What's draining stock exchanges' profits?

The Dhaka and Chittagong Stock Exchanges saw a significant decline in income from their core businesses — share transaction fees — in the 2023-24 fiscal year, attributed to persistent market volatility dampened trading activities and revenue generation.

Consequently, both bourses witnessed a decline in their net profits.

The Dhaka Stock Exchange (DSE), the premier bourse, saw its profitability fall to a three-year low in FY24, reporting a profit of Tk61 crore, the lowest since FY21. 

As a result, the exchange reduced its dividend payment to shareholders to 3.3%, down from 4% in FY23. Earnings per share (EPS) also decreased to Tk0.34 in FY24, compared to Tk0.44 the previous year.

DSE

During the pandemic, when the capital market experienced significant erosion due to widespread sell-offs, the DSE managed to post a profit of Tk27 crore.

In the following year, stocks bounced back as some major investors became active, leading to a significant spike in trade volumes.

It has posted 318% growth in profit for FY21 as its average daily turnover jumped to Tk1031 crore from Tk384 crore.

In FY22, its profit growth continued to Tk124 crore riding on the healthy turnover. In that year, its daily average turnover jumped to Tk1,327 crore.

In FY24, the total turnover at the DSE was Tk1,49,864 crore, with an average turnover of Tk621 crore.

In FY23, turnover stood at Tk1,91,087 crore, with an average turnover of Tk792 crore.

As turnover declined throughout FY24, the DSE's income from transaction fees, its core business, fell by over 20% to Tk74 crore.

The DSE earns 0.025% of the traded value of stocks as share transaction fees, recoverable from both the buyer and seller.

For any single block trade, floor crossing, and delivery versus payment (DVP) transactions with a traded value of Tk50 lakh or more, the transaction fee is 0.0125% of the traded value. The transaction fee for bonds is Tk50 per trade.

Meanwhile, its interest income from Fixed Deposit Receipts (FDRs) in several banks increased to Tk77 crore in FY24, up from Tk68 crore in the previous year.

Sattique Ahmed Shah, chief financial officer (CFO) and acting managing director of DSE, told TBS, "Market volatility, the national election, held in January 2024, and political unrest since July kept the capital market underperforming throughout the year. These factors significantly reduced trading volumes, which, in turn, led to a decline in the DSE's primary income from share transactions."

"Secondly, foreign currency fluctuations increased expenses for foreign payments. The DSE had to pay in dollars to NASDAQ for its services, raising costs further," he said.

Sattique also noted that the establishment of a new data centre contributed to increased expenses. However, higher interest rates have boosted earnings from FDRs.

CSE

The Chittagong Stock Exchange (CSE) reported an 11% fall in its revenue from operations to Tk31.63 crore and an 8% decline in net profit to Tk31.71 crore in FY24.

It reported a loss from its operations of Tk10.50 crore, compared to a profit from operations of Tk5.38 crore in FY23.

Despite the decline in net profit, the CSE proposed a 5% cash dividend for its shareholders in FY24, up from 4% in the previous fiscal year.

Share transaction income at the CSE slightly fell to Tk7.50 crore while listing income from listed companies increased to Tk22.34 crore in FY24, compared to Tk7.52 crore and Tk21.62 crore, respectively, in the previous fiscal years.

Its finance income — from FDRs, treasury bills, and zero-coupon bonds — rose by 31% to Tk47 crore in FY24. The CSE has Tk168 crore invested in FDRs, Tk222.77 crore in treasury bills, and Tk28.61 crore in zero-coupon bonds.

According to its annual report for FY24, the total number of listed securities on CSE stood at 623 at the end of June 2024.

From July 2023 to June 2024, a total of 1,891.72 million shares were traded, compared to 1,642.44 million shares from July 2022 to June 2023, representing a 15.18% increase from the previous year.

In FY24, the total turnover value of traded shares was Tk74.78 billion, which was 23.28% higher than the preceding year. The market capitalisation of the CSE stood at Tk6,915.76 billion at the end of June 2024, the report reads.