Mercantile Bank withholds dividend amid Tk1,700cr provision shortfall
In 2023, it had paid a 10% cash dividend to its shareholders
Mercantile Bank has decided not to declare any dividend for 2024 after reporting a provision shortfall of Tk1,700 crore against non-performing loans as of 31 December last year.
According to a bank's disclosure filed on the Dhaka Stock Exchange (DSE), a sharp decline in profit and its failure to meet the required provision levels under Bangladesh Bank's policy were the main reasons behind the decision by the board of directors.
The central bank's guidelines bar banks from declaring dividends if they fail to maintain adequate provisions against loans or have taken deferral facilities.
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From 25 May to 4 June, its share price dropped by 15% to close at Tk7.90 on the DSE.
In 2023, it had paid a 10% cash dividend to its shareholders.
The bank, in its financial statement, said Bangladesh Bank's assessment revealed a Tk2,121.19 crore provision shortfall as of 31 December 2024, with only Tk220.33 crore maintained, leaving an initial deficit of Tk1,900.86 crore.
Following a 22 May directive, the bank allocated Tk200 crore from 2024 pre-provision profits, reducing the gap to Tk1,700.86 crore.
Given profit constraints and capital adequacy considerations, Bangladesh Bank permitted finalising the 2024 financials without full shortfall adjustment, resulting in no dividend declaration, read the statement.
The financial statements disclose both the remaining shortfall and regulatory forbearance, with the bank committed to submitting a board-approved remediation plan within the stipulated time frame, it added.
According to the audited statement of the bank for 2024, its classified investments surged 199% year-on-year to Tk5,176 crore, making up 17.25% of its total loan portfolio.
This rise in bad loans led to a net loss of Tk272 crore in the October-December quarter last year.
As a result, the bank's consolidated net profit dropped by 68% to Tk64.95 crore for the year, with earnings per share (EPS) falling to Tk0.58 from Tk1.86 the year before.
Meanwhile, in the first quarter of 2025 (January-March), the bank posted a 14% growth in the consolidated net profit to Tk92.74 crore, while its earnings per share was Tk0.84.
