Merchant Banking Operation: A Case Study of Selected Merchant Banks in Bangladesh

Abstract

In Bangladesh the establishment of merchant bank added value to the stock market which plays a vital role in the progress of economic development. This study tried to analyze the performance of Lanka Bangla Investment Ltd., Prime Finance Capital Management Ltd., IDLC Investment Ltd. and Uttara Finance and Investment Ltd. Seven trend equations have been tested for different activities of the selected merchant banks. It is observed that the selected merchant banks were able to achieve a stable growth of investment in securities, margin loan to clients, brokerage commission, capital gain/loss from securities, portfolio management services, issue management fees, corporate advisory fees and underwriting commission during the period of 2011-2015. Among them the trend equation of investment in securities, margin loan to clients, and corporate advisory fees are positive incase of all the selected merchant banks. Square of correlation coefficient (r²) has also been tested for all trend equations. The r² of interest income from merchant bank, portfolio management services, settlement and transaction fees and documentation fees, is more than 0.5. It indicates the prospect of merchant banks in Bangladesh is bright.