Most of the merchant banks made profit last year after remaining in losing state since the market crash in 2010-11 despite the sluggish market trend, a BSEC report showed.
Of the 38 merchant banks operating their own portfolio investment in the capital market, 27 made Tk 211.72-crore profits in 2013 and seven others registered Tk 39.72-crore losses, while four entities’ profit-loss remained in parity, a BSEC report showed.
The key index of the Dhaka Stock Exchange, DSEX, remained almost at the same position despite enlistment of 17 new companies and mutual fund at the bourse.
As per the BSEC report, Southeast Bank Capital Services Limited made the highest profit among all merchant banks with Tk 27.19-crore unrealised gain in their own portfolio investments.
‘After incurring losses in 2011-2012 we have managed to make some profits in the last financial year on our own portfolio investors. But, we are yet to recover the losses we incurred in the previous two years,’ Southeast Bank Capital Management assistant vice-president Alomgir Hossain told New Age on Friday.
‘On the other hand, as the market situation remained unchanged and our clients are yet to recover from losses, recovery of margin loans became the major concern of our organisation as we are yet to realise significant amount of margin loans from our clients.’
Another official of a merchant bank said, ‘Low daily turnover and recovery of margin loans from our clients remained the main concern of our organisation as the number is much higher then we managed to make profit in the previous year.’
He also said that due to some unfriendly policy adopted by the merchant banks they were facing obstacle in increasing their profits.
ICB Capital Management stands second among the merchant banks with Tk 19.74 crore profits while Janata Capital and Investment with Tk 19.08 crore, Uttara Finance and Investments with Tk 18.84 crore, Prime Finance Capital Management with Tk 17.91 crore, BRAC EPL Investment with Tk 17.43 crore, Prime Bank Investments with Tk 14.52 crore, EC Securities with Tk 13.45 crore, SBL Capital Management with Tk 12.48 crore, Agrani Equity and Investment with 10.92 crore, GSP Finance Company (Bangladesh) with Tk 9.03 crore and Jamuna Bank Capital Management with Tk 9.01 crore followed the chart.
On the other hand, IDLC Investments registered the highest Tk 21.32-crore losses in 2013. The other merchant banks that incurred significant losses in their own portfolio investments were Sonali Investment (Tk 13.88 crore), PLFS Investments (Tk 2.92 crore), AFC Capital (Tk 0.62 crore), Business and Management (Tk 0.40 crore), Alliance Financial Services (Tk 0.36 crore) and NBL Capital (Tk 0.22 crore).
Union Capital, Trust Bank Investment, RACE Portfolio and Issue Management Limited and BLI Capital’s profit-loss remained in parity.
According to other BSEC data, the total outstanding margin loan of 38 merchant banks to its clients stands at around Tk 7740.37 crore as of April this year.
BB fails to check capital flight
The Bangladesh Bank has seemingly failed to check capital flight from the country although it has a full-fledged unit to monitor and detect such illegal transactions widely known as ‘hundi’.
The BB governor, Atiur Rahman, in a statement to the parliamentary standing committee on ministry of finance recently expressed his helplessness about the matter saying that in most of the cases the smuggled-out money remained untraced.
He admitted that the central bank had failed to check the thriving hundi business, an illegal transaction system that operates bypassing the banking channel.
Atiur’s statement stunned many, including the BB insiders, who said that a wing under the central bank had been working for long to detect such illegal transactions and check those.
The financial intelligence unit under the BB is said to have been strengthened following an amendment to the money laundering law. The BB has struck memorandums of understanding with central banks of other countries to exchange information on shady transactions.
In the same statement seen by New Age, Atiur, however, hoped that the situation would improve after the completion of automation in the National Board of Revenue.
‘Transparency and accountability would be established after the automation,’ said the BB governor.
The Paris-based Financial Action Task Force (FATF), de-listed Bangladesh from its ‘Grey List’ in February for the country’s efforts in combating money laundering.
The organisation had kept the country in the negative list since 2008.
‘We are examining the statement of the BB on money laundering and illegal transactions,’ standing committee chairman M Abdur Razzak told New Age last week.
He said it was important to check hundi business to halt capital flight for the sake of the economy. He said they needed to crosscheck the documents on the country’s imports and exports.
Under-invoicing and over-invoicing are widely used by dishonest businessmen as a means to smuggle out money, said BB officials.
NBR was primarily responsible to detect such practices, but BB cannot overlook the matter as import payments and export receipts are done through the banking channel, they said.
They alleged that many dishonest businessmen gave false statements on their import consignments to send money abroad. Besides, many exporters buy time to bring the receipts for the same purpose, they said.
Finance minister AMA Muhith in a number of pre-budget discussions was urged by experts and the treasury bench members to bolster efforts to check capital flight.
Muhith observed that there had been capital flight from the country to Dubai of the United Arab Emirates and Malaysia in the absence of private sector investments in the country.
Bank borrowing falls far below target
The government's borrowing from the banking system stood at only 21 percent of its target in the first 11 months of the outgoing fiscal year due to slow implementation of development programmes.
Between July 1 last year and June 9 this year, around Tk 6,359 crore was borrowed from banks against the revised target of Tk 29,982 crore. The amount borrowed during the period fell 57 percent year-on-year.
Initially the government had a borrowing target of Tk 25,993 crore, which was raised by 15 percent in the revised budget.
