Islami Bank posts profit despite regulatory clampdown, surging NPLs

Islami Bank reported a profit of Tk 1.09 billion for 2024 even after a 68 per cent year-on-year increase in provision in the year for non-performing loans (NPLs) under a strict regulatory measure by the central bank.

The lender had to reveal its actual status regarding the amount of loans that had turned sour to follow the newly-enforced stringent NPL policy. Hence, its NPLs increased to Tk 328.17 billion in December last year from only Tk 71.24 billion six months ago. The default loans again surged to Tk 476.18 billion by March this year.

The higher the loan defaults, the higher the provisions. Islami Bank witnessed its provisions go up to more than Tk 10 billion in 2024. During the time, it also paid a profit of nearly Tk 90 billion on deposits, a 37 per cent increase from the year before.

Higher provisioning and payment on deposits led to an 83 per cent year-on-year fall in profit in 2024, according to the earnings disclosure by the bank on Wednesday.

The Islami Bank board declared no dividend for 2024 for the first time since its listing on the stock exchanges four decades ago.

"The Bangladesh Bank did not allow us to declare any dividends despite making profit as the bank has taken deferral facilities to cover provisioning shortfalls against non-performing loans," said the bank in its earnings notes.

The banks, which are relying on a deferral facility from the central bank to meet provisioning requirements, are barred from paying dividends from 2024 onwards, according to the central bank's latest directive issued in March this year.

Moreover, the banks with non-performing loans exceeding 10 per cent of total loans are prevented from paying dividends to shareholders for 2025.

A large portion of Islami Bank's loans turned sour as S. Alam Group and many other business groups, which had close ties to the previous regime and the Awami League, defaulted on credits taken from the bank.

Meanwhile, Islami Bank witnessed signs of revival of customer confidence. Its growth in deposits is the second highest, having risen from Tk 1.58 trillion in December last year to Tk 1.66 trillion in May this year, according to the data of the central bank.

Islami Bank's downfall