Mutual Trust Bank to Raise Tk 500 Crore via Seven-Year Subordinated Bond

Star Business Report, Dhaka — Mutual Trust Bank PLC (MTB), a listed private sector commercial lender, has decided to raise Tk 500 crore to bolster its Tier-II regulatory capital through the issuance of a seven-year subordinated bond — the latest in a series of Bangladeshi commercial bank capital raising moves triggered by Bangladesh Bank's stricter capital adequacy and dividend distribution rules.

The decision was taken at the bank's board of directors meeting on 25 August 2026, according to a price-sensitive disclosure published on the Dhaka Stock Exchange (DSE) website on 27 August. The proposed bond will be structured as either a Shariah-compliant or conventional instrument, with final structure subject to approval from relevant regulatory authorities.

💰 Bond Structure and Use of Proceeds

The Tk 500 crore bond will have a seven-year maturity, making it a relatively long-term source of supplementary capital for the bank. Tier-II capital forms part of a bank's regulatory capital base and typically includes subordinated debt instruments that rank below depositors and other senior creditors in the event of liquidation.

Banks use such instruments to strengthen their capital adequacy position without immediately raising additional common equity — an important consideration for MTB at a moment when its H1 2026 earnings have come under pressure. The proposed capital raising is expected to provide an additional buffer for meeting regulatory capital requirements and support the bank's future lending and investment activities, subject to terms and conditions approved by regulators.

The bank has not yet disclosed the detailed terms of the proposed bond, including coupon or profit rate, issue price, payment structure, or whether the final instrument will be conventional or Shariah-compliant. The final structure and terms may depend on the approvals and conditions imposed by the regulators.

📊 MTB's Existing Capital Structure

As of December 2025, MTB's capital base and risk profile reflected the following key metrics:

• 💰 Capital to Risk-Weighted Assets Ratio (CRAR): 13.55% (above BB minimum of 12.5%)
• 💰 Total regulatory capital: Tk 4,220 crore
• 💰 Total risk-weighted assets: Tk 31,142 crore
• 🏛 Common Equity Tier-I capital: Tk 2,407.6 crore
• 🏛 Tier-I capital: Tk 2,807 crore
• 🏛 Tier-II capital: Tk 1,412.8 crore
• 👥 Advance-Deposit Ratio (ADR): 75.05%

MTB already has Tk 885 crore in liabilities related to existing bond issuance, comprising:

• 💰 Tk 400 crore from a contingent convertible perpetual bond issued as Additional Tier-I capital through private placement in December 2020
• 💰 Tk 485 crore from the bank's fourth and fifth non-convertible subordinated bonds (Tk 500 crore each issued through private placement)

The new Tk 500 crore seven-year bond will therefore build on MTB's existing subordinated debt programme, with the cumulative Tier-II base potentially reaching close to Tk 1,912 crore once the new issuance is completed.

📈 Asset Quality Improvement

Despite the H1 2026 profit decline, MTB's asset quality showed meaningful improvement in 2025:

• ✅ NPL ratio: fell to 5.77% (consolidated, end-2025), down from 6.95% in 2024
• 📊 Non-performing advances: declined to Tk 1,829.5 crore from Tk 2,074 crore
• 💰 2025 net profit: Tk 339.29 crore, up from Tk 316.65 crore in 2024
• 👥 2025 dividend: 12% stock dividend to shareholders

⚠️ H1 2026 Earnings Pressure

The capital raising comes against a backdrop of softer earnings momentum in the first half of 2026:

• 📉 Q2 2026 net profit: Tk 18.67 crore, down 42% YoY (vs Tk 32.20 crore Q2 2025)
• 📉 H1 2026 net profit: Tk 106.82 crore, down from Tk 116.11 crore H1 2025
• 📉 H1 2026 EPS: Tk 0.99, down from Tk 1.07 H1 2025

The profit decline was driven primarily by higher interest expense on deposits and borrowings — a reflection of the elevated cost of funds environment that has affected Bangladeshi commercial banks throughout 2025 and into 2026, as the banking sector absorbed the impact of successive policy rate hikes and the gradual unwinding of historically low deposit rates.

📈 Market Reaction

Following the bond disclosure, MTB's share price declined:

• 📉 Daily Star report: -0.75% to Tk 13.30 as of 1:00pm on DSE
• 📉 FE report: closed at Tk 13.40 on Tuesday

The muted market response likely reflects investor concern about the dilution implications of additional capital raising, even though subordinated bonds do not directly dilute existing shareholders. Sponsors and directors held an 33.26 percent stake in the bank as of 31 July 2026, with institutions and the general public holding the remaining shares.

🏛 Sector-Wide Capitalisation Push

MTB's Tk 500 crore bond announcement is part of a broader sector-wide capitalisation push by Bangladeshi commercial banks:

• 🏢 Dutch-Bangla Bank: raising authorised capital to Tk 3,500 crore
• 🏢 Meghna Bank: Tk 400 crore subordinated bond approved by BSEC
• 🏢 City Bank: Tk 3,000 crore capital plan
• 🏢 Sammilito Islami Bank: Tk 35,000 crore paid-up capital post-merger

The pattern reflects the regulatory pressure from Bangladesh Bank's new minimum Tk 2,000 crore paid-up capital requirement for commercial banks to remain eligible to declare cash dividends from 31 December 2026. Banks with thinner capital buffers are accelerating their capital raising programmes ahead of the year-end deadline — a process that is reshaping the competitive landscape of Bangladesh's commercial banking sector ahead of LDC graduation in November 2026.