Islami Bank's rollercoaster: Shareholder euphoria turns to anxiety amid boardroom turmoil

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The dramatic rise and equally sharp fall of Islami Bank's share price over the past year has left investors navigating a landscape shaped less by financial fundamentals than by persistent governance instability, raising serious concerns about the future trajectory of the country's largest private sector lender.

Investors who initially drove the bank's shares to a 12-year high on hopes of sweeping reforms are now grappling with growing uncertainty, as prolonged boardroom turmoil and weakening financial indicators cast a shadow over its prospects.

In the weeks following the fall of the Sheikh Hasina-led government, Islami Bank's shares staged a dramatic rally, rising 116% within a month to Tk70.4 on the Dhaka Stock Exchange.

The rally came despite the shares being locked under a regulatory floor price, reflecting strong speculative optimism among investors who anticipated sweeping reforms and improved governance at the bank.

However, that optimism has since dissipated. The share price has gradually retreated and now remains stuck at the floor level of Tk32.6, highlighting a sharp reversal in investor sentiment.

Market participants say the decline reflects mounting uncertainty stemming from ongoing upheaval within the bank's board and top management. Industry insiders point to a prolonged power struggle involving competing political interests as the primary barrier to restoring stability at the lender.

According to a managing director of a brokerage firm, the bank continues to struggle with internal conflicts, while rumours persist that the controversial S Alam Group is attempting to reassert its influence over the institution. 

Such developments have only deepened concerns among shareholders already wary of the bank's governance record.

Frequent leadership changes have further heightened the uncertainty.

Since the restructuring of the board following regulatory intervention in August 2024, the bank has witnessed a revolving door of chairmen. 

Obayed Ullah Al Masud, initially appointed by the central bank, resigned in July 2025 amid allegations of irregularities and is now in jail. His successor, Zubaidur Rahman, lasted less than a year before stepping down in May 2026 following sustained opposition from various stakeholders. 

Most recently, Khurshid Alam was appointed chairman. However, questions remain over whether his leadership can bring the stability investors have been waiting for.

The situation in the managing director's office has been equally volatile. Following the removal of Mohammad Monirul Moula in mid-2025, Omar Faruk Khan was appointed to the post.

Omar's tenure, however, has been marred by controversy, including a forced leave of absence and reports suggesting he was compelled to resign. Such frequent leadership changes have created an impression of disarray at the top, undermining investor confidence.

The turmoil has also alarmed market intermediaries.

The DSE Brokers Association recently wrote to the Bangladesh Securities and Exchange Commission, urging the regulator to remove the floor price on Islami Bank shares to allow proper price discovery.

At present, a staggering 81.92% of the bank's shares – equivalent to 131.89 crore shares – remain frozen, reportedly held by entities linked to the S Alam Group. Only a small fraction, around 11.43%, is available for trading, limiting liquidity and amplifying volatility.

Beyond governance concerns, the bank's financial health has also deteriorated. 

Islami Bank reported a loss of Tk288 crore in the January-March quarter of 2026, while classified loans surged by 44% to Tk94,322 crore in 2025. 

The bank is also grappling with a capital shortfall of Tk9,345 crore, raising further questions about its ability to sustain operations without significant restructuring. Compounding these issues, the bank has failed to declare dividends for two consecutive years, leading to its first-ever downgrade to the 'Z' category