Mutual Trust Bank to issue Tk500cr bond

Mutual Trust Bank is going to raise Tk500 crore, issuing a 7-year bond to disburse long-term loans in the private sector, and to invest in treasury bonds.

Bangladesh Securities and Exchange Commission (BSEC) on Wednesday gave approval to the bank to raise funds by issuing bonds.

It is the fifth time that the bank is raising funds this way.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank, told The Business Standard, "We will raise funds with bonds for long-term capital and liquidity support. The bond will be issued at 7.5% interest rate for every six months. We have raised funds like this before."

Capital can be raised by issuing the right shares. But in this case, it becomes difficult to give dividends, he said.

He said bonds are very helpful in disbursing loans by keeping the Capital Adequacy Ratio (CAR) under control.

According to BSEC, Mutual Trust Bank has been authorised to raise funds with subordinated bonds.

Syed Mahbubur Rahman said, "We have short term deposits so it becomes difficult for us to invest for the long term. That's why bonds are important for long term funding."

As per Bangladesh Bank instructions, 50% of the total bond units will be sold from various banks and the rest will be sold to corporate institutions.

The price of a single unit of the bond has been fixed at Tk1 crore. RSA Advisory and MTB Limited have been respectively selected as mandated lead arranger and co-arranger of the bond. UCB Investment Limited will act as the trustee of the bond.

Meanwhile, the BSEC has given conditions for the bond to be listed on the Alternative Trading Board of the stock exchange. Once listed there, an investor can buy or sell the bond.

Financial status

According to Bangladesh Bank data, the total loan disbursement by Mutual Trust Bank at the end of 30 June was Tk24,064 crore. Of this 5.54% were loans in default.

The Capital Adequacy Ratio (CAR) of the bank was in good condition at 13.96% at the end of June.

However, the bank's provision shortfall is Tk213.94 crore against the loans in default. In this regard, the managing director of the bank said that provisions were not kept against several loans due to legal complications, hence the shortfall showing.

The bank's profits fell 27% during the pandemic year. But in 2021, the bank turned around and its profit increased by 206% (Tk297 crore).

The profit growth has continued in the first half of this year. From Janurary-June, the bank's profit increased 56% to Tk133.66 crore. However, this growth is largely due to the appreciation of the dollar.

The bank has paid cash dividends to shareholders only once in the last decade, and the rest of the years it has paid stock dividends only. Hence its shares have traded at a low price in the last two years.

The closing price of the bank's shares on the Dhaka Stock Exchange on Wednesday was Tk17 a share.

Syed Mahbubur Rahman said, "We have provided stock dividends to strengthen the capital base."