How ICB recovers big losses in final quarter
Turnaround was primarily due to capital gains, dividend income
The Investment Corporation of Bangladesh (ICB), a state-owned entity primarily responsible for stock investments, made a significant comeback, ending the year in the green by recovering its previous losses that occurred in the nine months of 2023-24.
In the first nine months, the ICB faced a loss of Tk267 crore, primarily due to lower capital gains. However, despite this setback, the corporation posted a profit of Tk32.28 crore for the entire FY24.
However, Corporation's consolidated profit for FY24 is 58% lower compared to the previous fiscal year.
This turnaround was primarily due to capital gains and dividend income, largely from multinational companies, and lower provisioning against loans, according to ICB officials.
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As the profit for FY24 was nearly half of what it achieved in the previous fiscal year, it recommended a lower dividend of 2% cash dividends for its shareholders.
Its previous data showed that it had made a profit of Tk77.58 crore in FY23 and it distributed a 2.5% cash and 2.5% stock dividends to its shareholders.
On Sunday, ICB's board of directors meeting approved the annual financials and dividend for FY24.
In the first nine months of FY24, ICB's earnings per share (EPS) was negative at Tk3.08. At the end of 30 June 2024, its EPS stood at Tk0.38, which was Tk0.89 in FY23.
An official, wishing anonymity, told The Business Standard, "In the final quarter during the April to June 2024, ICB posted significant come back riding on capital gains, and dividend income as well as lower provisioning against its project loans."
He added, "Owing to the floor price, the corporation fell into crisis as it was not able to sell shares for the purpose of capital gains. As the floor price was removed, the corporation was able to sell shares. That is why, in the final quarter, it managed to make a good profit that helped it stay green."
ICB floor price woes
ICB, one of the biggest institutional investors in the capital market, has been struggling for years owing to its bad investment choice in the listed companies as well as its junk stocks, and fixed deposits in the weak non-bank financial institutions.
Later, imposition of the floor price to prevent the free fall of indices by the Bangladesh Securities and Exchange Commission (BSEC), it faced another blow as the corporation was not able to sell shares from its holdings.
Floor price is the lowest limit of a stock that cannot go below the limit.
When the Ukraine War started in February 2022, the stock market faced a downturn trend amid huge shares owing to fear of uncertainty for the economy and businesses.
Then, the regulator, on 28 July that year, repeated the same floor price restriction. Previously for the first time in 2020, the BSEC imposed floor price.
Nearly one and half months later in January this year, the stock market regulator withdrew the floor price from the stocks except 35 companies.
State guarantee for Tk3,000cr loan
In the first week of November, the ICB secured a state guarantee for a Tk3,000 crore loan aimed at boosting its financial base and investments in the capital market.
The government support, in the form of a loan guarantee, is intended to revitalise the institution and stimulate market activity.
The Financial Institutions Division of the Ministry of Finance sent a letter to the ICB regarding the state guarantee for the loan from the Bangladesh Bank.
The letter instructs the ICB to submit the necessary documents to complete the paperwork for securing the guarantee and obtaining the loan.
If the funds are deposited to the ICB, with the funds a portion of the term deposits will be repaid, and the remainder will be invested in the capital market. By repaying some of these term deposits, the interest payment burden will be reduced, thereby increasing ICB's financial strength.
According to the annual report for FY23, the ICB had Tk8,877 crore in term deposits from the general public, banks, non-bank financial institutions (NBFIs), and other institutions.
A recent jump in interest rates has pushed the repayment pressure on the institution.
Banks and NBFIs account for Tk5,322 crore of the term deposits, while Tk3,546 crore is from other institutions.
