Bonds are a lucrative alternative for savers: UCB Investment CEO

Various types of bonds, offering 6%-10% annual return to investors, have become a lucrative alternative for savers in Bangladesh nowadays, said Tanzim Alamgir, an investment banker and the Managing Director (MD) and Chief Executive Officer (CEO) of UCB Investment Ltd.

Despite the lucrative returns, bonds are yet to attract the mass people and bond investment is still limited to institutional investors.

In an interview with The Business Standard on Thursday, Tanzim Alamgir said the country needs financial literacy among the people, a liquid secondary market, and some policy incentives to popularise the bond market.

The annual return most banks are offering to the investors who are buying the bonds they have issued is roughly 250 basis points higher than that they are giving to their depositors, but people still prefer saving at banks for an interest lower than the current inflation, said the CEO of the merchant bank that has won the regulator's first prize for its first year of operations.

Mainly due to the lack of financial literacy, the mass people barely opt for the higher returns from bonds that also might help them diversify their asset portfolio to a wider range of asset classes – bank deposits, fixed income securities, and equity alongside real estate and gold, he said.

"A bank is getting Tk40,000 crore deposits with much ease, while for its Tk500 crore bond you have to look for investors here," said Tanzim.

UCB Investment's tremendous start

Bangladesh Securities and Exchange Commission (BSEC) last week jointly awarded UCB Investment the first prize for the merchant banks in the Swadhinata Golden Jubilee Award, 2021.

Alamgir said hard work, team building, and a strategy they call "360-degree investment banking solutions" are the factors that took the young firm so high so fast.

"You are as good as your team," said Alamgir who joined UCB Investment in November 2020 as its founding MD and CEO with more than one decade of experience in the industry, while the firm's parent United Commercial Bank (UCB) has gained a reputation for hiring talents in its capital market subsidiaries.

Also, the large commercial bank's unconditional support added to the strength of the investment banking firm, said Alamgir.

UCB Investment started its operations amidst the pandemic and continued its best preparation for providing "360-degree investment Banking Solutions."

The company within a very short period of time has proved its worth in every sphere of Investment Banking and has earned the credibility of all the leading banks, non-bank financial institutions, and stakeholders of the industry for raising funds in the most efficient manner, said Tanzim Alamgir.

The company has built an impressive portfolio with Syndication financing, IPO, Agency, and Trusteeship through diverse bonds like Perpetual Bonds, Zero Coupon Bonds, and several Islamic bonds.

"We are the only merchant bank, so far, working in syndication financing," said Alamgir.  

Last year, UCB Investment raised approximately Tk5,000 crore through the perpetual bond, subordinate bond, zero coupon bond, and preference share. It also completed the subscription of one Initial Public Offering (IPO) as the issue manager in its first year of operation.

UCB Investment had the honor to execute both the largest perpetual bond issuance till date – the IBBL 2nd Perpetual Mudaraba Bond worth Tk800 crore and the very first BASEL-III compliant listed perpetual bond under new regulation- AIBL Mudaraba Perpetual Bond worth Tk500 crore.

Five out of seven perpetual bonds that are listed in Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) currently, were managed by UCB Investment.

In addition, the firm also helped to complete three other banks' perpetual bonds'  funding rounds as the placement agent, since the arranger of those bonds fell short in doing so.

This is not the end, UCB Investment is now mandated to raise Tk6,000 crore funds for its clients through bonds, syndicated term financing, and IPO.