Banks struggling to hit turnover heights

The listed banks have failed for the fourth consecutive year to regain the top position in the turnover board of the country`s both bourses although over five years have already elapsed since the last stock market debacle.

Banks used to dominate the daily turnover board prior to the 2010-11 stock market collapse. The fuel & power sector has emerged as turnover leader since the year 2013 by replacing the banking sector.

Experts have figured out multiple reasons for the declining interests of investors in banks` stock. The reasons include the erosion in banks` profitability, quite a number of large loan scams and substantial rise in non-performing loans (NPLs).

They, however, said there is still scope for investment in the banks` shares as price earnings (P/E) ratios of many banks continue to be reasonable.

The banks started drawing the investors` attention since 2008 after reaching the peak of the turnover chart and their dominating performance continued even after the market debacle until 2012.

The years preceding the time when market became extremely bullish in 2010, the banks` average monthly turnover ranged between Tk 12.27 billion and Tk 20 billion, according to information obtained from the premier bourse Dhaka Stock Exchange (DSE).

In the year 2010, the same shot up to nearly Tk 93 billion.

After the December (2010)-January (2011) market debacle, the banks` monthly average turnover gradually started declining unabatedly and reached Tk 6.67 billion in 2015.

The banks` dividends ranged between 5.0 per cent and 30 per cent during the period while the fuel & power companies were seen declaring dividends ranging from 5.0 per cent to 350 per cent.

Out of the listed 30 banks, share prices of 19 are now below Tk 20. Among those, market prices of three are still below the face value of Tk 10 while prices of three others are close to the face value as of Monday.

During the period of January-October, the banks this year featured with an average monthly turnover of above Tk 7.75 billion only.

When asked, former Chairman of the securities` regulator Dr. AB Mirza Azizul Islam said the banks earlier were under pressure to bring down their exposure to the capital market.

"They failed earlier to get significant returns on investments (RoI) made in their subsidiaries and capital market as well. For this rationality, the banks` profitability was not up to the mark," he observed.

He, however, said many investors also look at other reasons such as NPLs before making investments in the banks` shares.

"The NPLs of many banks have increased day by day. That`s why, the banks are yet to attract investors significantly," he added.

BRAC Bank`s Managing Director Selim RF Hussain said there were many irregularities in the banks` investments in the capital market before the market debacle.

"The banking sector came under discipline after strict monitoring by the central bank and the restructured securities` regulator. That`s why, the sector is now going through strict phase of discipline compared to any other sector," he noted.

He also said the profitability of some banks declined as investment scopes got reduced.

"Some banks are showing bad loans as good ones by rescheduling those," he added.

According to the central bank, the total figure of the banks` NPLs rose to Tk 633.65 billion as on June 30 last from Tk 513.71 billion as on December 2015. The amount was Tk 525.19 billion only a year before.

In 2008, the banks topped the volume chart by featuring with a total turnover of above Tk 147.26 billion capturing 22.05 per cent of the total market turnover. The average monthly turnover featured by banks was above Tk 12.27 billion in the year. Of the remaining sectors, pharmaceuticals captured 15.40 per cent of market turnover followed by fuel & power with 13.04 per cent and financial institutions 10.18 per cent.

In 2009, the banks featured with the second highest turnover of above Tk 240.0 billion which was 16.27 per cent of total market turnover for 12 months. In that year, average monthly turnover of the banking sector was above 20.0 billion while average monthly turnover of fuel & power was above Tk 20.88 billion.

In 2010, the banks featured with the highest turnover total of above Tk 1.11 trillion capturing 27.76 per cent of the market turnover. In that year, the banks` average monthly turnover was above Tk 92.75 billion while the second highest average monthly turnover was above Tk 53.52 billion in the case of non-bank financial institutions (NBFIs) in 2010.

Former Chairman of the Bangladesh Securities and Exchange Commission (BSEC) Dr Islam said the banks` turnover, observed before the market debacle, could not be compared with other periods due to their abnormal upward trend.