Bank Asia valuation report: fair value BDT 6.3–19.4 (Oct 2026)

Fair value BDT 6–19, base 11; the price of 17.0 implies a 13% sustainable ROE

Bank Asia PLC (DSE: BANKASIA) has become a bank that earns its profit on government bonds, and that profit is shrinking as yields fall. In 2025 net interest income was negative (BDT -1.38bn), because the interest paid on the deposits that fund a BDT 220bn bond book sits in interest expense, while the bonds' BDT 26.4bn of income (including BDT 3.3bn of trading gains) sits in investment income [s1 p.305, p.357]. Those bonds were bought when T-bills paid 11–12%. The coupon yield on the book fell from 11.6% in 2025 to about 8.6% in H1 2026 [2 p.34], and new 364-day bills clear at 8.79% [8]. Core earnings (net interest income plus coupons, before gains) fell to about 3.1% of loans and investments from 4.4% [12].

Profit still rose: 9M 2026 consolidated net profit was BDT 4.72bn against 3.51bn, and Q3 alone earned 2.08bn [4]. Most of that Q3 jump came from tax and provisions, not from the core: Q3 tax was BDT 169mn on a profit before tax of 2,246mn (7.5%), provisions were 1,483mn against 3,347mn a year earlier, and investment income rose to 7.89bn, of which we estimate about 1.7bn was bond gains [4]. Q3 net interest income was more negative than a year ago (BDT -2.26bn vs -0.93bn) [4]. The bank's own tax reconciliation shows that the low tax rate comes mostly from deductible provisions and write-offs (-20.4 points), not from tax-exempt treasury income (-3.8 points) [4], so it fades as the write-off clean-up ends. Our forecast has standalone EPS of BDT 3.80 in FY2026F, falling to 2.09 in FY2027F as gains stop and tax returns to about 40% [12].

Our sustainable ROE is 9.9%, the median of the bank's own reported ROE in 2021–25 (9.9 / 10.9 / 8.2 / 9.0 / 13.3%) [1 p.36]; the driver-based model gives 7.9% for FY2028F [12]. The bear and bull cases sit 1.7 points either side (8.2% and 11.6%). Against a 15.8% cost of equity, every taka of book is worth about 0.49 taka, and growth adds little: at Bank Asia's usual 57% payout, retained profit funds only 4.3% growth a year. That gives a base value of BDT 11.2 and a range of 6.3–19.4, probability-weighted 12.0 [12]. The price of 17.0 is 0.63x the June 2026 book of BDT 27.01; at our cost of equity it implies a lasting ROE of about 13.0%.

A 131-branch bank with 5,057 agent outlets: deposits come from the villages, profit from T-bills

Bank Asia is a second-generation private commercial bank with 131 branches, 14 sub-branches, 15 Islamic windows and an offshore banking unit [1 p.36]. It makes money three ways: lending to corporates, trade and SMEs (BDT 295bn of loans at Dec-25), investing surplus deposits in government securities (BDT 209bn), and fees on trade, remittances and cards [1 p.303]. In 2025 loans grew only 0.3% while deposits grew 9.6%; in H1 2026 deposits grew 14.8% to BDT 524bn and loans 4.0% to 306bn [1 p.35] [2 p.7]. The loan-to-deposit ratio fell from 82% in 2021 to 58% in June 2026, so a growing share of every deposit taka goes into bonds.

Agent banking is the bank's distinctive franchise. Bank Asia started agent banking in Bangladesh and runs 5,057 outlets in all 64 districts and 492 upazilas, 89% of them rural, plus 29,238 micro-merchants [s1 p.85-86]. The bank reports a 24% share of the country's agent outlets and 30% of its 23 million agent-banking customers; it holds 7.53 million agent accounts, 64% owned by women, and pays social-safety-net allowances to 3.5 million people [1 p.85]. Agent deposits reached BDT 67.8bn in 2025 (+22%), about 15% of total deposits, and the bank reports agent-banking profit of BDT 1.65bn (+45%) [1 p.85]. Loans through agents were BDT 24.5bn disbursed [1 p.86]. These are small, sticky savings deposits, which is why we keep deposit growth at 10% a year in the base case (system deposits grew 10.7% in the year to June 2026 [9]).

