Liquidation-bound NBFIs dominate DSE gainers' chart 

In an unexpected twist today (16 October), several non-bank financial institutions (NBFIs) that are on the verge of liquidation emerged as the top gainers on the Dhaka Stock Exchange (DSE), even as the overall market sentiment remained subdued.

Peoples Leasing and Fareast Finance both surged by 10% to Tk1.10 per share, while Premier Leasing, International Leasing, and FAS Finance each rose by 8.33% to Tk1.30. The rally came despite these firms being on Bangladesh Bank's list of institutions slated for closure as part of its ongoing cleanup of the financial sector.

In stark contrast, Bangladesh Industrial Finance Company (BIFC), another liquidation-bound NBFI, dropped 10% to close at Tk2.70, becoming the day's top loser. GSP Finance and Prime Finance also fell by 4% and 4.76%, settling at Tk2.40 and Tk2 per share, respectively.

A managing director of a leading brokerage house, requesting anonymity, told The Business Standard that the gains were driven largely by speculative trading. 

"It's quite unfortunate to see that five struggling NBFIs slated for liquidation are leading the gainers' chart. These stocks are being bought by speculative investors simply because they trade at rock-bottom prices. Many aim to make quick profits, as the shares saw a steep fall between mid-September and mid-October after a brief rally," he said.

In August, Bangladesh Bank decided to shut down and initiate liquidation proceedings against nine NBFIs, eight of which are listed on the stock exchanges. 

The institutions are FAS Finance, BIFC, Peoples Leasing, International Leasing, Aviva Finance, Premier Leasing, Fareast Finance, GSP Finance, and Prime Finance.

The decision followed years of mismanagement, loan irregularities, and massive capital erosion in the NBFI sector. 

Earlier in May, the central bank had issued show-cause notices to 20 troubled institutions, demanding explanations for their continued failures to repay depositors and maintain adequate capital. 

Only eleven responded with viable recovery plans, while nine failed to satisfy the regulator.

Bangladesh Bank Governor Ahsan H Mansur said the liquidation move was aimed at protecting depositors. "We are moving forward with this process solely to safeguard the interests of depositors. Ensuring their money is returned will be our first priority," he said at an event on 27 August.

The DSE recently sought clarification from the eight listed NBFIs regarding their closure status, but only Fareast Finance responded, claiming it had not yet received any formal notice from the central bank.

According to Bangladesh Bank's Financial Stability Report 2024, only nine out of the 35 NBFIs in the country can be considered financially sound, while 21 are deemed weak. The sector's capital adequacy ratio stood at just 1.62% – far below the required 10% – and shareholders' equity was in the red by Tk9,716 crore by the end of 2024.

The report further revealed that defaulted loans in the NBFI sector reached Tk25,089 crore by the end of last year. Of this, the nine institutions now facing liquidation accounted for nearly 52% of the total.

Depositors have borne the worst impact of the sector's collapse. Troubled firms collectively hold more than Tk22,000 crore in deposits, including Tk5,760 crore from individual savers, many of whom have been unable to withdraw funds for years.

Meanwhile, the DSEX, the key index of the Dhaka bourse, managed a marginal gain of 0.05% to close at 5,119 points today, snapping a two-day losing streak. 

The blue-chip DS30 index also edged up by 0.04% to 1,967 points. Out of 398 issues traded, 154 advanced, 179 declined, and 65 remained unchanged. 

Turnover, however, dropped 9% to Tk444 crore, reflecting cautious investor sentiment amid ongoing market uncertainty.