City Bank to issue Tk1,200cr subordinated bond

City Bank has announced its plan to raise Tk1,200 crore by issuing a subordinated bond, according to a disclosure published on the bank's website following a board meeting held on 11 September.

The initiative, which is subject to regulatory approval, is aimed at strengthening the bank's capital base under Basel III requirements and supporting its business growth.

Earlier this year, on 9 February, the bank had decided to raise Tk800 crore. However, in light of prevailing market conditions and subsequent recommendations, the bank reviewed the structure and features of the instrument, ultimately deciding to increase the bond size. 

The revised issuance will require clearance from the Bangladesh Securities and Exchange Commission, Bangladesh Bank, and other relevant regulators before going to market.

The decision comes in line with the country's broader regulatory framework. Bangladesh adopted Basel III guidelines in January 2015, following Bangladesh Bank's issuance of revised capital adequacy standards in December 2014. Under the framework, banks were required to increase their minimum capital adequacy ratio to 12.5% against risk-weighted assets by the end of 2019, from 10% under the previous Basel II framework. 

Basel III, developed by a consortium of central banks from 28 countries in response to the global financial crisis of 2007–2008, emphasises stricter capital standards to improve the resilience of banks in facing economic shocks.

City Bank has consistently demonstrated its ability to meet and exceed regulatory capital thresholds. Its 2024 annual report showed that the bank maintained a capital reserve of Tk6,537 crore against a minimum requirement of Tk5,116 crore. 

This translated into a Capital to Risk-Weighted Assets Ratio of 16%, well above the required level, while its Tier-1 ratio stood at 11.7%. The figures underscore the bank's efficient capital management and ability to sustain business expansion while adhering to international standards.

The bank has also recorded impressive financial performance in recent years. In 2024, City Bank posted a record profit of Tk1,014 crore, marking a 59% increase compared to the previous year. Riding on the strong earnings, it declared a 12.5% cash dividend and a 12.5% stock dividend for its shareholders, rewarding them with one of the highest payout ratios in its history. Consolidated earnings per share rose to Tk7.53 from Tk4.74 a year earlier.

Momentum has carried into 2025, with the bank reporting a consolidated net profit of Tk301 crore in the first half of the year, reflecting 21% year-on-year growth. Investor sentiment has also remained positive, as City Bank shares closed 2.31% higher at Tk26.60 on Thursday following the bond announcement.