During the period, ministries spent only Tk 39,982 crore under the government's annual development programme, the amount being 67 percent of the revised allocation, according to Implementation Monitoring and Evaluation Division.
The implementation was 69 percent in the same period a year ago.
The pace of the development works usually goes up after September, but most payments are made in June, which pushes up expenditure, along with bank borrowing, in the last month of a fiscal year, an official of the planning ministry said.
The ADP's revised allocation was Tk 60,000 crore in the outgoing fiscal year.
Though only Tk 3,934 crore was spent each month on an average during July-May, Tk 20,000 crore has to be spent in the month of June to meet the revised target, which officials said is not doable. As a result, the government may not need to borrow the entire amount of its target.
Also, borrowing through savings instruments has reduced the government's dependence on the banking system, a finance ministry official said.
The government's net borrowing through savings instruments was Tk 8,734 crore in the first 10 months of the outgoing fiscal year, according to central bank statistics.
Borrowing through savings instruments has already exceeded the target at Tk 8,000 crore and is likely to go up further. Though it will reduce the amount of bank borrowing, the interest cost will mark a rise.
However, the central bank made a significant policy shift in bank borrowing this fiscal year, which has played an effective role in containing inflation.
The government borrowed Tk 21,201 crore from commercial banks during July 1 last year till June 9 this year.
However, it repaid Tk 14,841 crore to the central bank. As a result, the net borrowing was Tk 6,359 crore.
The commercial banks' excess liquidity is huge now and stood at Tk 138,020 crore at the end of March.
This is why the government's borrowing was more from the commercial banks. If the borrowing from the central bank is reduced, non-food inflation goes down, officials said.
Most merchant banks shun losses in 2013
HM Murtuza
First BEF conference begins in Dhaka tomorrow
We will discuss the futurea of Bangladesh at the first BEF conference
The first conference of Bangladesh Economists’ Forum (BEF) begins in Dhaka tomorrow, aiming to identify major challenges and potentials of Bangladesh’s long-term economic development.
The two-day conference will be held at Radisson Hotel. The theme of the conference is set as “Vision 2013: A Framework for Economic Policy Making and Strategy Formulation in Pluralistic Democracy.”
The conference will discuss a series of issues relating to growth strategies, macro and financial policies, fiscal policy and capital markets, trade, aid and infrastructure, poverty reduction strategies and policies.
“We will discuss the future of Bangladesh at the first BEF conference,” BB Governor Atiur Rahman told a pre-conference press briefing at the central bank headquarters in the capital yesterday.
Distinguished scholars, academics, civil society representatives, political and policy leaders, and private sector representative as well as the members of the diplomatic community are expected to participate at the conference.
Finance Minister Abul Maal Abdul Muhith is scheduled to open the conference where some other ministers will chair different sessions, according to the organisers.
Distinguished and keynote lectures will be delivered by Professor Michael Lipton of the United Kingdom, an old friend of Bangladesh; Professor Rehman Sobhan, Chairman, Center for Policy Dialogue; Fazle Hasan Abed, Chairman, BRAC; and Dr. Azizur Rahman Khan, Professor, University of California at Riverside.
Bangladesh Institute of Development Studies (BIDS), Policy Research Institute (PRI) and Bangladesh Bank (BB) are co-sponsoring the conference.
The governor said different issues including infrastructure facilities will be discussed at the conference, aiming to achieve optimum level of the economic growth that helps the country turn into an upper middle income and developed country by 2030 and 2050 respectively.
“It’s a forum, not organisation,” Mohiuddin Alamgir, former president of the Bangladesh Economic Association, said while replying to a question relating to formation of the new forum.
The senior economist said the prosperity of Bangladesh is much better than many other countries.
Sadiq Ahmed, vice-chairman of PRI, said Bangladesh undoubtedly made progress in all indicators. But the country could improve lot more than it has achieved so far.
He said the country needs a long-term policy for achieving desired development.
WB's $600m loan for rural power supply
The World Bank yesterday lent Bangladesh $600 million to help the country construct new power lines and substations, and upgrade existing lines, in an effort to ensure reliable power for 25 million rural consumers.
Christine E Kimes, acting head of World Bank Bangladesh, and Mohammad Mejbahuddin, secretary of Economic Relations Division, signed a loan agreement at the latter's office in Dhaka yesterday.
Credit for the Rural Electricity Transmission and Distribution Project will come from the International Development Association, the lender's soft loan arm.
The 40-year credit facility will come at an interest rate of 0.75 percent with a 10-year grace period.
The project will aim to reduce system losses and enhance the capacity of the rural electricity network in the Dhaka, Chittagong and Sylhet divisions.
“Only 42 percent of the rural population currently has access to electricity in Bangladesh, leaving about 13 million rural households without electricity,” Kimes said in a statement.
The project will reduce technical losses in the rural grid electricity system, improving the quality of supply for 25 million people in rural Bangladesh.
The WB also said it would contribute to increasing the capacity of the transmission and rural distribution system to supply and distribute additional power to rural consumers as additional generation becomes available.
Mejbahuddin welcomed the project, saying it would strengthen the rural network and improve efficiency of the power system.
The rural electrification programme of Bangladesh is recognised globally as one of the most successful programmes in the world. However, over the years, the transmission and distribution network has become overstretched.
This project will provide support to upgrade the network as well as strengthen the institutional capacity of rural electricity service delivery. State-run Rural Electrification Board and the Power Grid Company of Bangladesh will implement the project.