Islami Bank posts Tk32cr profit as strong Q3 reverses last year’s loss

Islami Bank Bangladesh, once the country's most profitable lender, has reported a significant recovery in its third-quarter earnings (July-September 2025), posting a consolidated net profit of Tk32.37 crore, a remarkable turnaround from a loss of Tk89.21 crore in the same period last year. 

Its consolidated earnings per share (EPS) rose to Tk0.20, reflecting improved operational performance and better management of investment income and provisioning expenses.

Following the disclosure, the share price of the private sector lender increased by Tk3.56 to Tk37.80 on the Dhaka Stock Exchange (DSE) today (30 October).

Speaking to TBS, the bank's managing director, Md Omar Faruq Khan, attributed the strong third-quarter performance to four key factors.

First, the bank experienced a significant increase in deposits, particularly cost-free deposits – those that do not require the bank to pay profit or interest. This growth helped lower funding costs, directly contributing to higher profitability.

Second, in previous quarters, Islami Bank had to make substantial additional payments to the Bangladesh Bank due to liquidity shortfalls. During the July-September quarter, these payments were significantly lower, which positively impacted the net profit.

Third, the bank made focused efforts to control operating expenses. Cost-saving measures and efficient management improved performance in administrative and operational areas, enhancing the overall bottom line.

Finally, the bank's non-investment income – earnings from sources other than financing and investments – increased this quarter, further boosting profitability. 

"The combination of higher deposits, lower funding costs, controlled operating expenses, and increased non-investment income are the four main drivers behind our strong third-quarter performance," Faruq said.

The quarterly improvement was also supported by higher returns on investments, particularly in shariah-compliant financing, and lower provisioning requirements, which reduced pressure on profit margins compared to the same period last year. Analysts noted that the third-quarter rebound reflects stabilisation in the bank's core operations after a challenging start to the year.

Despite the strong Q3 performance, the bank's cumulative profit for the first nine months of 2025 declined compared to the previous year. Rising operating expenses and a slowdown in investment growth in the early quarters constrained overall profitability. Nevertheless, the third-quarter recovery demonstrates the bank's ability to adapt and stabilize operations under challenging conditions.

Bank officials emphasised that the Q3 turnaround reflects better liquidity management, improvement in asset quality, and stabilization of key banking activities. "We are focusing on efficient cost management and strengthening our investment portfolio to maintain consistent profitability," the bank said in a statement.

On a standalone basis, Islami Bank reported a profit of Tk23.41 crore, a 123.2% improvement, while standalone EPS climbed 124.2% to Tk0.15.

Cumulative profit still down

Despite the Q3 rebound, the cumulative nine-month performance shows a significant decline. Consolidated net profit fell 62.7% to Tk99.77 crore, and consolidated EPS dropped by the same percentage to Tk0.62. Standalone profit declined by 67.7% to Tk78.77 crore, reflecting the impact of higher operating expenses and slower investment growth in the first two quarters.

Earlier, in the first half of the year, the bank's H1 profit plunged 81% amid rising defaults and soaring deposit costs. Behind the turmoil lies years of mismanagement and alleged large-scale financial irregularities linked to S Alam Group, which took control of the bank in early 2017.

An internal audit conducted after the regime change in August 2024 uncovered that the group and its affiliates had taken out loans worth nearly Tk1 lakh crore in violation of banking rules. Many of these loans were never properly serviced and eventually turned into defaults, plunging the bank into one of the worst crises in its history.

In September last year, the Bangladesh Bank intervened, reconstituting Islami Bank's board and removing the influence of S Alam Group. The new board initiated an internal probe, which confirmed the massive irregularities and losses.