ICB urges clients to wait for their money until stock market gets better

The spillover impact of the declining capital market is taking a toll on the Investment Corporation of Bangladesh (ICB), a state-owned entity with a significant focus on capital market operations. 

As the market has been deteriorating for over a year, ICB's earnings have declined, hurting its ability to repay depositors' money despite being a trusted name and custodian of deposits.

Recently, the state-owned Pashchimanchal (west) Gas Company Limited, applied for the encashment of a Tk84 crore term deposit upon its maturity. However, the ICB could pay Tk67.69 crore.

The gas company had sent several letters to the ICB regarding the outstanding dues, but with no success. Later, it turned to the Bangladesh Bank for intervention. 

In response to a letter from the central bank last month, the ICB stated that there were not enough buyers to sell its shares in the stock market and that it will repay the dues once the financial market stabilises.

In the letter sent to the central bank on 23 March this year, the ICB attributed the lack of buyers to the global economic instability and slowdown. The ICB had said the same last February in reply to another Bangladesh Bank letter asking it to refund the deposit of Pashchimanchal Gas Company.

Infographic: TBS

Persuading for reinvestment

According to ICB sources, the state-owned investment corporation is currently persuading depositors to renew their investments for a new term after their maturity as it is not able to sell shares in the stock market amid a shortage of buyers.

Abul Hossain, managing director of the ICB, said that due to the downturn in the capital market, they requested some companies to reinvest their funds after taking dividends on their previous investment. The same proposal was made to the Pashchimanchal Gas Company, but the company refused it.

Md Abdul Mannan Patwary, managing director of the gas company, told TBS, "We have some money stuck in the ICB. They have returned most of the deposit. I know nothing more about this at the moment." 

The gas company's General Manager (finance division) Mohammed Solayman Gazi told TBS the ICB had requested Paschimanchal Gas Company to reinvest the fund, but the gas company declined stating that its financial condition was not very sound. 

ICB Managing Director Abul Hossain, however, told TBS that the corporation is not having any problem repaying depositors' money. 

"We are continually giving money to those who want to break term deposits. But, the ICB has invested the deposit money of Pashchimanchal Gas Company in the capital market, so the capital market has to stabilise first for the ICB to return the money owed to the gas company."

The ICB is not investing in any sector other than the stock market, he added.

Investors have to wait to get their money back

"The capital market is already in a bad state. As a result, if the ICB pays back to its depositors by selling shares at this moment, the capital market situation will turn worse. Small investors will suffer. So, investors have been requested to wait till the market stabilises.

"If we want, we can sell shares today and pay back investors' money. But, they have been asked to wait so that the market is not affected even if the ICB sells shares," added Abul Hossain.  

The ICB receives deposits from various government companies for a period of three months, six months, or one year. Some companies renew their deposits after taking dividends upon the maturity of the deposits, and some companies need money, so they cash their deposits. 

The ICB invests the deposit money of various companies in the stock market and returns the profit to the depositors as well as the principal amount. If the capital market situation is good, the profit of ICB increases.

Currently, various institutions and individuals have total term deposits of about Tk9,353 crore in the ICB, of which deposits by banks and non-bank financial institutions are Tk5,774 crore. 

According to the financial report of the ICB, among the deposits of banks and non-bank financial institutions, state-owned Sonali Bank, Janata Bank, Agrani Bank, Bangladesh Development Bank and General Insurance Corporation have term deposits of Tk3,546 crore in the ICB. The remaining deposits are by non-bank financial institutions. 

The ICB has fallen into a financial crisis due to declining profits amid a downtrend in the capital market for the past one year. 

In the July-December period of the current fiscal year 2022-23, the net profit of the ICB was Tk46.5 crore, down from Tk140 crore in the same period a year ago.

Due to falling stock prices and floor prices, the capital market has been bearish. As a result, the ICB is unable to sell shares, affecting the ICB's income from capital gains. 

Again, if the ICB starts selling shares in the depressed market, there is a danger that the capital market situation will worsen. As a result, the ICB's capital gain also has decreased.  

Besides, ICB's subsidiary, ICB Securities Trading Company Limited, buys and sells shares of ordinary investors besides selling and buying shares for its own portfolio and earns commission charges apart from capital gains. But due to the low trading of shares in the capital market, the company's income from commission charges has also decreased.

In the first six months of the last financial year, ICB's income from capital gain was Tk512.31 crore, and income from fees, commissions, and service charges was Tk130 crore. But the figures came down to Tk208 crore and Tk99 crore, respectively, in the first half of the current fiscal.