Three banks get green light to issue Tk2,300cr bonds to strengthen capital base
The issuances come as banks face rising pressure to maintain stronger capital buffers under the Basel III framework, which Bangladesh adopted in 2015
The Bangladesh Securities and Exchange Commission (BSEC) has approved three commercial banks – BRAC Bank, United Commercial Bank (UCB), and Trust Bank – to raise Tk2,300 crore through subordinated bonds to strengthen their capital base and meet Basel III regulatory requirements.
The approval came at a commission meeting held on 29 September, according to a press release.
Of the total issuance, BRAC Bank will raise Tk1,000 crore, UCB Tk800 crore, and Trust Bank Tk500 crore. All three bonds will be listed on the alternative trading board of the Dhaka Stock Exchange (DSE).
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BRAC Bank's bond will be an unsecured, non-convertible, fully redeemable, floating-rate based social subordinated instrument, carrying a coupon of reference rate plus 2.5%. Prime Bank Investment has been appointed as trustee, while BRAC EPL Investment will act as lead arranger. The proceeds from issuance will be used to strengthen the bank's Tier-II capital.
UCB will issue an unsecured, non-convertible, redeemable, floating-rate subordinated bond carrying a coupon of reference rate plus 3%. DBH Finance PLC will serve as trustee, while UCB Investment Limited will act as the lead arranger. The funds will be used to boost its Tier-II capital under Basel III standards.
Trust Bank will also float an unsecured, non-convertible, fully redeemable, floating-rate subordinated bond with a reference rate plus 3% coupon. DBH Finance PLC has been appointed as trustee, while UCB Investment Limited and Trust Bank Investment Limited will act as joint arrangers.
The issuances come as banks face rising pressure to maintain stronger capital buffers under the Basel III framework, which Bangladesh adopted in 2015.
The rules require banks to maintain a minimum capital adequacy ratio (CAR) of 12.5% against risk-weighted assets, compared with 10% under Basel II, to strengthen resilience against potential shocks.
As of the end of 2024, BRAC Bank maintained a healthy capital cushion with a consolidated CAR of 19% and a solo CAR of 14.9%. UCB's solo CAR stood at 10.59%, while Trust Bank reported a consolidated CAR of 13.16% and a solo CAR of 13.21%.
However, expanding loan portfolios are steadily tightening capital ratios, prompting more banks to consider bond issuances to stay compliant.
Bankers note that international counterparties often prefer Bangladeshi banks to maintain CAR levels of at least 14%, putting further impetus on lenders to shore up their balance sheets.
