ICB hit by Tk140cr loss as five banks merge

Infographic: TBS

Amid mounting financial strain due to a volatile capital market and poor investment choices, the Investment Corporation of Bangladesh (ICB), a state-owned investment bank, has taken another hit, with investments worth around Tk140 crore in five banks wiped out following their merger.

ICB alone had investments of around Tk120 crore in shares of the five publicly listed banks, with the highest exposure – about Tk80 crore – in EXIM Bank, while its consolidated investment, including that of its subsidiaries, stood at around Tk140 crore, according to sources.

Following the decision to merge the five banks – First Security Islami Bank, Global Islami Bank, Social Islami Bank, EXIM Bank, and Union Bank – the Bangladesh Bank has reduced their paid-up capital to zero under the Bank Resolution Ordinance 2025.

As a result, the value of shares of the publicly listed banks has fallen to zero, and ICB's investments in these banks – along with those of other shareholders – have been entirely wiped out.

A senior ICB official told TBS, "Due to the poor condition of the capital market, ICB has already been facing financial strain. On top of that, it has suffered an additional loss of Tk140 crore following the merger of five banks. As the paid-up capital of these banks has been declared zero after the merger, the value of their shares has effectively become zero."

He added, "According to ICB board decisions, there was an opportunity to sell the shares even at a loss, but officials did not sell the shares of those banks. As a result of this loss, a decision has been taken to issue show-cause notices to the officials in the last board of directors meeting held two weeks ago."

Speaking on the board's decision, another official said, "Matters related to investment in or withdrawal of investment from any company fall under the purview of the portfolio management committee, and such decisions are taken collectively."

"There is no scope for any individual official to take these decisions unilaterally. Moreover, as market prices declined extremely rapidly during the relevant period, the value of many shares fell significantly even before the portfolio management committee could fully assess the situation, he said"

"Therefore, the losses incurred by ICB due to not selling the shares should be evaluated in light of the overall context," he added.

Bleeding at ICB

Once a highly profitable institution, the Investment Corporation of Bangladesh (ICB) incurred a historic loss of Tk1,213.86 crore in fiscal year 2024-25 – the first such loss in its history.

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.

The heavy loss resulted from higher provisioning against fixed deposit receipts (FDRs) stuck at weak non-bank financial institutions (NBFIs), erosion of its investment portfolio amid a volatile capital market over the past year, and high-cost bank borrowings used for capital market investments.

Despite mounting pressures from high provisioning and interest expenses on loans taken from several government banks for capital market investments, ICB's operating income – its core business segment – declined sharply due to market volatility, as a substantial portion of its investments was wiped out when prices fell far below cost.

According to its annual report for FY25, its operating income year-on-year decline by 21% to Tk713 crore in FY25, which was Tk908.16 crore in the previous fiscal year.

It's all the major income sources – dividend income, capital gain, and fees, commission and service charges – witnessed a decline in FY25 compared to the previous fiscal year.

It earned Tk357.27 crore as dividend, while capital gain Tk206.71 crore and Tk148.64 crore from fees, commission, and service charges, which was Tk384 crore, Tk363.61 crore and Tk157 crore in the previous year respectively.

Also, it had paid Tk941 crore as interest on deposit and borrowing – with the highest paid was Tk758 crore interest on term deposits.

Previously, 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.

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.