UCB to raise Tk 775cr through rights issue

United Commercial Bank (UCB) will raise Tk 775 crore through a rights issue to address its capital shortfall and support its business operations.

The Bangladesh Securities and Exchange Commission (BSEC) approved the proposal of the private sector commercial lender at a meeting yesterday chaired by BSEC Chairman Masud Khan.

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According to the plan, UCB will offer one rights share for every two existing shares held by shareholders.

A rights issue is an invitation to existing shareholders to purchase additional new shares of a company, directly proportional to their current holdings.

Under the proposal, the bank will issue 77.51 crore new shares at a face value of Tk 10 each, which is higher than UCB’s current market price.

UCB shares closed at Tk 9 on the Dhaka Stock Exchange (DSE) yesterday. The stock has traded below its Tk 10 face value since March 3.

Listed on the stock exchange in 1986, UCB is currently in the Z category because it has not paid any dividend after 2023.

The bank’s paid-up capital is Tk 1,550 crore. It will rise to more than Tk 2,000 crore after the rights issue.

BSEC Spokesman Md Abul Kalam said the issue is fully underwritten.

The merchant banking subsidiaries of Dhaka Bank, Al-Arafah Islami Bank and Rupali Bank are underwriting the rights issue, meaning they will buy any shares that existing shareholders do not subscribe for.

“Investors have the full right to decide whether they will invest or not at the higher price when they are getting shares at a lower price on the market,” the BSEC spokesman said. “As the bank needs funds and the underwriter is ready to pay the face value, the regulator approved the proposal.”

However, Md Moniruzzaman, chief executive officer of Prime Bank Securities, said the one-for-two rights issue would significantly dilute existing shareholdings, which could discourage shareholders from subscribing and leave underwriters to absorb a large portion of the offer.

“In Bangladesh, only merchant banks can underwrite issues. Many of them have poor balance sheets and liquidity positions, raising concerns about their ability to come to the rescue if the issue is undersubscribed,” he said.

According to the BSEC, UCB will use the proceeds from the rights issue to support its regular business operations.

The bank reported a capital shortfall of Tk 2,659 crore at the end of 2025.

Its capital-to-risk-weighted asset ratio (CRAR) fell to 8.42 percent at the end of 2025 from 10.59 percent a year earlier, according to its annual report.

The ratio is below the minimum Basel III requirement of 10 percent.

The bank’s ratio of non-performing loans (NPLs) to total loans and advances also rose to 15.50 percent at the end of last year from 14.90 percent a year earlier.

Despite the deterioration in asset quality, UCB’s net profit increased to nearly Tk 24 crore in 2025 from Tk 8 crore the previous year.

Listed on both the Dhaka and Chittagong stock exchanges, the bank said it is confident that investors would participate in the rights issue despite the weak share price.

“Though the share price is low, book value per share is Tk 27, so investors will be attracted to invest in the share,” said Faruk Ahammad, deputy managing director and chief financial officer of UCB.

“As banks need huge capital and the big problem of the sector is capital, the central bank is also focusing on raising capital of banks.”

Faruk said, “We have some other options to raise capital, but we are offering general shareholders first. Although the share price is low now, when we get capital, business will grow quickly, and then we will be able to provide a dividend quickly.”

“The bank has a plan to attract strategic partners too, so before that the bank is trying to turn around,” he added.

At the same meeting, the BSEC also approved the draft prospectus and abridged prospectus for the open-ended Blue-Wealth First Stable Return Fund.

The fund aims to raise Tk 30 crore. Its sponsor, Blue-Wealth Assets Limited, has already contributed Tk 3 crore, while the remaining Tk 27 crore will be offered to investors.

The mutual fund has a face value of Tk 10 per unit. Blue-Wealth Assets Limited will manage the fund, while Sandhani Life Insurance Company Ltd will serve as trustee and Commercial Bank of Ceylon PLC as custodian.