Remittances are a large flow but a small earner. Inward remittances through the bank were US$1,370mn in 2025, up 23% [1 p.111], helped by two remittance subsidiaries in the UK and USA and the agent network that pays them out. Remittance income is thin, though: commission, exchange and brokerage income fell 36% in 2025 to BDT 3.15bn, mainly because foreign-exchange gains halved (BDT 1.55bn vs 3.07bn) as the taka stabilised, and imports fell 11% in dollar terms [s1 p.357, p.111]. It fell another 35% in H1 2026 [2 p.34]. We forecast a further 28% fall for FY2026 and 8% growth a year after that [12].

What is coming. The bank agreed to buy Bank Alfalah Limited's Bangladesh operations (seven branches) for a base price of Tk580 crore; shareholders approved it at an EGM on 12 April 2026, and it awaits Bangladesh Bank and State Bank of Pakistan approval [1 p.322] [11] [10]. The board also approved a Hong Kong money-lending subsidiary with HK$6mn of capital over three years (28-Oct-2026) and a BDT 8bn subordinated bond, which BSEC cleared on 30-Sep-2026 [5]. We do not model the Alfalah deal until it closes; The Business Standard reported Alfalah Bangladesh's 2025 total assets at Tk2,942 crore and net assets at Tk102 crore [10], about 4% of Bank Asia's assets.

Cost of funds of 6.2% against 8.6–8.8% T-bills leaves a thin carry on half the balance sheet

Deposits are growing fast but are expensive. Fixed deposits were 60% of deposits in June 2026 and grew 24.7% in six months; current and savings accounts were 35% [2 p.7]. Interest expense over average deposits and borrowings was 6.43% in 2025 (5.93% in 2024) and 6.22% annualised in H1 2026 [12]; the bank's own cost of deposit was 6.06% in 2025, up from 4.41% in 2023 [1 p.36]. The system's weighted average deposit rate was 6.21% in June 2026 and the lending rate 12.13% [9]. Overnight call money was 9.24% on 29 October [8].

Q3 2026 interest expense (BDT 9.06bn consolidated) was 16% higher than a year earlier, while interest income was flat [4], so deposit costs have not yet started to fall. We assume cost of funds of 6.2% in H2 2026, 5.9% in FY2027F and 5.7% in FY2028F as term deposits reprice to a lower T-bill curve. A 1-point higher cost of funds (with a 2-point lower sustainable ROE) cuts fair value to BDT 7.0 [12].

Investment income is 106% of core revenue, so a 1-point fall in bond yields takes fair value to BDT 8.2

The earnings tree. In 2025 interest income was BDT 28.7bn (loans 25.7bn) and interest expense 30.1bn, so net interest income was -1.38bn; investment income was 26.4bn: T-bill interest 10.8bn, T-bond interest 9.4bn, gains 3.3bn [s1 p.305, p.356-357]. Loans yield only about 8.7% on the book because BDT 24.7bn of classified loans earn nothing and interest suspense rose to BDT 10.4bn [1 p.345]. Total operating income was BDT 29.8bn, cost-to-income 35%, and provisions took BDT 14.3bn of the 19.4bn pre-provision profit [1 p.305].

