6 banks incur Tk332cr quarterly loss as S Alam-era weakness exposed  

Six banks have incurred a combined loss of Tk352 crore in the July-September quarter, exposing their poor financial health after being freed from the control of the controversial S Alam Group.

This represents a stark contrast to the Tk331.58 crore profit the Sharia-based lenders reported in the same quarter last year.

Additionally, the private-sector lenders – First Security Islami Bank, Global Islami Bank, Islami Bank, Social Islami Bank (SIBL), and Union Bank – faced net operating cash crises during the quarter.

Insiders at these banks revealed that during S Alam Group's control, numerous irregularities in loan disbursements occurred, primarily benefiting the conglomerate.

Following the appointment of a new Bangladesh Bank governor, tighter oversight measures were implemented, curbing S Alam's influence by restricting the boards of these banks, they added.

Investigations by the central bank revealed that S Alam Group had syphoned off significant funds from these banks, violating regulations. These irregularities led to a rise in classified loans, forcing the banks to allocate higher provisions, which ultimately resulted in financial losses, the insiders further said.

Analysts have pointed out that such malpractices have eroded investor confidence, further undermining discipline in the banking sector. Consequently, four of the six banks are now trading below their face value of Tk10, with only Islami Bank and Al-Arafah Islami Bank trading above face value.

According to the Dhaka Stock Exchange (DSE), as of Thursday's (28 November) close, First Security Islami Bank shares were priced at Tk5.80, Global Islami Bank at Tk5.20, Social Islami Bank at Tk9.10, and Union Bank at Tk5.20. Meanwhile, Islami Bank shares closed at Tk52.40, and Al-Arafah Islami Bank at Tk19.60.

Islami Bank

Islami Bank Bangladesh incurred a loss of Tk89 crore in the July-September quarter, marking an unprecedented event for the country's largest private lender in over three decades of its operation.

Its consolidated loss per share during the quarter stood at Tk0.55.

In a statement, the bank attributed the loss to an increase in total provisions against investments – loans and advances – compared to the same period a year ago.

On 22 August, Islami Bank was freed from the grip of S Alam Group after nearly seven years, with the Bangladesh Bank appointing a new five-member board of directors to oversee its operations.

According to sources from the central bank and documents from Islami Bank, as of 18 August 2024, the bank's total loan portfolio amounted to Tk1.5 lakh crore, while total deposits stood at Tk1,53,274 crore. Of these loans, Tk74,972 crore – constituting half of the total loans – was identified as benefiting the S Alam Group.

Union Bank

The Shariah-compliant Union Bank has incurred a loss of Tk80 crore between July and September due to "low profitability," according to a price-sensitive statement.

Union Bank extended Tk17,229 crore in loans to 247 entities affiliated with the S Alam Group, making up 64% of the bank's total lending, mostly unsecured, according to a recent Bangladesh Bank inspection report.

During this time, the bank reported a loss per share of Tk0.77, while it had earnings of Tk0.52 a year ago.

SIBL

SIBL reported a loss of Tk29 crore in the third quarter of this year, according to the bank's statement.

As per the financial report, its consolidated loss per share stood at Tk0.37 during the quarter, while the earnings per share were Tk0.43 at the same time a year ago.

The bank is also suffering from a severe cash crunch as its net operating cash flow per share turned negative at Tk37.56 during the January-September period.

Al-Arafah Islami Bank

The bank incurred a loss of Tk46 crore in the July-September quarter.

According to its price-sensitive statement, its loss per share during the quarter was Tk0.41.

The bank said in the statement that it incurred losses in July-September as total provision against investment increased compared to the previous corresponding period.

First Security Islami Bank

The bank reported a loss of Tk31.31 crore in the third quarter of this year, according to the bank's statement.

As per the financial report, its consolidated loss per share stood at Tk0.26 during the quarter, while the earnings per share were Tk0.31 at the same time a year ago.

The bank is also suffering a severe cash crunch as their net operating cash flow per share turned negative at Tk27.16 during the January-September period.

The bank said it incurred losses mainly due to an increase in profit rates on deposits and placements from banks and financial institutions.

Global Islami Bank

It incurred a loss of Tk57 crore in three months through September due to keeping higher provisions against classified loans.

According to the bank statement, its loss per share stood at Tk0.55 during the quarter.

Besides, its net asset value per share became negative at Tk9.14 at the end of September.