Banking stocks drive market decline after dividend block
Staff Reporter :
The recent directive by Bangladesh Bank (BB) barring 18 listed banks from disbursing dividends has sent shockwaves through the capital market, sparking a sharp and sustained downturn in investor sentiment. The move, aimed at enforcing financial discipline, has had immediate and far-reaching consequences, particularly for the banking sector – the largest component of the Dhaka Stock Exchange (DSE).
Banking stocks led the market decline, with sharp price falls prompting panic selling across other sectors and dragging down the overall market index. Data from the DSE show that between May 23 and May 29, the benchmark index fell by a total of 189 points – 16 on Thursday, 39 on Saturday, 10 on Sunday, 17 on Monday, 41 on Tuesday, and 63 on Wednesday.
Among the worst-hit were NRB Bank, Mercantile Bank, NRBC Bank, and SBAC Bank, all of which featured prominently on the list of top losers by index. NRB Bank consistently ranked among the biggest price losers based on both opening and closing prices. Similarly, on May 29, Al-Arafah Islami Bank and Social Islami Bank recorded notable losses, along with Southeast Bank, Exim Bank, and First Security Islami Bank.
The abrupt nature of the dividend ban has eroded investor confidence, especially among retail investors who were anticipating dividend
payouts. With these expectations dashed, many are now facing unexpected losses, contributing to the prevailing uncertainty in the market.
Bangladesh Bank issued the dividend restriction after 18 of the 36 listed banks failed to finalise their annual financial reports by the original deadline of 30 April. This delay stemmed largely from shortfalls in loan provisioning.
Although the government subsequently approved an extension of the deadline to 31 May and granted additional time to meet provisioning requirements, the central bank maintained its stance, rejecting multiple appeals from bank directors and executives to reconsider the dividend restrictions.
The affected banks include AB Bank, Al-Arafah Islami Bank, Dhaka Bank, Exim Bank, First Security Islami Bank, IFIC Bank, Islami Bank Bangladesh Ltd (IBBL), Mercantile Bank, NRB Bank, NRBC Bank, One Bank, Premier Bank, Rupali Bank, SBAC Bank, Social Islami Bank, Southeast Bank, Standard Bank, and United Commercial Bank.
Conversely, 18 banks successfully met the regulatory deadlines and declared dividends. These include City Bank, BRAC Bank, Pubali Bank, Uttara Bank, Eastern Bank, Prime Bank, NCC Bank, Dutch-Bangla Bank, Mutual Trust Bank, Bank Asia, Jamuna Bank, Shahjalal Islami Bank, Trust Bank, and Midland Bank.
Market analysts believe the regulatory action, though intended to reinforce financial prudence, has had a destabilising effect due to its sudden execution. A more phased or pre-announced approach, they argue, could have cushioned the impact on market sentiment.
The dividend suspension has highlighted the underlying structural challenges in Bangladesh’s banking sector, particularly in asset quality and provisioning compliance.
To restore investor confidence and market stability, analysts recommend urgent steps, including clear and timely communication from regulators, better coordination among financial institutions, and enhanced corporate transparency.
They also urge the government to introduce a comprehensive reform roadmap for the banking sector, improve liquidity conditions, and foster a more investor-friendly capital market environment.
Without swift, coordinated interventions, experts warn that the current erosion in trust could deepen, further exacerbating the liquidity crunch and extending the market’s downward trajectory.