BSEC to restructure board of ICB Islamic Bank

In an effort to improve the financial situation of ICB Islamic Bank, the Bangladesh Securities and Exchange Commission (BSEC) has taken steps to restructure the board of the poor-performing bank.

As part of this, two independent directors will be appointed to the board of the listed bank, BSEC sources said.

Besides, instructions will be given by the commission to improve the business condition of the bank including its loan collection activities.

BSEC officials recently held a meeting with the board members and officials of the bank where they were informed of the decisions.

According to BSEC sources, the board, chief financial officer (CFO) and company secretary of ICB Islamic Bank were summoned to the commission on June 21 for failing to pay dividends to investors for a long time.

The commission is holding regular discussions with such ailing listed companies to make them financially viable, BSEC Executive Director and Spokesperson Mohammad Rezaul Karim told the Business Insider Bangladesh.

As part of that move, the commission held the meeting with ICB Islamic Bank last week, he said.

In the meeting, chaired by BSEC Chairman Prof Shibli Rubaiyat Ul Islam, ICB Islamic Bank officials said it was not possible to raise new capital due to legal complications. As a result, its reconstruction activities are not gaining momentum.

During the discussion, the commission gave instructions to the bank on how to recover its defaulted loans quickly, recover the funds, reduce unnecessary expenses and increase profits.

Also at the meeting, the regulator directed the bank to recast its board of directors, including an expert and an independent director to help change the bank’s financial shortfall.

In this regard, capital market expert Professor Abu Ahmed said ICB Islamic Bank is in the worst position among all listed banks in the capital market and its shareholders have long been suffering from it.

It should not be acceptable that a listed company would not pay dividends year after year, he said.

“Now if the commission takes any initiative to improve the condition of the bank, it will be very beneficial for the investors,” he said, adding that the BSEC can take cooperation from the central bank if necessary.

ICB Islamic Bank, formerly known as Oriental Bank, was listed on the stock exchange in 1990.

It has a current authorised capital of Tk 1,500 crore and paid up capital of Tk 664,70,20,000.

According to the audited financial statements for the financial year ended December 31, 2021, ICB Islamic Bank’s accumulated losses stood at Tk 1,923 crore, up from Tk 1,884 crore in the previous year.

In 2021, the bank’s negative equity stood at Tk 1,205 crore, up from Tk 1,165 crore in the previous year. The capital adequacy ratio of the bank has been negative 137.41 percent at the end of 2021, which was negative 133.16 percent in 2020. About 80.80 percent of the bank’s total investments have now defaulted, up from 73.37 percent in 2020.

The total number of shares of the company is 66,47,02,330. Of these, 52.76 percent are held by entrepreneurial directors, 0.17 percent by the government, 22.34 percent by institutional investors and the remaining 24.73 percent by ordinary investors.

Incidentally, Oriental Bank was acquired by Bangladesh Bank in 2006 due to financial fraud of Tk 650 crore.

Some shareholders were anonymously holding more than 10 percent of Oriental Bank’s shares in violation of the Banking Companies Act.

During the acquisition, 86.34 percent of the shareholders’ shares — with a face value of Tk 445 crore — were confiscated by the Bangladesh Bank in its favour.

Bangladesh Bank later appointed an administrator. However, when depositors went to withdraw money from the bank, it fell into a liquidity crisis.

Later in 2007, a scheme was introduced with a period of six and a half years to repay the depositors. However, the term of the scheme has been extended a few times later.

Under the new scheme, the bank’s paid-up capital is estimated at Tk 700 crore. Some 52.67 percent of its shares were sold through open tender to Malaysia-based ICB Financial Group Holdings AG, which is based in Switzerland.

After the restructuring, the bank was renamed ICB Islamic Bank Limited in 2008.