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City Bank’s Tk 85cr investment in Sea Pearl
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Besides, City Bank’s decision to invest in Sea Pearl back then gave market manipulators the scope to offload their shares at higher prices, they said.
Toufic Ahmad Choudhury, director general of the Bangladesh Academy for Securities Markets, said banks usually invest in stocks to make extra profit apart from their core activities related to lending.
“But it is not acceptable if they incur such a huge loss through investment,” he added.
Citing how this shows that City Bank failed to analyse its investment decision, Choudhury said anyone would question whether the lender chose to buy the stock to benefit someone else.
The Bangladesh Securities and Exchange Commission (BSEC) had formed a probe committee in September 2023 to investigate the abnormal price movement of Sea Pearl’s shares.
Media reports had alleged that some brokerage houses and several individual investors were involved in manipulating the company’s share price.
A few other banks that bought shares in Sea Pearl when the price was being manipulated made hefty profits but some incurred a loss, according to the BSEC investigation report.
However, this information is missing from the banks’ financial statements as they did not hold the shares until the end of 2023.
A mid-level official of the BSEC confirmed that the stock rose based on rumours and manipulation. But the regulator, led by Professor Shibli Rubayat-Ul Islam, left them only with a warning.
The company’s share price had stayed below Tk 50 per unit for several years before starting to rise in mid-2022 and peaking a year later at Tk 308.
It started to fall after that, reaching Tk 46 per unit as of Thursday, according to the Dhaka Stock Exchange (DSE).
City Bank spent an average of Tk 203 for each of its 42 lakh shares in Sea Pearl, showed the bank’s annual reports for 2023.
A top official of an asset management company, preferring anonymity, said a bank cannot buy this type of share in any situation as the bank would ultimately be the loser.
“Why would a bank buy this share with the fund of its depositors?” he questioned.
The auditor of the luxury hotel company gave a qualified opinion as it found some material misstatements in the financial reports for the year 2022-23.
The company was facing debt amounting to Tk 565 crore consisting of long-term loans, short-term loans, bond payments, lease finance and other related dues.
The total debt represents 71.18 percent of the company’s equity, the auditor said in its report.
Moreover, the company failed to pay regular instalments of its bond since June 2020. Due to this, its liabilities have increased significantly, the auditor added.
In 2017, Sea Pearl raised Tk 325 crore through a 20 percent convertible bond to expand its business. The bond was fully subscribed by the Investment Corporation of Bangladesh (ICB).
And after Sea Pearl failed to repay instalments of the bond, the company went to the High Court and blamed the Covid-19 pandemic for its decline in business and subsequent non-payments to the ICB.
Later, Sea Pearl requested to convert its remaining bond proceeds of Tk 120 crore into ordinary shares.
The BSEC gave its approval in this regard last February considering the hotel’s failure to repay its bondholders.
In a written reply to queries regarding its investment, City Bank said the decision was made after finding that Sea Pearl’s earnings per share posted 10 times higher growth in 2023 compared to previous years.
On top of that, Sea Pearl planned to buy 30 percent of the shares of Shamim Enterprise (Pvt), which was projected to contribute additional profit of Tk 18 crore to the company annually.
It also announced that GEM Global Yield LLC would buy shares in Sea Pearl worth Tk 350 crore and the related purchase agreement was approved by both BSEC and DSE.
“During our investment period, we observed that Sea Pearl always remained in the top 20 traded stocks. For this reason, we considered it as the most liquid share at the time,” City Bank said.
But despite all the disclosures, Sea Pearl later informed that it had not completed its amalgamation with Shamim Enterprise while GEM Global did not go ahead with its share purchase.
Against this backdrop, City Bank launched an internal investigation on this matter on July 30.
City Bank further said that it has appointed a reputed brokerage house, United Securities, as one of its capital market investment fund managers.
United Securities, a subsidiary of United Group, said in a written response that a brokerage house only provides brokerage services that include providing research, analytics and market sentiment to customers.
“United Securities had no idea or knowledge about any sort of manipulators seeking to offload their shares of Sea Pearl,” it added while pointing out that the ultimate decision to buy the shares was made by the bank’s investment committee.
A top official of a leading asset management company said the BSEC should investigate why Sea Pearl’s plans to buy shares of Shamim Enterprise and sell shares to GEM Global has not been executed yet.
When a company provides such types of disclosures but does not implement them, it indicates that the owner may have serious bad intentions to fuel the stock price, according to the asset manager.
And although Sea Pearl had forecasted higher profits, the hotel’s earnings actually declined. Its net profit dropped 42.5 percent to Tk 46 crore between July 2023 and March 2024 in the current fiscal year.
BSEC Spokesperson Farhana Faruqui said the commission gave some conditions to sell the shares to GEM Global but the company did not fulfil them, and so the sale was not completed.
As the hotel could not complete its share sale in the last one year, it should have given another disclosure on the last status of sale announcement, she added.
Sea Pearl’s Managing Director Md Aminul Haque did not receive phone calls for a comment despite repeated attempts by the time this report was filed.
Choudhury, also a former director general of the Bangladesh Institute of Bank Management, said a bank should invest in fundamentally strong stocks.
“Otherwise, they will incur loss instead of profit,” he added.

Oil eases
REUTERS, New York
Oil prices fell on Friday as US Gulf of Mexico crude production resumed following Hurricane Francine and rising data showed a weekly rise in US rig count.
Brent crude futures settled at $71.61 a barrel, down 36 cents, or 0.5 percent. US West Texas Intermediate crude (WTI) settled at $68.65 a barrel, down 32 cents, or 0.5 percent.
As US Gulf Coast production and refining activity resumes, investors have opted to offload oil contracts going into the weekend, said Bob Yawger, director of energy futures at Mizuho in New York.
“You could come back Monday and everything is fine - the refineries are running at 100 percent, everyone is back on the platform, oil comes back and gasoline is coming out of the refinery - and the market could potentially pull back exponentially,” Yawger said.
For the week, oil futures finished higher following sharp storm-related increases early in the week, breaking a streak of declines. Brent logged an increase of about 0.8 percent since the close of last Friday’s session, while WTI registered a roughly 1.4 percent gain.
Official data showed that, as of Thursday, the storm nearly shut in 42 percent of oil production in the region that accounts for about 15 percent of US output.
“These cuts are expected to prove brief and within the broader context are unlikely to spur much movement in the crude balances given the importance of shale production that accounts for the major portion of US output,” Ritterbusch said.
Crude prices also took a hit from the US rig count from energy services group Baker Hughes, which reported the biggest weekly rise in oil and natural gas rig in a year.
The oil and gas rig count rose by eight in the week to Sept. 13 to 590, returning to mid-June levels. The increase was the biggest since the week to Sept. 15, 2023. , , . Crude oil rigs rose by five to 488 this week, while gas rigs rose by three to 97.
Also on the week, money managers cut their net long crude futures and options positions in New York and London by 27,493 contracts to 59,741 in the week to Sept. 10, the US Commodity Futures Trading Commission said.
Both the Organization of the Petroleum Exporting Countries and the International Energy Agency lowered their demand growth forecasts this week, citing economic struggles in China, the world’s largest oil importer.
US oil stockpiles also rose across the board last week as crude imports grew and exports dipped, while fuel demand weakened, the Energy Information Administration said on Wednesday.
Investors are looking ahead now to the US Federal Reserve’s two-day policy meeting next week. It is widely expected to cut interest rates on Wednesday.