Midland Bank Ltd, a new generation private sector commercial bank, recently applied to the Bangladesh Securities and Exchange Commission for raising Tk70 crore from the stock market through an initial public offering (IPO).
The bank will offer seven crore ordinary shares at a face value of Tk10 each.
The size of the planned IPO is significantly smaller compared to its peer new generation banks which are collecting up to more than five times money from the capital market.
"Factually we have been operating with more than adequate capital and the sought amount is mainly to fulfil the regulatory requirements only," said Md Ahsan-uz Zaman, the managing director and chief executive officer (CEO) of Midland Bank.
"The more equity you collect from shareholders, the more dividends you need to pay and that pushes banks to take more risks," he said, adding that when in need the bank might go for more equity in future.
Of the Tk70 crore IPO proceeds, the bank will invest over Tk61 crore in Treasury bonds and bills, Tk5 crore in the listed 'A' category securities, and the remaining Tk3.89 crore to meet the IPO expenses.
The bank, which was incorporated in 2013, steadily raised its balance sheet over the years and has been maintaining a profitable bottom line at least since 2017, according to its IPO prospectus.
However, it filed for IPO when its net profit and earnings per share (EPS) were the lowest in five years.
In 2021, its EPS dropped to Tk0.9, while net asset value per share stood at Tk13.
"Because our borrowers went through a challenging time, non-performing loans increased in 2021 and we have made adequate provisions to increase our shock absorption capability," the Midland Bank CEO told The Business Standard in a telephone interview.
"We neither went for any deferral facility in provisioning nor have had any capital shortfall," he added.
Midland Bank emerged as a full-fledged commercial bank with a well-diversified portfolio, a strong financial base with shock absorption capability, and operational efficiency.
"In terms of cost against the income, our bank is at the bottom of the industry table, thanks to our early moves in technology adoption for efficient operations," said Ahsan-uz Zaman who has been leading the bank since 2014, following his long services to many reputed banks in Bangladesh and the USA.
Midland Bank's paid-up capital is nearly Tk570 crore, which is set to elevate to nearly Tk640 crore after the IPO.
LankaBangla Investments is the issue manager of Midland Bank IPO, while other merchant banks - ICB Capital Management, Sonali Investment, Rupali Investment, and Prime Bank Investment - joined as the underwriters to the IPO.
The issue manager provides all the professional services to a company to go public, while the underwriter guarantees to buy out all the unsold securities if any.
According to the Credit Rating Agency of Bangladesh, Midland Bank's long term credit rating is A1, which is ST-2 for the short term. The credit rating reflects the creditworthiness of entities.
The bank now operates with 35 branches, 16 sub-branches, and 100 agent banking centres, and its non-urban outlets outnumber the ones in cities.