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Pubali Bank wants to raise Tk 15 billion through subordinated bonds to strengthen capital base under Basel-III compliance as per the Bangladesh Bank's December 2014 guidelines on risk-based capital adequacy.
The bond issuance is subject to the approval of the regulatory authorities concerned- Bangladesh Bank and Bangladesh Securities and Exchange Commission, according to a stock exchange filing on Monday.
Banks are required to maintain a certain level of capital to ensure their financial stability and protect depositors. The bond proceeds will be treated as capital and it will help the bank grow its investment and loan portfolio.
Basel III is an international regulatory accord that introduced a set of reforms designed to mitigate risk within the international banking sector by requiring banks to maintain proper leverage ratios and keep certain levels of reserve capital in hand.
As per the Bangladesh Bank's Basel III guidelines, each bank must hold capital equivalent to 10 percent of its risk-weighted assets or Tk 5 billion, whichever is higher. Failure to meet this requirement is considered a capital shortfall.
Subordinated bond is an unsecured loan or bond that ranks below other, more senior loans or securities with respect to claims on assets or earnings. Subordinated bonds are thus also known as junior securities.
Financial performance
Pubali Bank secured more than a 12 per cent year-on-year growth in profit to Tk 7.80 billion in 2024, highest in its history, driven by strong returns from Treasury bonds and increased lending rates.
Based on the profit, the board of directors recommended a 25 per cent dividend (12.5 per cent cash and 12.5 per cent stock shares) for 2024.
Stock dividend has been recommended to strengthen the capital base of the bank in order to support projected business growth and to improve certain regulatory ratios, the bank said.
Pubali Bank also recorded a strong performance in its consolidated net operating cash flow per share, which jumped to Tk 61.01 for the year from Tk 3.09 (restated) the year before.
The private lender attributed this cash flow improvement to a substantial increase in interest income, fees and commission, investment income, and robust deposit collection from customers.
The bank's deposit grew 24 per cent while loans and advances also surged 14 per cent for the year.
At present, Pubali Bank is one of the largest private commercial banks, having 508 branches, 224 sub-branches, 26 Islamic banking windows, according to its website.
Its stock closed at Tk 28.3 per share on Monday, remaining unchanged from the previous day.
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