NBFI stocks slide on firm liquidation signals; market extends losses
According to market data, share prices of these distressed institutions declined by as much as 27% during the week.
Shares of listed non-bank financial institutions (NBFIs) facing liquidation fell sharply over the past week, as investors reacted to clear signals from the central bank that the closure process will proceed with government funding.
According to market data, share prices of these distressed institutions declined by as much as 27% during the week. The fall follows an earlier rally when several of these stocks had surged three to four times after the change in government, raising concerns about speculative trading in fundamentally weak companies.
The latest decline was triggered by remarks from Bangladesh Bank Governor Md Mostaqur Rahman, who confirmed that the finance ministry would provide the necessary funds to complete the liquidation process. His statement reinforced expectations that authorities are moving decisively to wind down troubled institutions.
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The Bangladesh Bank had initially decided in December last year to shut down several financially weak NBFIs. On 27 January, the central bank's board approved the liquidation of six institutions, while allowing three others a three to six-month window to attempt recovery.
The six institutions set for liquidation are Fareast Finance, Premier Leasing, First Finance, Aviva Finance, Peoples Leasing, and International Leasing. The three given time for turnaround are Bangladesh Industrial Finance Company, GSP Finance, and Prime Finance & Investment.
Market analysts say volatility in these stocks began even before the official decision, as investors anticipated downside risks. Following the governor's latest remarks, selling pressure intensified, pushing prices down further. The recent correction suggests that inflated prices are now adjusting closer to underlying fundamentals.
A senior central bank official recently said the Finance Division plans to release funds in two phases – Tk2,600 crore initially and Tk3,000 crore by June. Once the first tranche is disbursed, administrators will be appointed to manage the affected institutions, with a priority on repaying individual depositors. The institutions will then proceed with formal liquidation through the courts.
Out of 35 NBFIs in the country, 20 have been identified as distressed. These institutions collectively hold loans worth Tk25,808 crore, of which Tk21,462 crore – about 83.16% – are non-performing. Their collateral value stands at Tk6,899 crore.
In contrast, the remaining 15 relatively healthy NBFIs reported a non-performing loan ratio of 7.31%, earned a combined profit of Tk1,465 crore last year, and maintain a capital surplus of Tk6,189 crore.
Deposits in the 20 troubled institutions amount to Tk22,127 crore, including around Tk4,971 crore in net individual deposits. Ensuring repayment of these depositors is expected to be a key priority in the liquidation and restructuring process.
Market overview
The broader market also ended lower today (2 April), reflecting weak investor sentiment. The benchmark DSEX index of the Dhaka Stock Exchange fell 53 points, or 1%, to close at 5,220. The blue-chip DS30 index dropped 21 points to 1,980, while the Shariah-based DSES index edged down by 6 points to 1,060.
Among the day's top gainers, Janata Insurance rose 10%, followed by Daffodil Computers (7.78%) and Sonargaon Textiles (5.26%).
Trading activity remained concentrated in a few high-volume stocks, with Khan Brothers PP Woven Bag, Summit Alliance Port, and ACME Pesticides emerging as the most actively traded shares.
All major large-cap sectors ended in negative territory. The banking sector posted the highest loss, declining by 1.49%, followed by the Engineering 1.07%, the NBFIs 0.92%, the Telecommunication 0.81%, the Fuel & Power 0.70%, the Food & Allied 0.39%, and the Pharmaceutical 0.36%. Block trades accounted for 2.4% of the total market turnover.
The Chittagong Stock Exchange also closed lower, with the CASPI index falling 78 points to 14,701 and the CSCX index declining 39 points to 8,983, indicating a broadly bearish trend across both bourses.
