ICB hides losses by valuing securities at cost with regulatory approval

The state-run Investment Corporation of Bangladesh (ICB) avoids showing actual losses by valuing its investments in securities at cost rather than at current market value.

The Bangladesh Bank has issued a 'no objection' to reporting investments at cost price in the financial statements of ICB, the auditor of the investment bank said in its review for this year.

According to the auditor, investments in securities are worth Tk 141.71 billion as of June this year when valued at cost prices, but their market value stood at Tk 96.65 billion. Hence, ICB did not recognise losses amounting to Tk 45.05 billion-from investments in securities alone-in FY25.

While the Bangladesh Bank has been lenient in the portrayal of the actual status of invested securities, the market watchdog has allowed partial provisioning by ICB until the end of this year.

The company has so far made a provision of Tk 10.46 billion against investments in securities and, as a result, its provisioning shortfall in this segment alone amounts to Tk 34.59 billion.

Therefore, the actual financial status of ICB is far worse than what it has reported-a loss of Tk 12 billion-for FY25.

"Because of the regulatory waivers, ICB is not bound to ensure full provisioning," said ICB's Managing Director, Niranjan Chandra Debnath.

On the possibility of recovery from such an enormous loss, Mr Debnath said his organisation could hope for a strong rebound in the equity market for the losses to be reduced.

"It's not possible for any management to improve the situation unless the market plays a supportive role," he added.

Meanwhile, the amount of unrealised losses declined slightly over the last six months following a rise in the equity market.

The ICB has calculated that the company's provision requirement declines by about Tk 13.8 million for a one-point rise in the broad index of the Dhaka bourse. Accordingly, the company's provision requirement would roughly fall by Tk 1.38 billion if the index goes up by 100 points.

Sources at ICB said no provision had been kept against unrealised losses in securities for FY25. The company only made a total provision of Tk 7.91 billion against loans and advances.

Following the provisioning, the company showed a loss of Tk 12 billion in FY25.

A Bangladesh partner of one of the global big four audit firms said the accounting standards do not allow any deferral of provisions.

"In a real sense, the company actually incurred a further loss equivalent to its provisioning shortfall if all assets were liquidated at market prices by FY25," he said.

"The deferral of provisioning is one reality amid the practice of granting waivers to banks and financial institutions.

"But, on the other hand, investors are unable to obtain actual information about a company's profitability or losses due to unrecognised losses in financial statements," he added.

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