BB may approve City Bank's share sale to IFC

Bangladesh Bank considers allowing City Bank to sell its 5 percent equity shares to International Finance Corporation, the private sector arm of the World Bank Group, about eight months after the signing of the deal.

The development came after a meeting between Finance Minister AMA Muhith and BB Governor Fazle Kabir at the former's office last week.

“The finance minister has instructed Bangladesh Bank to consider the issue positively,” said an official of the central bank.

Eunusur Rahman, secretary of the bank and financial institutions division of the finance ministry, also confirmed the matter to The Daily Star, and said: “The issue has been handed over to Bangladesh Bank.”

Earlier in February, the City Bank signed a deal with the IFC to sell 5 percent of its shares at more than Tk 131 crore. The IFC will pay Tk 28.3 for each share, which includes a premium of Tk 18.3. A City Bank share closed at Tk 23.3 on the Dhaka Stock Exchange yesterday.

Accordingly, the City Bank, which is a first generation private lender, applied to the central bank for approval.

But the agreement did not get through after the BB declined to approve the deal. The central bank had suggested that if City Bank needs capital, it should raise it from the local market, not from any foreign organisation.

“If we need to raise our capital, we can do so by issuing fresh shares to local parties,” said a top official of City Bank, quoting a letter from the BB sent to them against their application.

Later, the City Bank pursued the issue with top government officials and the latest meeting was an outcome of the local bank's continuous effort.

Mashrur Arefin, additional managing director and chief communications officer of the City Bank, said they are yet to get an update on the issue.

On whether the IFC is still interested in the deal, Arefin said, “Yes.”

The IFC provides debt, equity and guarantee products in sectors, including financial markets, infrastructure, agribusiness and manufacturing to help enhance employment opportunities, fuel growth and spur innovation.

The IFC's equity investment ranges between 5 percent and 20 percent of a company's shares, according to its website. It said equity investment provides developmental support and long-term growth capital that private enterprises need.