What awaits general shareholders once BB merges 5 banks
Under the Bank Company Act, general shareholders are not entitled to compensation in the event of liquidation or merger
Bangladesh Bank has recently initiated a process of merging five banks into one entity, which will become the country's largest bank by assets.
This gave rise to questions like what will happen to the stakeholders.
All five soon-to-be-merged banks are listed on the Dhaka Stock Exchange (DSE) and will be delisted once the merger is complete.
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Under the Bank Company Act, general shareholders are not entitled to compensation in the event of liquidation or merger. However, the Bangladesh Bank is considering ways to compensate them following advice from the finance ministry, a senior central bank executive told TBS.
The central bank will hold a meeting with the Bangladesh Securities and Exchange Commission (BSEC) to discuss the delisting process and possible compensation for general shareholders. According to the Bank Resolution Ordinance, the licenses of all five banks will be cancelled, and a new license will be issued for the merged entity.
General shareholders have already incurred heavy losses, with the share prices of all five banks falling below Tk5 each, against a face value of Tk10.
As of August this year, public shareholding stood at 65% in First Security Islami Bank, 31.46% in Global Islami Bank, 18% in Social Islami Bank, 39.28% in EXIM Bank and 31% in Union Bank, according to DSE data.
Losses in these banks have also weighed on investor sentiment across the banking sector. Of the 36 listed banks, only about a dozen now trade above their face value of Tk10.
BRAC Bank, the most profitable private commercial bank, recorded the highest share price – above Tk70 – while even strong performers like City Bank have struggled.
Despite joining the Tk1,000 crore profit club in 2024, City Bank's shares have remained stuck at Tk25, reflecting low investor confidence.
Merger
The banks to be merged are First Security Islami Bank, Global Islami Bank, Union Bank, Social Islami Bank, and EXIM Bank. Four of them were controlled by Chattogram-based S Alam Group, which has long faced scrutiny for its dominance in financial institutions.
Once merged, the five banks will form an entity with assets worth around Tk2.20 lakh crore. Its paid-up capital will be Tk35,000 crore, financed by Tk20,000 crore from the government, Tk10,000 crore from the deposit insurance fund, and Tk5,000 crore from multilateral lenders such as the IMF, World Bank and ADB. Ultimately, even external funds will be repaid by taxpayers.
Bangladesh Bank has also decided to replace the managing directors of these banks with administrators, who will run operations during the transition. The boards will remain inactive throughout the process.
