Trust Bank Ltd is due to issue a Tk400 crore bond and its proceeds would be regarded as Additional Tier 1 capital of the issuer. Issuing a redeemable non-convertible unsecured subordinated bond is expected to help the commercial bank fulfil its Basel III requirements. Previously, on June 28 this year, the bank decided to issue a perpetual bond of Tk400 crore. Mizanur Rahman, company secretary of the bank, told The Business Standard, “We are issuing this bond to strengthen the bank’s capital base, subject to approval of the regulatory authorities.”
A new product to fulfil Basel III requirements
Currently, the local bond market is dominated by redeemable subordinated bonds mainly issued by commercial banks; which help them construct their mandatory secondary capital base through the bond proceeds within a specific tenure. The Bangladesh Bank is implementing Basel III in the local banking industry so that banks are adequately capitalised to avert a systematic risk. Basel III is an international regulatory accord that introduced a set of reforms designed to mitigate risk within the international banking sector by requiring banks to maintain proper leverage ratios and keep certain levels of reserve capital in hand. The capital adequacy has two parts. The first part is equity that is perpetual in nature and regarded as Tier 1 capital base. The second tier is capital formed through debt securities, which is repayable at maturity but helps strengthen a bank in the interim. In the first half of this year, Trust Bank posted consolidated earnings per share (EPS) of Tk2.10, which was 19% higher than the previous year at the same time. The bank has maintained its profitability despite the Covid-19 pandemic due to the central bank’s policy support, said the company secretary. The bank was listed on the Dhaka Stock Exchange (DSE) in 2007. Its paid-up capital is Tk643 crore. It also paid a 5% cash and 5% stock dividend to its shareholders in the 2019 financial year. Its shares closed at Tk28.80 at the DSE on Sunday. Sponsors and directors hold 60% of the bank’s shares, while institutional investors have 17.49%, foreign investors 0.73%, and general investors 21.78%.
