Merger Causes Tk 4,500 Crore Loss for Shareholders

The decision to merge five Shariah-based banks into a large Islamic bank has caused losses of about Tk 4,500 crore for general and institutional shareholders. The central bank announced that the shares of these five banks are now completely worthless. Following the Bangladesh Bank’s merger order, share trading of the concerned banks was suspended on Thursday at the Dhaka and Chattogram Stock Exchanges. The banks are First Security Islami Bank, EXIM Bank, Social Islami Bank, Union Bank, and Global Islami Bank.

According to the Dhaka Stock Exchange, the five banks issued a total of 582 crore shares, each with a face value of Tk 10. Of these, general and institutional investors own 443 crore shares, with a total face value of about Tk 4,433 crore. The market value of these shares was about Tk 1,022 crore. Bangladesh Bank Governor Dr. Ahsan H. Mansur announced on Wednesday that shareholders will not receive any shares in the new bank because the net asset value per share of these banks is negative, ranging between Tk 350 and Tk 420.

Asif Khan, President of CFA Society Bangladesh, said the situation should not be described as a “merger.” It is essentially a taxpayer-funded bailout for depositors since the banks’ assets are insufficient to cover their liabilities. According to law, when a bank goes bankrupt, depositors are paid first, followed by employees, bondholders, and lastly shareholders. He also mentioned that under the strict conditions of the IMF program, the government is not in a position to compensate shareholders.

Saiful Islam, President of the DSE Brokers Association, said the governor’s statement aligns with international practices. However, he believes that misleading financial statements misled investors, and the government might consider giving some shares to small investors under special consideration. Meanwhile, several investors expressed anger toward the government, saying it also bears some responsibility for the banks’ condition and should consider compensating investors.

First Security Islami Bank has 113 crore shares with a face value of Tk 1,130 crore and a market value of Tk 215 crore. Social Islami Bank’s 100 crore shares were valued at Tk 301 crore, EXIM Bank’s 97 crore shares at Tk 293 crore, Global Islami Bank’s 84 crore shares at Tk 142 crore, and Union Bank’s 47 crore shares at Tk 293 crore.

A senior official of a merchant bank said that when banks face distress, depositors are repaid first. These banks cannot even meet their deposit liabilities, so shareholders are not legally entitled to receive anything. He added that the government’s planned Tk 20,000 crore recapitalization fund should primarily be used to safeguard depositors, not shareholders. Source: bd protidin
 

Khaborwala/TSN