Why sponsors struggle to sell bank shares

Sponsors in at least four banks have struggled with their efforts to divest their shares for prolonged periods, spanning months and, in certain instances, even years.

This challenge arises from diminished market demand due to prevailing economic and political uncertainties within the country.

The investors had announced their intention to sell their shares within 30 working days at the prevailing market price, but their efforts proved futile.

In the worst-case scenario, a sponsor announced the sale of around 29 lakh shares of Standard Bank back in November 2019, yet has been unsuccessful in finding buyers for all of the shares thus far.

As a result, the Bangladesh Securities and Exchange Commission (BSEC) has allowed four sponsors of Exim Bank, Southeast Bank, Standard Bank, and NCC Bank to sell their shares by 31 January 2024, according to information from the Dhaka Stock Exchange (DSE).

Stock market insiders said investors are avoiding new investments in stocks due to the current economic situation and uncertainties surrounding the upcoming general elections. This has created a supply-demand gap, with more shares available for sale than buyers. 

Besides, the BSEC's floor price imposed in August 2022 following the Russia-Ukraine war has kept most company shares stuck at the same price for a long time, with only a handful of weak companies with poor dividend trading, they said.

A top official of a brokerage house told The Business Standard that shares are not being sold despite announcements because of the economic crisis, which has caused investors to hold off on new investments and trapped many investors' funds at the floor price due to a lack of buyers. Even selling at a loss is difficult.

"Investors once had confidence in bank shares and earned good returns at the end of the year. However, due to various irregularities in banks, increasing defaulted loans, and nominal dividends from some banks, investor confidence has waned and bank share prices have plummeted," he added.

Meanwhile, Mazakat Harun, a sponsor of Exim Bank, who announced on 31 May 2023 that he would sell 4.80 lakh shares of the bank at the prevailing market price within 30 working days, has finally managed to sell the shares following a time extension by the BSEC.

Similarly, on 23 July, Rehana Kashem, a sponsor of Southeast Bank, announced the sale of 20 lakh shares of the bank. She owned 87.53 lakh shares. As of 21 October, only 2.84 lakh shares had been sold.

Standard Bank sponsor Harun-Or-Rashid announced the sale of 28.81 lakh shares of the bank on 17 October. By 7 November, he was able to sell 26.41 lakh shares but could not sell the remaining 2.40 lakh shares. 

NCC Bank sponsor Nisar Kader announced the sale of three lakh shares of the bank on 11 July but to no avail.