Listed bank shares tumble below face value

Muhammad Ayub Ali :

Bangladesh’s listed banking stocks, once a cornerstone of the equity market, continue to fall to multi year lows as concerns over liquidity, governance and asset quality weigh on investor sentiment.

Market data show that 18 of the 36 banks quoted on the Dhaka Stock Exchange (DSE) are now trading at, or below, their Tk 10 face value-long viewed as the sector’s notional floor for investor confidence. Five of those institutions are priced under Tk 5, indicating deep scepticism about prospects for earnings and dividend growth.

Of the 36 banks on the exchange, 33 have published unaudited results for the January-March 2025 quarter. Seventeen reported year on year declines in earnings per share (EPS), according to DSE filings, reinforcing the market’s cautious stance.

Industry observers link the poor performance to elevated funding costs, restrained credit growth and tighter regulatory requirements.

“A severe liquidity shortage means many banks are struggling to generate profits robust enough to sustain dividends,” said Md Nazmus Saadat, Deputy Director at Social Islami Bank. He added that recent conditions imposed by Bangladesh Bank have limited the flexibility of lenders to manage capital and shareholder distributions.

Non performing loans (NPLs) remain the core structural challenge. Central bank data put outstanding NPLs above Tk 4.2 lakh crore-roughly 24 percent of total loans-highlighting continuing stress in asset quality.

Analysts point to longstanding governance shortcomings, including related party lending and political influence, as well as limited enforcement capacity at the regulator, all of which have eroded confidence.

The sector’s liquidity profile has also deteriorated. Persistent deposit withdrawals, coupled with muted remittance growth, have squeezed banks’ ability to extend credit and impaired net interest margins.

The re rating of banking shares has substantially reduced the sector’s weight in the broader market. In financial year 2015 16, banks accounted for more than 20 per cent of total DSE capitalisation. By 2023, that share had fallen to 14.9 per cent; as at June 2025, it stands at just 13.01 per cent.

Because institutional investors have traditionally relied on bank stocks for stable dividend income, the retrenchment has curtailed reinvestment capacity across the exchange, lowering turnover and liquidity in other sectors.

Market strategists argue that sentiment will improve only if tangible reforms are implemented-particularly in governance, credit risk management and loan recovery processes. Clearer disclosure, stronger regulation and consistent enforcement are viewed as prerequisites to restoring credibility and unlocking new capital.

Without such measures, analysts warn the sector could remain under pressure, constraining the wider equity market and complicating efforts to deepen Bangladesh’s capital market base.