The decision was taken at a meeting of the bank’s board of directors on 4 November. The bank informed shareholders of the development through the stock exchange on Thursday, 5 November.
A senior official of the bank said the move was prompted by the capital shortage resulting from irregularities during the period when the S Alam Group controlled the institution. Increasing the authorised capital is expected to create scope for bringing a foreign strategic investor on board and supporting the bank’s efforts to recover from its financial difficulties.
The official also said the proposal to raise the capital had come from Bangladesh Bank, adding that the bank expected 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 not take effect immediately, as it remains subject to approval from Bangladesh Bank and other relevant regulatory authorities. Shareholders must also give their final consent at an Extraordinary General Meeting (EGM).
The proposed change represents a significant shift in the bank’s capital structure. However, an increase in authorised capital does not automatically mean that the bank will receive additional funds. Rather, it provides the legal scope to raise capital through future share issuance or other approved investment arrangements.
Mounting losses deepen financial pressure
The capital restructuring plan comes at a time when Islami Bank is facing substantial financial losses.
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 performance marks a dramatic reversal from the corresponding period in 2025, when the bank reported a profit of approximately Tk 79 crore.
The situation remained difficult 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 the losses has significantly weakened the bank’s financial position, particularly its net asset value (NAV), an important indicator of a company’s underlying financial strength and the value attributable to shareholders.
According to the bank’s financial information, its net asset value stood at Tk 3,584 crore on 30 September. During the corresponding period a year earlier, the figure was Tk 6,963 crore.
This represents a decline of Tk 3,379 crore, or approximately 48.5 per cent, within a year. The sharp reduction has also affected the bank’s net asset value per share, reflecting the pressure on its overall financial position.
Dividend suspension puts shares in Z category
Islami Bank has also been unable to distribute dividends to shareholders since 2023, reflecting the prolonged financial difficulties facing the institution.
As a result, its shares are currently classified in the Z category on the stock market, which includes companies that fail to meet certain requirements relating to dividend payments and other regulatory obligations.
The classification has added to concerns among investors, particularly as the bank struggles with mounting losses and declining asset values. For shareholders, the absence of dividends and the deterioration in financial indicators have raised questions about the institution’s ability to restore profitability.
S Alam Group’s tenure and loan irregularities
The bank’s financial difficulties have been closely associated with allegations of large-scale irregularities during the period of control by the Chattogram-based S Alam Group.
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, placing enormous pressure on the bank’s financial health.
Large volumes of non-performing loans can weaken a bank in several ways. They reduce the flow of recoverable income, increase the need for provisions against potential losses and constrain the institution’s ability to provide fresh financing. In Islami Bank’s case, the scale of the alleged irregularities has become a major challenge for its recovery efforts.
The political developments of August 2024 also brought a change in the bank’s ownership and management landscape. 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 overseeing the bank’s operations. Bangladesh Bank has now assumed responsibility for its management.
Foreign investment seen as part of recovery efforts
Against this backdrop, the proposed increase in authorised capital is being viewed as part of a broader effort to rebuild the bank’s financial foundation.
Bringing in a foreign strategic investor could provide an opportunity to strengthen its capital position and improve institutional management. Such an investor could also potentially contribute expertise in risk management, corporate governance and financial discipline.
However, attracting investment will depend heavily on the bank’s actual financial condition, the quality of its assets, the recovery of defaulted loans and the effectiveness of measures taken to address past irregularities.
The approval process is another important step. Bangladesh Bank and other regulators will have to assess the proposal before it can proceed, while shareholders will retain the final say through the required special general meeting.
For Islami Bank, the challenge extends beyond increasing its authorised capital. Restoring depositor confidence, recovering outstanding loans, improving asset quality and returning to profitability will be essential to securing a sustainable recovery.
The proposed fivefold increase therefore marks an important development in the bank’s restructuring efforts. Whether it can translate into meaningful financial improvement will depend on the implementation of the plan and the success of broader reforms.