Line by line forecast. Interest income = loan yield × average loans (9.4% in H2 2026, falling to 8.8% by FY2028F as lending rates follow T-bills; loans grow 2% in H2, then 6% and 8%). Interest expense = cost of funds × average deposits and borrowings. Investment income = coupon yield × the bond book, which is what is left of the balance sheet after loans (8.6% in H2 2026, 8.3% and 8.1% after). For H2 2026 the loan yield (9.0%) and cost of funds (6.35%) are the Q3 annualised rates [4]. Securities gains are a separate input: BDT 1.1bn in H1 2026 [2 p.34]; about 1.7bn in Q3 (our estimate: Q3 investment income less coupons at the H1 yield) and 0.5bn in Q4, then 0.3bn and zero. Staff costs grow 13% in FY2026F (H1: +14%) and 9–10% after; other costs 5–7% [2 p.9]. Tax is built from the bank's Q3 reconciliation: 37.5% statutory, less 3.8 points for tax-exempt treasury income, less 20.4 points for deductible provisions and write-offs [4]. That last item belongs to the 2025–26 write-off clean-up; before it, in 2021–24, the rate ran 39–56% because provisions were added back [1 p.35]. We use 22% for H2 2026 (Q3's 7.5% plus a Q4 year-end true-up) and 40% from FY2027F (37.5 − 3.8 + about 6 points of non-deductible provisions at a 2% credit cost); bear 44%, bull 36%. Result: total operating income of BDT 24.4bn in FY2026F, 24.6bn in FY2027F and 26.3bn in FY2028F, and net profit of 5.65bn, 3.28bn and 3.66bn [12].

Q4 2026 against the run rate. Consolidated 9M net profit was BDT 4.72bn [4]. The Q3 statement is consolidated only, so we compare it with our standalone forecast; the gap is small (consolidated 4.44bn against 4.46bn standalone in 2025 [s1 p.300, p.305]), and we will restate with the 9M standalone figure once it is filed. Our FY2026F standalone 5.65bn implies Q4 net profit of about BDT 0.88bn against 1.29 / 1.41 / 2.08bn in Q1–Q3. Line by line: Q4 operating income is 5.61bn against 6.92bn in Q3, almost all because bond gains fall from about 1.7bn to 0.5bn; net interest income (-2.31bn) is in line with Q3 (-2.26bn); provisions (1.28bn) are close to Q3 (1.48bn); and the tax rate rises from 7.5% to 43% as the year-end computation adds back non-deductible items, in line with the bank's stated 37.5% tax provisioning [4]. FY2027F falls further because gains disappear, tax is about 40% and core NIM stays near 3.0%; ROE drops to 7.8%.

NPL fell to 8.38% after BDT 12.9bn of write-offs; there is no provision deferral, but BDT 14.8bn sits under stay orders

No Bangladesh Bank provision deferral. The auditor (MABS & J Partners) gave an unmodified opinion with an emphasis of matter that only points to note 2: the accounts follow Bangladesh Bank's rules on loan classification and provisioning [1 p.293]. The key audit matter says the auditor compared loan classification and provisions with the BB inspection team's requirement (letter of 28 April 2026) [1 p.294], and the bank's classified-loan disclosure shows a provision surplus or shortfall of nil [1 p.366]. So, unlike banks that carry a deferred shortfall, we value Bank Asia on its reported book less an NPL haircut, not on a book cut for unbooked provisions.

The NPL ratio fell for a reason. Classified loans fell from BDT 33.5bn (11.40%) to 24.7bn (8.38%) in 2025 [1 p.35], mainly because the bank wrote off BDT 12.9bn of fully provided loans [1 p.346]; cumulative written-off loans are BDT 39.9bn [1 p.158]. Specific provisions of BDT 22.5bn cover 91% of classified loans, plus 6.5bn of general provision [1 p.346]. The auditor notes that a 'significant proportion' of classified borrowers took BB's special rescheduling (BRPD circular 07 of 2025) and are reported as unclassified [1 p.293]. 6.72% of rescheduled loans fell back into default and now make up 23.69% of classified loans, and BDT 14.8bn of loans are under court stay orders [s1 p.157-158]. The bank targets an NPL ratio below 7.36% for 2026 [1 p.158]. The interims do not disclose the June 2026 NPL; interest suspense rose 18% to BDT 12.3bn in H1 2026, which suggests more loans stopped paying [2 p.26]. The system classified-loan ratio was 31.2% at Dec-25, as quoted by the bank [1 p.158].

