Ten more banks set to slide into ‘Z’ category after dividend failure
These banks fail to declare dividends for two consecutive years
Bangladesh's banking sector is facing mounting pressure in the capital market as at least 10 more listed banks are set to be downgraded to the Dhaka Stock Exchange's (DSE) 'Z' category, commonly known as junk stocks, after failing to declare dividends for two consecutive years.
Sources at the DSE said the affected banks include AB Bank, Al-Arafah Islami Bank, IFIC Bank, Mercantile Bank, NRB Bank, NRBC Bank, ONE Bank, Premier Bank, Rupali Bank and United Commercial Bank. If implemented, this will mark the first time these lenders fall into the lowest trading category.
A senior official of the Dhaka Stock Exchange (DSE) said the banks will be downgraded to the 'Z' category from today, the first trading session of the week.
The development follows a similar move earlier this week, when Islami Bank Bangladesh, Standard Islami Bank and SBAC Bank were downgraded after failing to reward shareholders for two consecutive years.
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Market sources said the primary reason behind the sector-wide dividend drought is a large provision shortfall against classified loans and investments. Under Bangladesh Bank regulations, lenders with provision deficits are barred from declaring dividends.
To remain compliant with regulatory requirements, several banks have reportedly taken deferral facilities from the central bank, effectively postponing financial obligations while remaining unable to distribute profits.
Financial data for 2025 reflects significant stress in the sector. AB Bank reported a consolidated loss of Tk 3,889 crore alongside a provision shortfall of Tk 16,874 crore.
IFIC Bank posted a loss of Tk 2,560 crore with a shortfall of Tk 18,557 crore.
Even banks that managed marginal profits remain under pressure. United Commercial Bank reported a profit of Tk 23.25 crore, while ONE Bank posted Tk 29.84 crore, both facing provision gaps exceeding Tk 5,000 crore and Tk 1,700 crore, respectively.
Al-Arafah Islami Bank reported a consolidated profit of Tk 85 crore against a provision shortfall of Tk 4,998 crore. Mercantile Bank posted a profit of Tk 121 crore with a shortfall of Tk 2,161 crore.
NRB Bank earned Tk 13.81 crore profit with a Tk 180 crore shortfall, while NRBC Bank reported Tk 13.25 crore profit against a Tk 1,006 crore gap.
Premier Bank incurred a loss of Tk 993 crore with a Tk 6,089 crore provision shortfall, while Standard Islami Bank reported a profit of Tk 80.34 crore against a Tk 5,904 crore shortfall.
Rupali Bank posted a profit of Tk 23.25 crore but faced a Tk 14,014 crore provision gap.
Islami Bank Bangladesh reported the highest provision shortfall at Tk 84,615 crore, despite posting a profit of Tk 136 crore in 2025.
Market experts said the expected downgrade signals deteriorating fundamentals in the banking sector, raising concerns over governance, asset quality and risk management.
Z-category stocks are widely considered high-risk due to persistent compliance failures and weak financial health. These shares are subject to stricter trading rules, including a T+3 settlement cycle instead of T+2, cash-only transactions and restrictions on margin loans, significantly reducing liquidity.
Currently, 36 banks are listed on the country's stock exchanges. With 10 more banks set to join the five already in the junk category, a total of 15 banks, around 42% of listed banking stocks will be in the 'Z' category.
This does not include five other banks, Social Islami Bank, Exim Bank, Global Islami Bank, First Security Islami Bank and Union Bank, whose shares remain suspended due to merger-related processes with Sommilito Islami Bank, though they are yet to be formally delisted.
Analysts attribute the growing crisis to a surge in non-performing loans, many of which were allegedly disbursed without adequate due diligence in previous years.
Following regulatory tightening in 2024, scrutiny has intensified, exposing deeper weaknesses in loan portfolios across several banks.
A senior market analyst said that while stricter regulatory measures are necessary to restore discipline in the sector, general shareholders are bearing the cost of governance failures and deteriorating asset quality, as dividend flows continue to shrink.
