Islami Bank deep in the red as income bleeds across all segments

Highlights:

• Islami Bank posts Tk1,316 crore net loss
• Retained earnings turn negative after massive income decline
• Net investment income falls into negative territory
• Deposits plunge by Tk17,308 crore in six months
• Bank skips dividend for second consecutive year

Islami Bank Bangladesh PLC, once the country's most profitable Shariah-based lender, has plunged deeper into distress as its retained earnings flipped into negative territory following a massive fall in income across all major business segments.

According to the bank's latest financial statements for the first half of 2026, a heavy consolidated net loss of Tk1,316 crore wiped out reserves and pushed retained earnings down to negative at Tk1,157.18 crore as of June 2026 – a sharp reversal from a positive retained profit of Tk206 crore recorded in December 2025.

The bank attributed the losses mainly to higher profit paid on deposits expenses, lower investment income due to rising non-performing investments and reduced income from placements with other banks. 

The primary catalyst behind the mounting losses was a steep 67% drop in total operating income, which shrank to Tk705.05 crore in H1 2026, down from Tk2,135 crore in the same period last year, according to the statements.

Its income from core investments (loans) fell 21% to Tk4,855.88 crore, while profit paid on customer deposits surged to Tk5,188 crore. 

As deposit costs of its clients outpaced lending yields amid rising non-performing assets, net investment income turned negative at Tk330 crore.

In addition to its core business, Islami Bank suffered a heavy bleed from its capital market portfolio, driven by a sharp drop in yields from government Treasury bills and bonds and other income.

Its statements showed its income from investments in shares and securities fell 33% to Tk277 crore, despite the bank holding a massive portfolio of Tk22,718 crore in capital market assets – including Tk20,971.90 crore in government securities and Tk1,746 crore in other equities/bonds.

Its income from commission, exchange, and brokerage earnings dropped 12% to Tk268.60 crore, and other income dipped 10% to Tk489.42 crore.

While top-line earnings declined across the business segments, its operational expenses continued to escalate. 

Its total operating expenses rose 3.52% to Tk1,990 crore, while salaries and allowances surged 3% to Tk1,347 crore, adding to the fixed cost burden during a period of declining income.

The bank drastically slashed its loan loss provisions. Total provisioning dropped 85% to Tk10.64 crore in H1 2026, compared to Tk69.99 crore set aside during H1 2025. 

Despite this steep reduction in provision buffers, the bank still registered an operating loss of Tk1,295 crore.

Acting Managing Director Md Altaf Hossain said the bank's large investment exposure to a major group was generating no income, while depositors' profits still had to be paid.

He added that under Shariah banking rules, unrealised income is kept as suspense income rather than recognised as earnings. Recovery of such income in the future could significantly boost the bank's profits, he said.

According to its consolidated balance sheet, as at June 2026, Islami Bank's deposits and other accounts dropped by Tk17,308 crore in six months to Tk1.64 lakh crore. 

Six months ago, as at December, deposits and other accounts amount was Tk1.81 lakh crore, its report showed.

Of the deposits and other accounts, Mudaraba saving deposits dropped by Tk8,986 crore to Tk46,647 crore, Mudaraba term deposits dropped by Tk3,800 crore to Tk69,216 crore, and other Mudaraba deposits dropped by Tk1,088 crore to Tk32,502 crore. 

In June, Islami Bank's customers withdrew significant funds following the appointment of former Bangladesh Bank deputy governor Md Khurshid Alam as chairman, amid growing uncertainty among depositors.

According to its annual reports, Islami Bank remained profitable over the past five years, posting profits of Tk136.34 crore in 2025, Tk108.78 crore in 2024 and Tk635.33 crore in 2023 – its highest profit during the period.

The bank did not recommend dividends for shareholders for the second consecutive year, prompting the Dhaka Stock Exchange to place its shares in the Z category.

On Thursday, Islami Bank's shares closed at Tk31.10 each, a 2.51% drop from the previous trading session.