Junk NBFI stocks rebound despite liquidation fears

Struggling under heavy classified loan burdens, several non-bank financial institutions (NBFIs) have emerged as top performers in the stock market, posting sharp price increases in February after months of steep declines triggered by liquidation concerns.

According to data from the Dhaka Stock Exchange (DSE), the share prices of eight troubled NBFIs surged between 145% and 224% during the month, even though most of them remain under severe financial distress and face potential liquidation.

The rally came after their share prices had earlier plunged to historic lows amid continuous sell-offs driven by investor fears that shareholders could lose their entire investments if the institutions were wound up.

At one point, the share prices of some NBFIs dropped below Tk1 for the first time in the history of Bangladesh's capital market.

In response, the DSE introduced a new trading rule for such ultra-low-priced stocks. The bourse fixed the minimum price movement (tick size) for shares trading below Tk1 at Tk0.01, while the existing tick size for equities priced above Tk1 remains Tk0.10.

Despite the weak fundamentals, these beaten-down stocks staged an extraordinary rebound in February.

Data show that the share price of Bangladesh Industrial Finance Company soared by 224% during the month to Tk5.50 per share.

Premier Leasing and Finance jumped 216% to Tk1.70 from Tk0.57 at the beginning of February. People's Leasing and Financial Services and FAS Finance and Investment both climbed 174% to Tk1.70 each.

International Leasing and Financial Services rose 171% to Tk1.60, Prime Finance and Investment advanced 167% to Tk4, while Fareast Finance and Investment gained 154% to Tk1.70.

GSP Finance also recorded a sharp increase, rising 145% to Tk4.96 per share.

Market insiders say the rally reflects the long-standing tendency of many investors in Bangladesh's capital market to speculate on junk stocks despite their high risks.

Usually investors here like to bet on weak stocks hoping for quick gains. Sometimes the risk pays off, but often it ends with investors losing their hard-earned money," said market insiders.

They also noted that investor sentiment shifted after the change in the governor of Bangladesh Bank. Many traders appeared to assume that the planned liquidation of troubled NBFIs might not proceed as earlier indicated, prompting renewed speculative buying in these distressed stocks.

Abu Ahmed, chairman of the Investment Corporation of Bangladesh and a capital market analyst, recently told The Business Standard that many investors prefer short-term trading gains rather than long-term.

He said abnormal price surges are often driven by manipulation in junk stocks. Once such stocks start rising sharply, many investors rush to concentrate their investments in them in hopes of quick profits.

The capital market analyst advised investors to focus on fundamentally strong companies instead, although he acknowledged that the number of quality stocks in the market remains limited.

The surge in prices comes against the backdrop of ongoing regulatory actions aimed at reviving or resolving scam-hit NBFIs.

On 5 January, then governor of Bangladesh Bank, Ahsan H Mansur, said at a press briefing that nine NBFIs would be declared non-viable within a week. He also announced that independent auditors would be appointed to assess the actual financial conditions of the institutions.

Following the announcement, panic selling swept through the shares of weak financial institutions as investors feared a complete erosion of shareholder value.

However, many investors were unable to exit their positions because buyers virtually disappeared from the market, leaving large volumes of unexecuted sell orders throughout the trading day.

"The market was flooded with sell orders, but there were practically no buyers," a broker said at the time. "Investors were trying to cut losses, but confidence had completely evaporated."

Later, on 27 January, the central bank decided to liquidate six NBFIs plagued by irregularities, corruption and prolonged mismanagement, while allowing three others an additional three months to improve their financial conditions.

The institutions granted time include Bangladesh Industrial Finance Company, GSP Finance Company and Prime Finance and Investment.

Those set for liquidation include FAS Finance, Premier Leasing, Fareast Finance, Aviva Finance, People's Leasing and International Leasing.

Financial data show that most of these institutions were already in deep distress.

As of September 2025, many had accumulated massive losses and recorded deeply negative net asset values.

International Leasing alone posted accumulated losses exceeding Tk5,100 crore, with its net asset value per share falling to minus Tk219 and a non-performing loan (NPL) ratio approaching 98%.

People's Leasing reported losses of more than Tk4,800 crore with an NPL ratio nearing 99%, while FAS Finance showed an almost 100% NPL ratio along with heavy negative equity.

Similar financial distress is evident at Premier Leasing, Fareast Finance, First Finance, GSP Finance and BIFC, highlighting years of weak governance, reckless lending and capital erosion.

The central bank's decision follows a circular issued on 21 December that brought NBFIs under the Bank Resolution Ordinance 2025, empowering the regulator to take decisive action, including liquidation, against institutions that remain in prolonged distress and fail to protect depositors' funds.

Earlier, on 30 November, the board of Bangladesh Bank had given preliminary approval to liquidate nine NBFIs, including People's Leasing and International Leasing.