Why half of listed banks haven't declared dividends despite holding board meetings

Eighteen banks listed on the stock exchange held board meetings on 30 April to approve their audited financial statements for 2024 and announce dividends. However, they were unable to declare dividends as they are still awaiting approval from Bangladesh Bank.

Separately, Global Islami Bank postponed its meeting a day before the scheduled date on 30 April. These banks will now reconvene their board meetings after securing clearance from the central bank, sources said. Union Bank has yet to announce its board meeting for the last year.

Under listing regulations, companies must submit audited financial statements within 120 days of their fiscal year-end to the stock exchange and the Bangladesh Securities and Exchange Commission (BSEC). 

Failure to do so incurs a daily penalty of Tk5,000 for delayed submissions. To avoid penalties, banks typically seek deadline extensions from the BSEC, sources added.

The 18 banks involved are AB Bank, Al-Arafah Islami Bank, Dhaka Bank, Exim Bank, First Security Islami Bank, IFIC Bank, Islami Bank, Mercantile Bank, NRB Bank, NRBC Bank, One Bank, Premier Bank, Rupali Bank, SBAC Bank, Social Islami Bank, Southeast Bank, Standard Bank, and United Commercial Bank.

A shareholder-director of one of the banks, speaking on condition of anonymity, explained that banks require Bangladesh Bank's approval to declare dividends. Also, issuer companies must announce board meeting dates at least three working days in advance. 

"It was assumed that Bangladesh Bank's approval would be secured within this timeframe. However, as the approval was not received, the banks were unable to declare dividends," he said.

Tighter rules on dividends

Several bank directors and officials said the Bangladesh Bank had imposed stricter conditions on dividend declarations. The central bank stated that banks cannot declare dividends if they have shortfalls in provisioning against defaulted loans or risky investments, or if they are availing deferral facilities.

Sources said Bangladesh Bank has taken a firm stance on provisioning, requiring banks to maintain 100% provisioning against non-performing loans. This includes fixed deposits held in weak banks and non-bank financial institutions, as well as classified loans under High Court stay orders. 

As a result, many banks have incurred significant losses to meet the provisioning requirements.

The circular also stated that dividends must be paid only from the profit of the current financial year, not from retained earnings. Due to these stricter rules, many banks are unlikely to declare dividends this year.

A bank chairman said, "Banks want to declare at least a small dividend in the interest of the industry and shareholders. That's why we have appealed to Bangladesh Bank for some relaxation in the provisioning requirements. However, we haven't received a decision yet."

Meanwhile, Bangladesh Bank has informed that it has sent a letter to the finance ministry, seeking a decision on whether any relaxation can be granted regarding provisioning requirements for defaulted loans and investments. 

"We expect a decision on this matter by next week," added the banker.

Following the change in government, Bangladesh Bank has restructured the boards of several banks – including Al-Arafah Islami Bank, Exim Bank, First Security Islami Bank, IFIC Bank, Islami Bank, Premier Bank, Social Islami Bank, United Commercial Bank, Global Islami Bank, and Union Bank – allegedly due to loan scams and governance failures.

Among the 36 listed banks, 14 declared dividends for the last year. Eastern Bank and Uttara Bank announced the highest payout to their shareholders, each declaring a 17.50% cash and 17.50% stock dividend.

Other banks that declared dividends include Bank Asia (10% cash and 10% stock), BRAC Bank (12.50% cash and 12.50% stock), City Bank (12.50% cash and 12.50% stock), Dutch-Bangla Bank (10% cash and 10% stock), Jamuna Bank (17.50% cash and 6.50% stock), Midland Bank (3% cash and 3% stock), Mutual Trust Bank (10% stock), NCC Bank (13% cash), Prime Bank (17.50% cash and 2.50% stock), Pubali Bank (12.50% cash and 12.50% stock), and Shahjalal Islami Bank (10% cash). Trust Bank declared a 7.50% cash and 7.50% stock dividend.

ICB Islamic Bank and National Bank declared no dividend, as both incurred losses in the last year.

The banking sector contributes the highest share (18.8%) to the Dhaka Stock Exchange's total market capitalisation, with a sector-wide market cap of Tk62,375 crore. The sector has the lowest price-earnings ratio at 6%, with 16 banks trading below their face value of Tk10. BRAC Bank has the highest share price at Tk49.6, while ICB Islamic Bank has the lowest at Tk2.9.