Capital market volatility bleeds ICB to historic Tk1,213cr losses

Infograph: TBS

Once a highly profitable state-owned investment banker, the Investment Corporation of Bangladesh (ICB), which was mandated to support the capital market, has now incurred historic losses amounting to over Tk1,000 crore – the first such instance in its history.

The loss of Tk1,213.86 crore in the fiscal 2024-25 resulted from higher provisioning due to poor investment choices in some weak non-bank financial institutions (NBFIs), erosion in its portfolio amid a volatile capital market over the past year, and high-cost bank borrowings for capital market investments.

Of the total losses for the year, the ICB incurred a Tk935 crore loss in the fourth quarter of the fiscal year, April to June 2025 after having recorded a Tk279 crore loss in the first nine months, July to March.

Previously, it had experienced quarterly losses due to capital market volatility, but substantial annual losses of this magnitude have occurred for the first time, according to sources at the ICB.

During the fourth quarter of FY25, the stock market experienced a volatile situation with losing DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), by 312 points and market capitalisation – total value of a company's outstanding shares dropped by Tk14,383 crore.

Owing to the substantial losses, the government institution has decided not to pay any dividends to its shareholders for the first time since its establishment in 1976, in its board of directors meeting held on Tuesday.

Following the big losses and zero dividend, ICB's share price fell by 6.14% to Tk42.80 each on the Dhaka Stock Exchange (DSE).

In FY24, the investment banker managed to make a profit of Tk32.68 crore, despite having a Tk267 crore loss in the first nine months of the fiscal year, and paid a 2% cash dividend to its shareholders. 

Niranjan Chandra Debnath, managing director of ICB, attributed the losses primarily to an increase in provisioning against investments, erosion in the portfolio due to a lack of activity in the volatile capital market, and higher interest expenses on bank borrowings.

ICB is yet to publish its full annual financials for FY25. The investment banker has Tk920 crore invested in 10 NBFIs and two banks as fixed deposit receipts (FDRs), which have been stuck for years as these institutions struggle to stay afloat.

There is an ongoing discussion to merge some weak NBFIs as they are failing to repay their clients' deposits.

Due to these reasons, and following the auditor's advice to comply with financial standards, ICB has had to make provisions.

According to its officials, due to irregularities in the FDRs, it has had to keep provisions of over Tk550 crore, along with around Tk200 crore for its other investments.

In 2017, ICB invested Tk325 crore in a convertible bond offered by Sea Pearl Beach Resort and Spa.

Despite the bond reaching the end of its tenure, Sea Pearl failed to repay the invested amount, and a lawsuit is currently ongoing in court.

Last year, ICB secured Tk3,000 crore in funds from the government to invest in the capital market.

With a view to offsetting its high-cost borrowing, ICB requested the government to provide another Tk13,000 crore fund, and submitted a revival plan to the government. The investment banker is yet to get the funds.

Niranjan said, "In the past, high-interest loans were taken from various banks to support the capital market, and just to pay the interest, the monthly expenditure reached Tk90 crore. Due to the lack of market activity, there have been losses in the shares of many companies in the portfolio, capital gains have decreased, and dividends from listed companies have also fallen."

He added, "Up to 2010, the institution had earned good profits and paid dividends. For its development, the government has been provided with short-, medium-, and long-term plans. To overcome the current situation, it is imperative to repay the high-interest loans taken from banks. Fresh funds have been requested from the government for this purpose."

Responding to a question on whether the government would provide further support to ICB using taxpayers' money, he said, "Since 2010, following government directives, ICB has invested to support the capital market, which has led to the current situation. The loans were taken precisely because the government asked ICB to support the market. However, there was an opportunity to consider whether investing the borrowed funds in shares was appropriate, but that was not done."

He further stated, "Government support has been sought to overcome ICB's current situation. The financial report reflects the true picture. Various measures are being taken to resolve the situation, and we hope that with a more dynamic capital market and the listing of new companies, ICB will return to its previous position."