First Security Islami Bank to raise capital with right shares

First Security Islami Bank wants to raise capital of Tk498 crore by issuing the right shares to its shareholders to strengthen the capital base as required by the Bangladesh Bank.

The bank took the decision at a board meeting on 16 September, a source at the lender confirmed the matter to The Business Standard.

As per the board decision, the bank wants to issue the right shares at a ratio of 1R:2 (one right share for every two ordinary shares) at an issue price of Tk10 each.

Right shares are issued by a company in a ratio of equity shares to its existing shareholders to raise capital.

The bank will arrange an extraordinary general meeting on 27 October to get shareholders' approval for the right share issuance. To entitle the shareholders, the record date has been set for 6 October.

It needs approval from the Bangladesh Securities and Exchange Commission (BSEC) to execute the plan.

A senior officer of the bank, seeking anonymity, said it wants to go for large-scale investment in various sectors, which have a good prospect in the coming days.

"That is why the bank needs a strong capital base," he added.

The bank started its commercial operation in 1999 and its board is controlled by the country's business conglomerate S Alam Group.

Earlier in 2014, the lender had raised paid-up capital of Tk206 crore by issuing the right shares at a ratio of 1R:2 at an issue price of Tk10 each.

In December last year, BSEC gave consent to raise Tk600 crore by issuing a mudaraba bond to comply with the Tier-1 capital base under Basel III.

In the first half of this year, the bank reported 34% falls to Tk53 crore in its net profit as its net interest income declined by 10.20%.

At the end of 30 June this year, its earnings per share stood at Tk0.54, which was Tk0.82 at the same time a year ago.

But in the April-June quarter of this year, its net profit jumped 38% to Tk22 crore as the bank's operating expenditure decreased by 17% where its salary and allowance expense to the employees fell by 19%.

At the end of June this year, its total classified loan stood at Tk1,759 crore, which was 3.99% of the total outstanding loan.

The bank paid 5% cash and 5% stock dividends to the shareholders for 2020. In the previous year, it had paid a 10% stock dividend.

The lender got listed on the capital market in 2008. In the last six months, its share price rose 44% to Tk13 each at the Dhaka Stock Exchange.

At the end of Thursday's trading session, its share's closing price was Tk13.

Sponsors and directors hold 33.34%, institutional investors 20.63%, foreign investors 1.75%, and general investors 44.28% shares of the bank.