The curious case of ONE Bank’s soaring shares

It was ONE Bank's day all along. On Tuesday's falling market, the bank alone grabbed more than half the day's total turnover of banks amounting to Tk376 crore at Dhaka Stock Exchange (DSE).

The high demand for ONE Bank share went up after its price had soared to Tk19 from less than Tk13 only 10 working days ago.

Rational investors are now very curious about how the bank's shares gained 54% in November, while all other banking stocks were struggling to survive the market selloff.

ONE Bank appears to be an even more curious case owing to its recent fundamental backgrounds of having been penalised by the Bangladesh Bank for cooking the books and paying cash dividends to owners, defying the central bank rules. Later, the bank posted a drop in quarterly profits as the central bank compelled it to cover the provision shortfall.

The bank's non-performing loans ratio also soared to over 9% to make it one of the highest among its peer banks, according to the central bank report at the end of September.

The bank was trying to inflate its earnings over 2020 and the first half of 2021 by not provisioning enough against the non-performing loans.

But as the central bank compelled it to correct the statements, it covered the provision shortfall in the July-September quarter, almost halving the bank's solo quarterly earnings year-on-year and dragging down its consolidated quarterly earnings to lower than in the July-September period of 2020.

The insane demand for its stocks was still observed in the stock market's bad month of November.

A number of stock market professionals told The Business Standard that they found no fundamental shift within the bank that might have driven this sudden and sharp rise in its stock prices.

Talking to The Business Standard, even ONE Bank officials could not mention any fundamental reason behind its soaring stock prices.

ONE Bank Company Secretary John Sarkar did not respond to phone calls and SMS for a comment, and its Managing Director M Fakhrul Alam redirected queries to the managing director in-charge as he was on leave.

The bank's Additional Managing Director Md Monzur Mofiz, who was in charge of managing director on Sunday, also did not respond to repeated phone calls and SMS.

Craze for ONE Bank shares

ONE Bank craze in the bourses was mainly because Abul Khayer Hero, a "cult" figure among investors, was buying the stocks aggressively, like he had done in a number of stocks since the reopening of the stock market in mid-2020, market insiders say.

Several stockbrokers said Abul Khayer and his allies buy any kind of stocks, accumulate shares from the market and move prices up, and later herd investors keep chasing those.

More alarmingly, even some institutional investors now prefer joining Hero for quick and easy bucks, they added.

The "Hero-centric craze" is destabilising the market as people dump their other stockholding to chase the trendy stocks Hero buys, such as ONE Bank nowadays, and Delta Life Insurance, Genex Infosys Ltd, Fortune Shoes, NRB Commercial Bank, and Sonali Paper earlier, stockbrokers noted.

Stocks that Hero bought skyrocketed by 150%-200% this year.

When contacted, Abul Khayer Hero admitted that he aggressively bought ONE Bank stocks but without violating any securities rules.

"Following the problem with the central bank, ONE Bank stock was trading much lower than its net asset value per share, its price-to-earnings ratio was at 5, and most importantly in the recent tight money market liquidity situation, ONE Bank proved its liquidity strength," he said to justify his bulk buy orders at higher prices.

"Central bank fines are not recurrent every year and it should not trigger the collapse of a bank," he added.

"After my post graduate diploma in capital markets, I learned to look for opportunities in bad times of a company," he continued.

About the syndicated attempts from a number of investment accounts to fuel the targeted stock's prices, Hero said, "I trade up to my limit and I have the freedom until I violate any rule.

"It is not my fault if anyone mimics my trading in the market. Many people are trying to intrude into what I buy and sell in the market."