AGD Bank prepares IPO as profits drop

Asia Green Development Bank is preparing to launch an initial public offering, or IPO, on the soon-to-open Yangon Stock Exchange (YSX), though profits are down substantially on last year.

The bank’s net profit was K112.6 million for the 2014-15 fiscal year, far lower than K9.6 billion the previous year, officials said at the fifth annual meeting on October 24.

Chair U Than Ye said that as competition in the industry had increased, banks had raised deposit rates and reduced remittance charges.

“To be honest, we are not satisfied with our performance this year,” AGD said in its annual report. “Net earnings before tax are only marginal.”

As a result, the bank could not allocate any dividends to shareholders.

There are several reasons for the drop in profits. The first is increasing competition between banks to gain access to deposits, with lenders offering increasingly competitive interest rates, increasing the cost of funding. Rates have risen from 8 percent to 8.25pc or 8.5pc for savings accounts.

The Central Bank of Myanmar has also tightened regulations on lending, and banks are not permitted to charge anything higher than the 13pc rate cap, or to levy extra fees or charges beyond this.

The second factor is growing competition between banks for remittance income, leading to rates falling by two-thirds, from 0.15pc to 0.05pc, resulting in a dramatic decrease in remittance earnings, said U Than Ye.

The third is AGD Bank’s rapid expansion of branches and fixed assets, as the bank makes the transition to “a more viable financial institution”, said AGD in its report.

Deputy managing director U Soe Thein said that he hopes the environment will be more favourable in fiscal year 2015-16, adding that the bank will need to limit its spending on fixed assets in future. Other sources said that a shareholder transfer last year impacted the bank’s reputation.

It was rumoured at the time that up to 60pc of the bank had been sold by businessperson U Tay Za and his Htoo Group of Companies to U Kyaw Ne Win, the grandson of U Ne Win, head of the junta government from 1962 to 1981. However, AGD officials have said the stake sold was 15pc.

U Tay Za, his son managing director Htoo Htet Tay Za and Htoo Group of Companies are no longer shareholders, AGD officials previously told The Myanmar Times. The largest shareholder is Daw Thidar Swe, one of the bank’s directors, who owns 35pc, U Soe Thein said.

AGD Bank was founded in 2010 and has been a public company since 2013. It has K100 billion in authorised capital and K30 billion in paid-up capital. It has around 601,000 outstanding shares, worth K50,000 each.

Fifteen months ago, it began preparations to list on the YSX, which is due to open toward the end of this year.

It is working with Daiwa Securities, Mori Hamada & Matsumoto law firm and Win Thin and Associates Audit to prepare a prospectus, and will work on improving its corporate structure and governance ahead of attempting a listing. Daiwa is one of 10 securities companies to receive a provisional underwriter licence for the exchange.

Preparation for the listing is at the final stage, said U Soe Thein, adding that the bank hopes to raise capital from the public through a share sale to bolster its capital base in line with Central Bank requirements.

Source: Myanmar Times

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