Sammilito Islami Bank to decide fate of subsidiaries after merger

Sammilito Islami Bank, which emerged from the merger of five Islamic banks, will decide whether to close the banks' subsidiaries or keep their businesses running, according to the central bank.

The decision will be based on a feasibility study, sources at the Bangladesh Bank (BB) said.

"The subsidiaries, which will have prospects, will definitely continue operations," said Md. Jahir Uddin, a director of the Bank Regulation Department (BRD) of the central bank.

The five cash-trapped banks - Exim Bank, First Security Islami Bank (FSIBL), Social Islami Bank (SIBL), Union Bank, and Global Islami Bank - have recently been merged into Sammilito Islami Bank. Of them, Union Bank and Global Islami Bank have no subsidiaries.

"Sammilito Islami Bank will not operate as any charity organisation. It will need to make profits from operations," said Jahir Uddin. The continuation or closure of any subsidiary is yet to be determined. Sammilito Islami Bank, in association with the central bank, will make the decision, he added.

Representatives of the banks' subsidiaries told The FE that they were not aware of the feasibility study.

Of SIBL's two subsidiaries, SIBL Investments, a merchant bank with a paid-up capital of Tk 250 million, has not yet begun operations as it is still awaiting a licence. Officials said a significant portion of the merchant bank's paid-up capital remains unutilised, meaning the company could be liquidated easily, benefiting the merged entity.

On the other hand, SIBL Securities is a large company with a paid-up capital of Tk 1.98 billion. It has around 3,000 clients and reported an operating profit of Tk 77 million in 2024, while earnings in the eleven months to November this year totalled Tk 40 million amid the persistent fall of the equity market.

Mohammad Shoeb, chief executive officer of SIBL Securities, said officials of the central bank continued discussions with them about the subsidiaries.

"Subsidiaries are now assets of the merged entity. So, Sammilito Islami Bank can liquidate any organisation following a court order [regarding liquidation] or continue operations if it sees business prospects," he said.

The merchant banks of FSIBL, Exim Bank, and SIBL could be merged into a single entity. SIBL Investments is not operating, so it can either be liquidated or merged into another entity.

"We are sure that SIBL Securities will be able to sustain operations," said Shoeb.

Of the five Islamic banks, only SIBL has a brokerage firm, while the others have merchant banks and money exchange companies. Nizam Kazi, company secretary of First Security Islami Bank, said they were awaiting a decision from the central bank.

Meanwhile, the assets of the troubled Islamic banks, including loans and advances - around 90 per cent of which are classified - will be transferred to Sammilito Islami Bank. The merged entity will have to recover those non-performing loans.

The central bank has already nullified the free float of the Islamic banks, adding to the financial distress of general shareholders.

Questions have arisen about the fate of the subsidiaries operating in the secondary market and their clients, who are also investors. Additionally, the Bank Resolution Ordinance 2025 does not clearly address what happens to subsidiaries when parent companies complete the merger process.

The Bangladesh Securities and Exchange Commission (BSEC) last month renewed the licence of SIBL Securities.

In this regard, the spokesperson of the securities regulator, Md. Abul Kalam, said the regulator had renewed the licence in due course, in compliance with securities rules and regulations.

"Subsidiaries are separate legal entities. Every stock brokerage house or merchant bank is required to renew their licence every year. As separate legal entities, subsidiaries will continue operations under the existing securities rules until the merged entity takes any final decision," said Mr Kalam.

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