Once top-notch, Islami Bank now half the value of Brac

Brac Bank has become the country's largest private lender in market value, removing restructured Islami Bank Bangladesh Ltd (IBBL) from the top. 

On August 30, the last working day, the market value of Brac Bank was nearly Tk 8,312 crore, almost double of longtime leader IBBL's Tk 4,234 crore.

It's a sharp contrast from the last working day of 2015, when the market value of IBBL was nearly 30 percent higher than that of Brac Bank, data from the Dhaka Stock Exchange showed.

Exactly a year later, although IBBL was still at the top, the gap had fallen to only 5 percent.

Things started to reverse dramatically in 2017 when the Shariah-based lender went through massive changes, including a major shift in share holdings and in the board.

“Perhaps, the changes in the share holdings shook up investors and they have offloaded shares,” said Khondkar Ibrahim Khaled, a former deputy governor of the central bank.

But that's not the sole reason, according to the former banker, who had chaired the boards of a number of state banks.

“Share price often depends on a group of people who play with stocks as per their wish. Their activities are not transparent too,” said Khaled, who headed a probe committee on the 2010's share market debacle.

But Selim RF Hussain, managing director of Brac Bank, said the market can read a company clearly.

“Investors understand that Brac Bank is a transparent and compliant bank. Our board of directors is of top quality,” he said.

In terms of profits, Brac Bank was one of the 10 banks in 2015 and became the fourth-largest in the following year and the number one in 2017.  

Foreign entities now own 45 percent of the bank's shares, which according to Hussain, is a reflection of confidence in Brac Bank.

When Brac Bank surged to become the top private bank, IBBL went down as its share price has been sliding for the last two years, especially after a Chittagong-based business group took over its control.

Share of IBBL was traded at TK 47.80 and Brac Bank Tk 67.60 on January 26, 2017. But at the end of the year, IBBL's share went down to Tk 36.60 while Brac Bank's share shot up to Tk 108.40.

Since the last quarter of 2015, several little-known local companies started buying the bulk of the local shares of IBBL, leading to the reshuffle at its top level. Changes were made to the posts of the bank's chairman, managing director, heads of various committees and chief of the Islami Bank Foundation in line with a decision at the bank's board meeting in the first week of 2017. Former bureaucrat Arastoo Khan had replaced Mustafa Anwar as the chairman of the bank. But Khan also resigned on April 17 this year.

Some companies and individuals in Saudi Arabia, Kuwait and the United Arab Emirates were the major sponsors of IBBL and owned nearly 70 percent of the shares at the time of its establishment in 1983. They now hold about 40 percent shares and the rest are in the hands of local institutions and individuals.