Union Bank given conditional approval to go public

The Bangladesh Securities and Exchange Commission (BSEC) on Sunday allowed Union Bank to raise Tk428 crore in capital with an initial public offering (IPO).

But, the commission imposed two conditions. First, the bank must invest Tk200 crore in the capital market in 2021 as per Bangladesh Bank's circular. At the end of 2020, the lender had an investment of Tk4 crore in the capital market. 

Second, until being listed on the capital market, the private sector lender will not declare any dividends for its shareholders.

The shares will be offered to the public at a face value of Tk10 each. Of the total funds raised, the bank will invest Tk271.50 crore in SME and project finance, Tk100 crore in government securities, and Tk50 crore in the share market. The rest will cover IPO expenses.

Prime Bank Investment and Brac EPL Investment are the issue managers of the bank IPO.

As per the bank's draft prospectus, S Alam Group is the owner of the lender, and most of the directors are from the same business group. 

According to the prospectus, 5.22 crore or 9.35% shares of the bank are held by late president Hossain Mohammad Ershad. 

The bank started out in 2013 and its paid-up capital is Tk558.93 crore. It is operating in the country as a full-fledged Islamic bank.

According to the financial statement of the bank, its net profit was Tk98.84 crore at the end of 2020, which was 66% higher than a year ago. In 2018, its net profit was Tk95.36 crore, which was 37% higher than in 2019.

The lender said in the report that in 2019, its net profit decreased due to higher expenses. But in 2020, it witnessed a higher profit owing to lower provisioning against loans as the central bank had provided a loan moratorium facility during the pandemic. 

At the end of last year, its classified loans stood at Tk420 crore, which was 2.52% of its total loan portfolio.