GIB ineligible to pay announced dividends after balance sheet correction

Global Islami Bank (GIB) may have to backtrack on its decision to pay cash dividends to shareholders for 2023 after a correction in its balance sheet, showing a hefty loss in the year instead of previously-claimed profits.

It had announced a 10 per cent dividend for the year. In a disclosure on Sunday, the lender said it would hold an annual general meeting (AGM) to decide whether to announce a zero dividend for 2023.

Recently, the controversial S. Alam Group owned private commercial bank made a disclosure that they had incurred a loss of Tk 21.52 billion in 2023, rejecting the earlier claim of Tk 1.28 billion profit.

The error in the bank's balance sheet was identified by the new board of directors. The bank's board was reconstituted after the fall of the previous government in attempts to bring reforms to the faltering banking sector hit hard by scams and loan defaults.

At a recent programme organised by the World Bank and the Financial Reporting Council (FRC), BB Governor said the balance sheets of several banks had been found to be fictitious, not reflecting the true financial status of the lenders.

The financial health of GIB pre- and post-IPO raised questions about the business performance shown to get the regulatory approval of the IPO proposal to collect public money.

The lender sought liquidity support from the Bangladesh Bank soon after the 2022 listing.

The GIB's financial health was destined to deteriorate against the backdrop of political influence used by S Alam Group's Chairman Mohammed Saiful Alam to acquire the bank.

His company allegedly looted nearly Tk 5.74 billion from GIB. Some bank officials believe that the actual amount of money laundered from the bank is even higher than what has been revealed so far.

Company secretary Manjur Hossain told The FE on Sunday that GIB could not pay dividends - 5 per cent cash and 5 per cent stocks -- recommended for 2023 as it could not hold the annual general meeting after the fall of the previous regime.

However, following the correction, the bank is considered ineligible to pay dividends irrespective of whether shareholders approve zero dividends for the year or not in the upcoming AGM.

A Bangladesh Bank circular said cash dividends will be paid only from profits earned in the relevant calendar year.

As the bank recently declared zero dividends for 2023, the Dhaka Stock Exchange demanded an explanation as to why it would not pay any dividend to shareholders for the year.

In response, GIB said it had huge losses in 2023 and so they were unable to provide any dividend according to the law.

"However, the decision must be supported by shareholders. That's why we will take the final decision at our 11th AGM," said the company secretary.

GIB reported a loss of Tk 12.46 billion for 2024. The stock price of GIB fell 3.13 per cent on Sunday to Tk 3.10 per share on the Dhaka Stock Exchange, much lower than the face value of Tk 10 per share.

farhan.fardaus@gmail.com