Govt to get more shares in Rupali Bank against equity

Infographic: TBS

Rupali Bank, the sole publicly-listed state-owned commercial bank, has received approval from the finance ministry to issue ordinary shares, aiming to fortify its share money deposits.

As per finance ministry officials, the issuance of ordinary shares priced at Tk15 each, comprising a Tk5 premium and Tk10 face value, has been approved.

The shares issuance is subject to approval of the Bangladesh Securities and Exchange Commission (BSEC).

This move is poised to substantially boost the bank's existing paid-up capital, consequently increasing the government's stake in the institution while marginally reducing public shareholding percentages.

With the introduction of these new ordinary shares, Rupali Bank's paid-up capital is set to surpass its current authorised capital of Tk700 crore.

In response, the finance ministry has also granted approval for an increase in the bank's authorised capital to Tk2,500 crore.

Over time, Rupali Bank has received financial support from the government, deposited as share money in its account.

As of the latest financial reports up to September 2023, its share money deposits amounted to Tk679.99 crore.

In February 2020, the Financial Reporting Council issued a circular mandating the conversion of share money deposits into general shares within six months.

Despite regulatory directives, the bank has yet to convert the Tk679.99 crore share money deposit into share capital, as indicated by its independent auditor's opinion for 2022.

Bank officials say that adherence to the central bank and FRC guidelines prompted Rupali Bank to apply to the ministry for permission to convert shares against share money to the government.

Subsequently, the ministry has now provided consent for the issuance of shares, a senior Rupali Bank official said.

A director in the bank seeking anonymity told The Business Standard, "The board approved share issuance in favour of the government, and it was sent to the ministry for final approval. The bank took the fund for running its operation from the government and the amount must be converted into shares."

Md Harunur Rashid, chief financial officer (CFO) of Rupali Bank, told the Business Standard, "We obtained approval of the government, now we will complete the shares issuance accordingly."

The share issuance

The bank took some Tk679.99 crore fund as share money deposits from the government for its smooth operation, although it is now facing capital shortage.

Of the funds, Tk453.453.33 crore will be added to its paid-up capital divided by Tk10 each, and the rest Tk226.66 crore as premium.

In total, after issuance of new shares, the paid-up capital will be increased to Tk918.02 crore.

Now, its paid-up capital is Tk464.70 crore, he said.

According to its annual report for 2022, the total number of shares of the bank is 46.46 crore, of which, the government holds 90.19% or 41.91 crore shares while general public and institutional investors hold 9.81% or 4.56 crore shares.

After issuance of new shares, the number of shares held by the general shareholders including institutional investors will remain the same but it will decline in terms of percentage, said Rashid.

Augmentation of authorised capital

With the application seeking approval of ordinary share issuance, the bank also applied to the ministry for increasing the authorised capital.

If the new shares are issued for the government, the existing paid-up capital will surpass the authorised capital.

Now, its authorised capital is Tk700 crore, and from the new shares issuance, it will go up around Tk1,000 crore.

Now, the ministry allowed the bank to increase it to Tk2,500 crore.

Regarding the increasing authorised capital, the CFO said, "We took the permission, if in future, we need to increase paid-up capital to raise capital through the bonus or right offer, and then we will be able to do it easily."

In December last year, the securities regulator had allowed Rupali Bank to raise Tk1,200 crore through issuing a bond to reduce its capital shortfall.

Based on this year's September data, the bank is required to maintain Tk2,354 crore as capital, but it maintained only Tk233 crore. So, there was a shortfall of Tk2,121 crore capital.

According to the information of the BSEC, Rupali Bank's bond will be an unsecured, non-convertible, and fully redeemable floating rate subordinated one.

Its coupon rate will be the reference rate plus a 2% coupon margin. The unit price of the bond will be Tk1 crore. The bank will use this fund to strengthen the Tier-2 capital base under Basel-III requirement.

As of December last year, its non-performing loans stood at Tk7,847 crore — 17.81% of the bank's total loan disbursed, according to central bank data. The provision deficit against the classified loan is Tk2,273 crore, it shows.

According to the bank's latest annual report, it made a profit of Tk28 crore in 2022 and decided not to pay any dividends to its shareholders.

In the January-September period of 2023, its net interest income stood at negative Tk154.55 crore, which was also negative at Tk239 crore in the same period of the previous year.

Its net profit stood at Tk43.12 crore at the end of the first nine months of 2023, with earnings per share standing at Tk0.93 and net asset value per share at Tk36.93.

Rupali Bank shares closed at Tk31.70 apiece on the DSE on Thursday, marking a 3.59% rise from the previous trading session.

As of February 2024, the government held 90.19%, institutions 3.13%, and public investors 6.68% shares in the bank.