Forecast. Credit cost (provisions over average loans) was 4.85% in 2025 and 1.80% annualised in H1 2026 [12]; Q3 provisions were BDT 1.48bn consolidated [4]. We use 1.8% for H2 2026, 2.1% in FY2027F and 2.0% in FY2028F, against 1.5–2.4% in 2021–23. If the stay-order loans were classified and 50% provided in FY2027 (about 2.3 points of extra credit cost) and the NPL haircut rose to 100%, fair value would be BDT 10.0; a 3% credit cost in FY2027–28 gives 9.5 [12].

Paid-up capital must rise 44% to Tk2,000 crore before Bank Asia can pay cash again

The rule. Bangladesh Bank's SPCD Circular No. 06 of 23 May 2026 says a bank with paid-up capital below Tk2,000 crore may not pay any cash dividend, and a bank above the line may pay at most 50% of its total declared dividend in cash. It applies to dividends for the year ending 31 December 2026 and later [6]. Bank Asia's paid-up capital is Tk1,391.5 crore (1,391.5mn shares) after the 8.5% stock dividend for 2025 [2 p.12]. The 2025 dividend of 8.5% cash plus 8.5% stock (cash 0.85 a share on the old share count, about a 5% yield) cannot be repeated for 2026 [1 p.36].

Two routes, and the bank has prepared for both. Shareholders raised authorised capital from Tk1,500 crore to Tk3,000 crore, certified by the RJSC in August 2026 [5]. (a) Stock dividends: two 20% bonus issues, for FY2026 and FY2027, take paid-up capital to Tk2,004 crore by mid-2028, so cash can resume with the FY2028 dividend; we assume 30% of profit in cash then [12]. A bonus issue moves no value: it only spreads it over more shares (base value per post-bonus share BDT 7.79). (b) A rights issue of 608mn shares at Tk10 (about 1 for every 2.3 held) would raise BDT 6.1bn at once; the theoretical ex-rights price at today's 17.0 is 14.87. Because new capital would earn about 10% against a 16% cost of equity, our base value per post-rights share would be BDT 9.29 [12].

Capital is adequate. CRAR was 15.32% and Tier-1 11.28% at Dec-25 (minimum 12.5% with the buffer), BDT 8.5bn above the requirement [1 p.35]. Tier-1 includes a BDT 3.68bn 10% perpetual bond, whose BDT 368mn coupon is paid before ordinary shareholders [s1 p.305, p.345]. With no cash dividend and the BDT 8bn subordinated bond, we forecast CRAR of 18.2% in FY2027F [12]. Retained profit, not regulation, limits growth: at a 10% ROE the bank can fund only about 4.3% growth a year from its own profit at its usual payout.

Subsidiaries earn 0.1% of profit; the Tk580 crore Alfalah deal is the event that matters

Subsidiaries are not material, and we do not use a sum of the parts. Bank Asia Securities (brokerage, 99.99% owned) earned BDT 5.7mn in 2025 on equity of 3.28bn, after BDT 72mn of margin-loan provisions; the bank injected BDT 1.2bn of capital in December 2025 [s1 p.396-397] [5]. BA Exchange Company (UK) made a loss of GBP 144k and BA Express USA a profit of USD 17k; both channel remittances [s1 p.415, p.421]. Consolidated profit was BDT 4.44bn against 4.46bn standalone [s1 p.300, p.305]. No part is 15% of value, so we value the standalone bank and write Bank Asia Securities down by BDT 740mn to 75% of its own book, because it earns far below its cost of capital.

Bank Alfalah Bangladesh (not modelled). The bank agreed a scheme to take over the assets and liabilities of Bank Alfalah's seven Bangladesh branches for a base consideration of Tk580 crore, subject to closing adjustments, Bangladesh Bank and State Bank of Pakistan approval [1 p.322]. Both The Financial Express and The Business Standard reported the price and that Bank Alfalah's shareholders approved it in March 2026 [11] [10]. The Business Standard also reported that management said no goodwill premium would be paid [10]. The price is about 15% of Bank Asia's June 2026 book. If it paid more than net assets, the goodwill would be deducted from Tier-1 capital. We will add the deal to the model when it closes and the acquired balance sheet is published.

