Union Bank's unholy union sank it in deep crisis
Its default loans, which remained at a 3% level, suddenly jumped to 87% in six months after AL’s fall in Aug 2024
Highlights:
- Union Bank's default loans soared to Tk25,000 crore
- Political influence enabled a decade of loan concealment
- S Alam Group took 90% of total bank loans
- Regulators and auditors failed to detect massive irregularities
- New leadership aims to restore trust and recover loans
- S Alam family maintained tight control over Union Bank
Union Bank, formerly controlled by the controversial S Alam Group, is facing a severe financial crisis after default loans skyrocketed from Tk1,000 crore in June to nearly Tk25,000 crore by December 2024—a staggering 300-fold increase in just six months. The default loan ratio surged from 3.82% to 87%, crippling the bank's ability to repay depositors.
Licensed in 2013 under political influence, the bank concealed toxic loans for a decade, maintaining artificially low default rates to present a fabricated financial position. Following the fall of the Sheikh Hasina government on 5 August, the truth unraveled.
According to Bangladesh Bank, Union Bank alone contributed 18% of the Tk1.35 lakh crore increase in sector-wide defaults after the regime change. The spike led to a Tk14,000 crore provision shortfall and massive capital erosion, forcing the bank to borrow from the central bank to remain afloat.
Keep updated, follow The Business Standard's Google news channel
Despite reporting Tk160 crore in profits in 2023, Union Bank's five-year cumulative net profit of Tk557.64 crore falls far short of the 2024 provision deficit, indicating earlier profits were likely inflated by hiding bad loans.
The bank's Advance-to-Deposit Ratio (ADR) reached an alarming 118%, far exceeding the regulatory ceiling of 92%, reflecting reckless lending and severe liquidity stress.
Regulatory and auditor oversight failures
Despite clear red flags, neither Bangladesh Bank nor external auditors flagged the anomalies. The bank even received an A+ credit rating in 2023. Regulators allowed it to declare a cash dividend that was never paid, prompting a downgrade to the "Z" category. Its share price now trades at Tk3, down from Tk10 face value, according to DSE.
S Alam took 90% of the bank's total loans
The loans were primarily concentrated in Chattogram, accounting for 56% of total disbursement. A senior executive disclosed that 90% of the loans were granted to the S Alam Group, many without proper documentation. At least 40% of classified loans have no identifiable borrower.
"Loan projects were drawn up at S Alam Bhaban in Chattogram. Branch managers acted under direct instructions from former MD ABM Mokammel Hoque Chowdhury, a cousin of S Alam Chairman Saiful Alam," said the official.
Loans were routinely renewed despite non-payment. Genuine businesses were discouraged due to documentation barriers. This practice ceased after the August transition.
Mokammel remained in office until September 30, resisting loan classification efforts. Shortly after, he went into hiding after the Financial Intelligence Unit froze accounts linked to him and his wife.
New management struggles to rebuild trust
Union Bank's board was restructured in August 2024, removing S Alam Group's influence. New MD Md Humayun Kabir, appointed in March 2025, said the bank has received Tk2,000 crore in liquidity support from the central bank and is now repaying depositors.
He expects default rates to decline, claiming that several borrowers, including the S Alam Group, are negotiating settlements. The bank is also pursuing legal action against fraudulent borrowers.
"We hope to stabilise by June. Our countrywide network will help rebuild depositor confidence," said Kabir.
Collusion enabled financial cover-up
Audits by internal teams, external firms, and Bangladesh Bank failed to uncover the concealed defaults. The 2023 audit was conducted by MM Rahman & Co, while previous years saw audits by other BB-enlisted firms. Despite their role to ensure transparency, these auditors failed to verify financial records.
Key individuals behind the fabricated balance sheet—former MD Mokammel and CFO Md Ruhul Amin—were closely aligned with the S Alam Group. Amin was dismissed after the board overhaul, while Mokammel remains in hiding.
BB spokesperson Arif Hossain Khan admitted some loans were not classified due to the borrowers' prior business activity, which halted only after the political change. He noted many influential borrowers have since disappeared.
A 2020 internal report had recommended classifying 90% of the bank's loans, but the officer who filed it was transferred, and the report ignored under then-Governor Fazle Kabir.
Bangladesh Bank continued to allow violations of the ADR limit and even approved dividend declarations. Tripartite meetings between the bank, BB, and borrowers aimed to avoid classification, promising recovery instead.
Union Bank reported positive earnings and cash flow until the June quarter of last year. However, everything turned negative in the September quarter—EPS dropped to -Tk0.77 and operating cash flow fell to -Tk19.50 per share.
S Alam's family grip over the bank
From 2013 to 2024, Union Bank remained under the S Alam Group's tight control. Saiful Alam's son, Ahsanul Alam, was appointed chairman at 24, making him the youngest in the sector. Before that, he served as vice-chairman and led the executive committee. His uncle Shahidul Alam previously held the chair.
Ahsanul became chairman of Islami Bank in 2023, extending the S Alam Group's banking dominance.
Lavish offices, shallow oversight
Despite Union Bank's modest size, MD Mokammel's office was one of the largest in the industry, complete with a gym and three waiting rooms. He was widely known as the key figure in S Alam's financial operations.
