Pubali Bank is set to double its authorised capital to Tk 40 billion, creating room to raise its paid-up capital in compliance with the Bangladesh Bank's revised dividend policy.
In a circular issued in May this year, the central bank said banks with paid-up capital below Tk 20 billion would not be allowed to declare cash dividends from December 2026.
Under the revised requirement, profitability alone will no longer be sufficient for a bank to declare cash dividends. The framework also limits cash dividend payouts, allowing even eligible banks to pay a maximum of 50 per cent of their declared dividends in cash.
The changes are aimed at encouraging banks to retain more earnings and build stronger capital buffers to absorb future financial shocks, rather than distributing a large portion of profits to shareholders.
Pubali Bank's paid-up capital currently stands at around Tk 15.62 billion, leaving a shortfall of more than Tk 4.38 billion before it becomes eligible to pay cash dividends.
The increased authorised capital would give the bank the legal capacity and flexibility to issue additional shares in the future, subject to shareholder and regulatory approvals.
That will, however, require a plan, as the ultimate aim is to raise paid-up capital to reach the BB threshold for cash dividends.
The bank's board approved the proposal at its meeting on Wednesday, according to a disclosure made to the stock exchanges on Thursday. The increase in authorised capital would be equivalent to 2 billion ordinary shares of Tk 10 each.
The lender will hold an extraordinary general meeting (EGM) on October 25 to seek shareholders' consent for the increase and to amend the relevant provisions. The bank has fixed September 29 as the record date for determining shareholders eligible to attend the meeting and vote.
The proposal will also require the necessary regulatory approvals following shareholders' consent.
"Depending on regulatory and shareholder approvals, the bank could consider instruments such as rights shares or bonus shares as part of its capital-raising strategy," said Akramul Alam, head of research at Royal Capital.
The method and timing of any future capital raising will ultimately depend on decisions by the bank's board and shareholders, as well as approvals from the relevant regulators.
The bank has not yet made its position clear in this regard.
Financial performance
The move comes against the backdrop of strong financial performance in the first half of 2026.
Pubali Bank posted a profit of Tk 6.85 billion in H1, up 19 per cent year-on-year, driven by higher investment income and increased earnings from commissions and brokerage fees.
Higher deposit collection from customers, along with other liabilities, also helped improve the bank's cash flow, with consolidated net operating cash flow per share rising to Tk 48.78 in the first half of 2026, from Tk 32.28 in the same period a year earlier.
The bank's annual profit also climbed 40 per cent year-on-year to Tk 10.90 billion in 2025. It declared a 10 per cent cash dividend and a 20 per cent stock dividend for 2025.
Pubali Bank is not alone in seeking to expand its authorised capital to comply with the BB's dividend policy.
City Bank has proposed raising its authorised capital to Tk 30 billion from Tk 20 billion, while Dutch-Bangla Bank has planned to more than double its authorised capital, from Tk 15 billion to Tk 35 billion.
Both banks will also need shareholder and regulatory approvals to proceed with their plans.
City Bank's paid-up capital currently stands at Tk 17.49 billion, while Dutch-Bangla Bank's stands at Tk 10.15 billion.
The new capital requirement is likely to make cash dividend distribution more challenging for banks with paid-up capital below Tk 20 billion.
Among these banks, BRAC Bank is currently the only one that meets the Tk 20 billion paid-up-capital requirement while also appearing well positioned to offer cash returns.
Although National Bank has adequate paid-up capital, its high non-performing loan burden makes it difficult for the bank to pay cash dividends to shareholders.
