Most banks’ share prices below NAV

September 30, 2013

Share prices of the majority of listed banks have declined to below their net asset value per share because of the banks’ poor earnings last year and prospect of low return on investment in the scrips, experts said. They said banks were performing poorly as the financial entities reported low earnings in their half-yearly statements also. Out of the 30 banks listed with the stock exchanges, shares of only five banks are currently trading above their NAV.
Experts said banks’ shares were trading below their NAV as investors were not interested much to invest in the shares because of the banks’ low earnings in the previous disclosed financial reports and the recent scams in the banking sector.
They said that a decreased participation of the institutional investors in the market and the short-term investment approach of the retail investors were the other reasons for the fall in the share prices of banks.
Shares of five banks — BRAC Bank, Dutch-Bangla Bank, Islami Bank, Pubali Bank and ICB Islami Bank — are trading above their NAV because of their satisfactory earnings in the last year.
Faruk Ahmed Siddiqi, former chairman of the Bangladesh Securities and Exchange Commission, told New Age that most banks showed poor earnings in the half-yearly reports which prompted investors to switch to other stocks.
He said, ‘Investors were not satisfied with the performance of the banks and they feared that they would not get quick attractive capital gains or dividends from the investment in the shares.’
‘Our investors always want quick return, but that would not be possible now from investment in banks’ shares,’ he said.
The recent scams in both state-run and private banks also made investors worry about the prospect of the banking sector, he added.
AB Bank Limited reported EPS of Tk 3.32 last year. But the bank earned Tk 0.79 per share in the first half of this year against Tk 1.53 in the same period of the previous year.
The NAV of the bank was Tk 36.67 as per the audited report of the last year.
The share price of the bank closed at Tk 23.10 on Sunday.
Jamuna Bank Limited reported NAV of Tk 18.56 in last year. But its share price closed at Tk 13.3 on Sunday.
The bank earned Tk 0.21 per share in the first half of the year against Tk 1.60 in the same period of the previous year.
Uttara Bank showed EPS of Tk 3.76 in last year. The bank earned Tk 1.44 in the first half of this year against Tk 1.95 in the same period of
the previous year. The NAV of the bank was Tk 29.67 as per the audited report of last year. The share price the bank closed at Tk 25.2 on Sunday.
‘Banks are passing a tough time as their non-term loans and provisioning against defaulted loans are increasing while overall business of the banks is not good. The factors have made the earnings of the banks poor. Investors are switching to other scrips from the banks’ shares as the recent earning reports of banks have dejected them.’ Mahmood Osman Imam, professor at finance department of Dhaka University, told New Age.
‘I think it’s a good time to invest in the banks’ shares to get good return within one or two years. But, good return would come if investors purchase banks’ shares considering their financial statements properly,’ he added.
Experts said a long-term investment in the banks’ shares might bring good result to the investors as the situation of banks would improve with the improvement of the overall business situation of the country.

-With New Age input

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