Dutch-Bangla Bank declares a lower dividend to fortify its capital base

Dutch-Bangla Bank has declared a lower dividend for 2021 than the previous year, as the country's first joint venture bank plans to strengthen its capital base.

The private sector lender has set aside 27.50% dividend – 17.50% cash and 10% stock – for its shareholders, compared to 15% cash and 15% stock dividends in 2020.

Investors will receive Tk1.75 against each share while the bank's earnings per share (EPS) stood at Tk8.79 last year, according to its stock exchange filings on Monday.

The bank said in its statement that it has declared the dividend in line with the central bank circular. The retained amount of the profit will be used to strengthen the capital which helps the bank increase its capacity.

It has declared the stock dividend for strengthening the paid-up capital, which is currently Tk632.50 crore, according to the Dhaka Stock Exchange (DSE).

The bank also noted that, for shareholders' approval of recommended dividends, it will conduct the annual general meeting through a digital platform on 24 April. And the record date has been set for March 28.

Its shares closed 1.64% higher at Tk74.30 on the DSE.

On 16 March last year, the Bangladesh Bank amended the dividend payout policy for banks and proposed a 35% ceiling on banks' dividend issuance to strengthen the entities' capital base, making compliance with the rules mandatory from the year ending on 31 December 2020.

According to the central bank's circular, the money market watchdog has set six dividend sub-slabs under two slabs for the banks based on their liquidity situation.

The circular said the central bank aimed at strengthening banks' capital base by keeping their profits un-disbursed, as much as possible, so that the lenders can contribute more to the country's economy.

The Bangladesh Bank had taken the move following the outbreak of the coronavirus pandemic and to keep banks free from its impact.

According to the circular, the banks, which have refrained from taking deferral for maintaining provision and maintained 15% as capital including a 2.5% capital conservation buffer, would be allowed to announce up to 35% dividend, including a maximum of 17.5% cash.

In the January-September period of 2021, Dutch-Bangla Bank maintained the capital to risk-weighted assets ratio (CRAR) at 16.17% which included capital requirement and capital conservation buffer, where the central bank's requirement is 15%.

But during the period, it could not maintain average cash reserve requirement (CRR) at least 4%, where it maintained 3.94%.

The bank also maintained a statutory liquidity ratio (SLR) at 32.01%, where the minimum requirement is 13%.