Islami Bank sinks to Tk288cr loss in Q1 as crisis deepens
Net asset value per share declined to Tk42.56 from Tk44.31 a year earlier
The financial crisis engulfing Islami Bank Bangladesh PLC has taken a critical new turn, with the lender posting a consolidated net loss of Tk288.21 crore in the first quarter of 2026 a stark contrast to the days when it dominated the country's banking sector as the highest profit-making private bank.
The latest disclosure, submitted to the Dhaka Stock Exchange today (13 May), paints a grim picture of a lender struggling under the weight of soaring defaulted loans, widening provision deficits, and growing dependence on regulatory support to stay afloat.
For the January–March quarter, the bank reported a standalone loss of Tk291.88 crore. However, earnings from subsidiary companies slightly narrowed the overall consolidated loss to Tk288.21 crore.
The weak earnings performance has further eroded the bank's financial health. By the end of March 2026, Islami Bank's consolidated net asset value per share dropped to Tk42.56 from Tk44.31 a year earlier, while consolidated earnings per share turned negative at Tk1.79.
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Although consolidated net operating cash flow per share improved to Tk1.35 from negative Tk16.16 in the corresponding quarter last year, the bank clarified that the improvement was largely driven by a sharp contraction in fresh investment disbursements rather than a recovery in core operations.
According to the bank, higher profit payments on deposits and declining investment income due to rising non-performing investments significantly squeezed profitability. Reduced income from placements, caused by lower accrued profits, added further pressure on earnings.
The latest loss marks another chapter in the lender's steep decline over recent years. After posting a record profit of Tk635 crore in 2023, the bank's earnings collapsed to Tk108 crore in 2024 and Tk136 crore in 2025 before eventually slipping into losses this year.
The lender had first entered the red in the July–September quarter of 2024.
Defaulted loans hit historic high
Behind the bank's worsening condition lies an unprecedented surge in bad loans.
By the end of 2025, Islami Bank's classified investments rose 44% year-on-year to Tk94,322 crore the highest volume of defaulted loans ever recorded by a single bank in Bangladesh.
The classified investments now account for around 51% of the bank's total disbursements, meaning more than half of its investments have effectively turned sour. The bank alone now represents nearly 17% of the country's total classified loans.
Bank insiders and analysts have long blamed the lender's extensive exposure to the S Alam Group for the collapse. Following the political transition last year, the bank's new management began uncovering financial data that they claim had previously been concealed, resulting in a sharp escalation in reported defaulted assets.
Audit raises 'going concern' warning
The severity of the crisis became more apparent in the qualified audit report for 2025 prepared by Mahfel Huq and Co.
The auditors identified a massive provision shortfall of Tk84,615 crore. While the bank was supposed to maintain more than Tk92,000 crore in provisions against classified investments, it had allocated only Tk7,922 crore.
The audit firm warned that failure to recognise the full provision deficit had substantially overstated the bank's assets, equity and profits in earlier financial statements.
More alarmingly, the report questioned the bank's ability to continue as a going concern, saying its survival now depends heavily on extraordinary regulatory support from the Bangladesh Bank.
Although Islami Bank officially reported a capital shortfall of Tk9,345 crore, auditors estimated the actual deficit would soar to nearly Tk93,960 crore if the full provision gap were recognised.
The bank's Capital Adequacy Ratio stood at just 6.42%, far below the regulatory requirement of 12.50%.
According to the audit findings, without special regulatory relaxation from Bangladesh Bank, the lender would have incurred a standalone loss exceeding Tk84,507 crore for the 2025 financial year.
To avoid a wider financial shock, the central bank has allowed the bank to finalise its financial statements without immediately adjusting the full provision deficit. However, the lender has been directed to submit a realistic and time-bound recovery roadmap.
Investor confidence collapses
The bank's deteriorating fundamentals have also shaken investor confidence.
For the first time in its history, Islami Bank was recently downgraded to the 'Z' category after failing to declare dividends for two consecutive years. Its shares remain stuck at the floor price of Tk32.60, with trading activity almost frozen.
