Islami Bank shares bounce back, hit upper circuit for second straight day

After hitting near-lows following the removal of the floor price, shares of Islami Bank Bangladesh rebounded, supported by expectations of liquidity assistance from the central bank to help ease the bank's ongoing funding stress.

With gains in two consecutive sessions, Islami Bank's share price climbed nearly 20% in two days, reaching Tk32 each, close to its former floor price level of Tk32.60.

Following the removal of the floor price on 8 June, Islami Bank shares fell by around 20%, hitting the lower circuit – the maximum daily decline allowed under market rules – to Tk26.5 each.

Since touching that low, the stock has bounced back on hopes that the central bank will provide support to help mitigate the bank's liquidity crisis.

Today (14 June), shares of Islami Bank worth Tk85 lakh were traded, with 2.67 lakh shares changing hands through 390 trades, according to data from the Dhaka Stock Exchange.

The stock opened at Tk29.50 each and soon hit the upper circuit, surging 9.97% during the session.

Trading data showed that only a small number of investors were willing to sell Islami Bank shares despite strong buying interest from investors.

Yesterday, the Bangladesh Bank extended a special loan of Tk2,500 crore to Islami Bank to help the country's largest Shariah-based lender mitigate a deepening liquidity crisis.

The central bank disbursed the financial assistance, according to sources within Islami Bank.

The private commercial bank fell into a severe liquidity crunch following a wave of unrest that erupted after the Eid-ul-Adha holidays over the appointment of its new chairman.

Under the banner "Islami Bank Sachetan Grahok Forum," a group of clients has been staging continuous demonstrations opposing the appointment.

The prolonged agitation triggered panic among clients, prompting a massive volume of depositors to withdraw their funds from the bank.

As the cash flight intensified, the liquidity crisis deepened to a level where the bank failed to disburse cash according to its customers' demands. Alongside failing to meet customer withdrawals, Islami Bank also failed to maintain its mandatory Cash Reserve Ratio (CRR) with the central bank.

Consequently, the private lender sought liquidity support of Tk10,000 crore from the central bank last week.

Earlier, on Friday, during a post-budget press conference, Bangladesh Bank Governor Md Mostaqur Rahman hinted at providing liquidity support to Islami Bank.

He stated that the crisis at Islami Bank would be resolved quickly and depositors would face no trouble withdrawing their money.

Beximco shares continue to fall

Shares of Beximco Ltd, a flagship concern of the Beximco Group, have been witnessing heavy selling pressure for the four consecutive sessions and hit the lower circuit – the maximum daily decline limit – after the removal of the floor price. 

Since removing the floor price on 8 June, Beximco shares saw substantial sell-offs as investors opted to exit the stock after a prolonged period of stagnation.

Amid the selling-offs, Beximco Ltd's share price closed at Tk72.3 each yesterday.

Before the floor price was lifted, Beximco shares stood at Tk110.1 each, meaning the stock has lost Tk37.8 per share, or more than 34%, over the period.

Investors in Beximco Ltd and Islami Bank had remained stuck for around three years and seven months after the Bangladesh Securities and Exchange Commission imposed floor prices in October 2022 amid the fallout from the Russia-Ukraine war, acute dollar shortages, rising inflationary pressures, and a prolonged downturn in the domestic stock market.

Prior to that, the regulator had first introduced the floor price mechanism on 19 March 2020 during the Covid-19 pandemic, when global financial markets were experiencing severe volatility.

Although the BSEC later gradually lifted the floor price from almost all listed stocks, Beximco and Islami Bank remained under the artificial pricing mechanism.

Market participants repeatedly urged the regulator to remove the floor prices on the two stocks, but the previous commissions did not take any steps in that regard.