Union Bank's audacious Tk450cr book cooking
Bank hid Tk292cr loss to show Tk162cr profit, concealing non-payment of S Alam Group’s loans
Highlights:
- Union Bank's 2023 profit revised to Tk292 crore loss
- Dividend revoked after falsified profit uncovered by same auditor
- Previous management hid S Alam Group's massive defaulted loans
- Default loans surged from Tk1,000 crore to Tk25,000 crore
- Bangladesh Bank forced merger due to severe capital shortfall
- S Alam Group controlled 72% of Union Bank's total lending
The private commercial Union Bank, previously controlled by the loan scammer S Alam Group, has reported a loss of Tk292 crore for 2023 following the rectification of its previously audited balance sheet, which had shown an artificial profit of Tk162 crore for that year.
The fourth-generation lender, currently in the process of merging with four other Islamic banks, posted its rectified financial statement on the Dhaka Stock Exchange (DSE) website yesterday.
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The bank also revoked the 5% cash dividend declared for 2023 and decided to declare no dividends due to the substantial loss, according to its statement.
According to the Bangladesh Bank, Union Bank alone accounted for 18% of the Tk1.35 lakh crore increase in sector-wide defaults exposed after the regime change
The rectification comes after the bank engaging auditor MM Rahman & CO, which had also prepared the previous balance sheet that showed profit, followed by cash dividend declaration. However, the dividend was not disbursed as the bank could not hold its annual general meeting due to political turbulence in mid-August last year.
When asked how the same auditor found such a huge discrepancy, Md Humayun Kabir, managing director of Union Bank, said the previous management had not provided accurate documents regarding the bank's financial health.
He explained that auditors prepare financial statements based on documents supplied by the client. In the case of Union Bank, the auditors themselves approached the bank for a further audit after media reports highlighted corruption issues.
From this perspective, the bank appointed the same auditor, who revealed the real financial situation, he added.
The previous management had concealed defaulted loans and reported S Alam Group's loans as regular, despite non-payment, he said.
According to the rectified financial statement, the bank's earnings per share turned negative at Tk2.8 for 2023, compared to a previously reported positive Tk1.58.
The bank's share price on Sunday fell to Tk1.70 at the Dhaka Stock Exchange (DSE) against a face value of Tk10. Its record low was at Tk1.50 each on 24 September.
The Bangladesh Bank recently placed Union Bank into a merger scheme with other lenders due to its severe financial crisis, as defaulted loans skyrocketed from Tk1,000 crore in June to nearly Tk25,000 crore by December 2024 – a staggering 25-fold increase in just six months. The default loan ratio surged from 3.82% to 87%, crippling the bank's ability to repay depositors.
Licensed in 2013 under political influence, the bank had concealed toxic loans for a decade, maintaining artificially low default rates to present a fabricated financial position.
Following the fall of the Sheikh Hasina government on 5 August 2024, the truth began to unravel.
According to the Bangladesh Bank, Union Bank alone accounted for 18% of the Tk1.35 lakh crore increase in sector-wide defaults exposed after the regime change.
The spike created a Tk14,000 crore provision shortfall and massive capital erosion, forcing the bank to borrow from the central bank to stay afloat.
A Bangladesh Bank investigation found that the bank, which listed on the DSE in 2022, was fully controlled by the S Alam Group family, which held 26.18% of shares.
The investigation also revealed that the total loan of S Alam Group with the bank stood at Tk20,634 crore at the end of September 2024, representing 72% of the bank's total lending of Tk28,533 crore.
The controversial business group obtained these loans directly through 24 companies and indirectly through 259 companies. However, it repaid only a minimal portion of the loans.
In a similar case, a Bangladesh Bank audit in July revealed that Global Islami Bank, also previously controlled by S Alam Group, had falsely reported a net profit of Tk128 crore for 2023, despite actually posting a loss of Tk2,259 crore.
The bank's declared 5% cash and 5% stock dividends were subsequently revoked following the findings.
