Undersubscribed during IPO, Midland Bank’s shares now run the show

Midland Bank, whose shares were undersubscribed at the time of its initial public offering (IPO), became the highest gainer of stock price at the Dhaka Stock Exchange (DSE) on Sunday. 

Its shares secured the top gainers' position with a 9.32% price hike to reach Tk12.90 at the end of the session.

On the previous day, the bank's shares were in the second position of the top gainers' chart. The bank's shares have been ranked among the DSE top ten gainers for three consecutive working days.

However, on its first trading day on 27 March, the bank's shares traded at Tk9 each – below the  face value of Tk10. Later, its share price closed at Tk10.2 that day due to some active buying. Since then, its share price had been stuck at Tk10.2 till 4 April due to a lack of buyers.

Market insiders said Midland Bank shares were undersubscribed due to the negative sentiment of investors towards the bank's shares.

According to the IPO subscription of Midland Bank that ended on 28 February this year, primary shares worth more than Tk18 crore of the bank remained unsold while its IPO size was Tk70 crore – Tk5 crore to its employees, Tk16.25 crore to the eligible institutional investors, and Tk48.75 crore to the general public. The unsold shares were taken by its five underwriters.

The new-generation bank released its third quarterly financials just before its debut trading date, reporting a 58% drop in profit during the first nine months of 2022.

And such a decline in profit has affected the share price of the bank, market participants think.

Having said that, the bank is in a better condition in several indicators among its peers. Hence investors are showing interest in its shares. They are actively placing buy orders on Midland Bank shares, and no one seems to be willing to sell them right now. 

According to EBL Securities, the non-performing loan ratio of Midland Bank was 3.2% in 2021, which was much lower than the industry average of 7.9% until December 2021. Besides, the bank has been maintaining adequate loan provisions as per the regulatory requirements which indicates the bank's shock absorption capacity for any future contingencies. It has been efficient in its operational cost management as the operating profit margin of the bank is higher than the industry average.