The decision was taken at a meeting of the bank’s board of directors on 4 November. Islami Bank informed its shareholders of the development through the stock exchange on Thursday, 5 November.
A senior official of the bank said the institution had fallen into a capital crisis because of irregularities during the period of control by the S Alam Group. Raising the authorised capital is intended to create an opportunity to bring a foreign strategic investor into the bank and strengthen its financial position.
The official said the proposal to increase the authorised capital had come from Bangladesh Bank. The bank’s management expects the central bank to approve the decision.
According to the disclosure submitted to the Dhaka Stock Exchange (DSE), the proposed increase will require amendments to the bank’s Memorandum of Association. The decision will become effective only after receiving approval from Bangladesh Bank and other relevant regulatory authorities, as well as final consent from shareholders at an Extraordinary General Meeting (EGM).
The proposal marks an important step in the bank’s efforts to rebuild its financial foundation. However, increasing authorised capital does not automatically provide a bank with additional funds. It creates the scope to raise capital through future share issuance or other approved investment arrangements.
Heavy losses deepen the bank’s financial difficulties
The decision comes as Islami Bank continues to face substantial financial pressure following a sharp deterioration in its earnings.
During the first nine months of the current calendar year, from January to September, the bank recorded a net loss of Tk 3,303 crore after tax. The figure represents a dramatic reversal from the corresponding period in 2025, when the institution reported a profit of approximately Tk 79 crore.
The situation was equally challenging during the first quarter of the 2026–27 financial year, covering July to September, when the bank incurred a loss of Tk 1,976 crore.
The scale of these losses has raised concerns about the bank’s ability to restore profitability and maintain a healthy capital position. Persistent losses can erode a financial institution’s asset base, weaken its capacity to absorb future shocks and limit its ability to support lending activities.
According to the bank’s financial information, its net asset value (NAV) has fallen by almost half within a year.
At the end of 30 September, Islami Bank’s net asset value stood at Tk 3,584 crore, compared with Tk 6,963 crore during the same period a year earlier. This represents a decline of Tk 3,379 crore, or around 48.5 per cent.
The fall has also reduced the bank’s net asset value per share, an important indicator for investors assessing a company’s underlying financial strength.
Dividend suspension leaves shares in Z category
Islami Bank has been unable to distribute dividends to shareholders since 2023 because of its financial difficulties. Consequently, its shares are currently classified in the Z category on the stock market.
The classification reflects the bank’s prolonged inability to meet relevant dividend-related requirements and has added to concerns among investors. For shareholders, the combination of mounting losses, declining asset values and the absence of dividends presents a challenging investment outlook.
Restoring investor confidence will therefore be an important part of the bank’s recovery efforts. A return to consistent profitability and improvements in financial indicators will be essential if the institution is to strengthen its position in the capital market.
S Alam Group’s control and alleged financial irregularities
The bank’s present difficulties are closely linked to allegations of large-scale financial irregularities during the period when the Chattogram-based S Alam Group controlled the institution.
The group took control of Islami Bank in 2017. Subsequently, allegations emerged that nearly Tk 1 lakh crore had been withdrawn from the bank through loans issued in the names of various companies and entities, including those allegedly operating under undisclosed ownership arrangements.
According to the information provided, the entire amount has since turned into defaulted loans. The failure to recover such a substantial volume of financing has placed considerable pressure on the bank’s financial position.
Large-scale defaulted loans can create serious problems for commercial banks. They reduce the recovery of loan principal and interest, increase the need for provisions against potential losses and weaken the institution’s ability to provide fresh financing. In Islami Bank’s case, the alleged irregularities have become a major obstacle to financial recovery.
The political developments of August 2024 also brought a change in the bank’s management. Following the fall of the Awami League government on 5 August amid the mass uprising, the S Alam Group lost control of the institution.
During the interim government’s tenure, independent directors were entrusted with managing the bank. Bangladesh Bank has now assumed responsibility for its operations.
Foreign strategic investment considered vital
Against this backdrop, the proposed increase in authorised capital is being viewed as part of a broader effort to restructure the bank and restore its financial strength.
Bringing in a foreign strategic investor could help strengthen the institution’s capital base and introduce international expertise in banking operations, risk management and corporate governance. Such investment could also support efforts to improve financial discipline and rebuild confidence among depositors and shareholders.
However, attracting a foreign investor will depend on the bank’s financial condition, the quality of its assets, the scale of its defaulted loans and the prospects for recovering outstanding funds.
The regulatory approval process will also be crucial. Bangladesh Bank and other relevant authorities must assess the proposal before it can proceed, while shareholders will have to provide their consent through the required special general meeting.
For Islami Bank, increasing authorised capital is only one part of a much larger recovery challenge. Recovering defaulted loans, reducing losses, improving asset quality and restoring depositor confidence will require sustained efforts.
The proposed fivefold increase could create opportunities for fresh investment and financial restructuring. Whether those opportunities translate into a genuine turnaround will depend on the successful implementation of the plan, regulatory approval and the bank’s ability to address the problems that have weakened its financial position.
