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