Governance and shareholders. The auditor's opinion is unmodified, with the BB-rules emphasis of matter that most banks carry [1 p.293]. CRISL rates the bank AA+/ST-1 with a stable outlook (June 2026) [5]. Sponsor director Rumee A Hossain sold 4.66mn shares between July 2025 and August 2026; the managing director bought 100,000 shares in September 2025 [5]. The board approved a BDT 10bn green subordinated bond (May 2026) and BSEC cleared a BDT 8bn sustainable bond (September 2026) [5].

Net profit falls from BDT 5.7bn in FY2026F to 3.3bn in FY2027F as gains and tax relief fade

Each line has its own driver, with the history and reason in the Note column of the Assumptions sheet. Bear and bull cases move the same drivers by similar amounts either side of the base: deposit and loan growth ±2–3 points, loan yield and cost of funds ±0.1–0.3 points, credit cost ±0.3–0.5 points, tax ±4 points (44% / 36%), H2 bond gains ±0.5bn, sustainable ROE ±1.7 points and the NPL haircut ±25 points. Bear-case EPS is BDT -0.39 in FY2027F and bull-case 5.07 [12].

Note: the model uses line items to H1 2026 and the 9M 2026 consolidated totals; it will be updated when the full Q3 notes or the FY2026 audited accounts are filed, and after the Q3 earnings programme (3 November 2026), which we have not yet seen.

Fair value BDT 6–19: base 11 = 0.42x June 2026 book for a 9.9% sustainable ROE

Method. Residual income on adjusted book (80%) and a justified P/E on normalised earnings (20%). A peer P/B leg is not used because peers' book values are only available to us on a consolidated screener basis, not from their filings (the Peers sheet is context). Cost of equity is 15.8%: the 10-year T-bond cut-off of 9.268% (25-Oct-2026) [8] plus a Blume-adjusted beta of 0.87 (raw 0.81 against the DSEX on two years of weekly data [7]) times a 7.5% equity risk premium.

Sustainable ROE and growth. We anchor the sustainable ROE to Bank Asia's own record: base 9.9% is the 2021–25 median, with bear 8.2% (the 2023 low) and bull 11.6% symmetric at ±1.7 points [1 p.36]. We do not use 2025's 13.3% as a bull anchor, because BDT 3.3bn of bond gains and a 12.7% tax rate flattered it [s1 p.305, p.357]. The NPL haircut is 50% in the base and moves ±25 points (75% bear, 25% bull). The driver-based model's FY2028F ROE, with bond yields at the T-bond rate less one point and no gains, is 7.9%, below the base: it carries a 40% tax rate and no gains, so we treat it as a bear-side check rather than the anchor [12]. Terminal growth is the lower of 7% and ROE × retention; Bank Asia has paid out a median 57% of profit in cash over five years (65/57/73/42/24%) [s1 p.35-36], so g = 9.9% × 43% = 4.3%. The same g and payout feed the terminal value, the justified P/B (0.49x = (ROE − g)/(Ke − g)) and the justified P/E (5.1x = payout × (1 + g)/(Ke − g)). Once cash is allowed, SPCD caps it at 50% of the dividend, so the rest of the 57% payout would be retained as excess capital, which is value-neutral.

Result. Adjusted book of BDT 33.4bn, plus negative residual income of -4.5bn over FY2026–28 (profit below the 15.8% charge on book) and a terminal term of -14.7bn, (the cost-of-equity charge is on adjusted book, the same basis as the start) gives 14.2bn at Dec-25, or BDT 10.74 a share rolled to October 2026 after the 2025 dividend. The P/E leg is 5.1x normalised EPS of BDT 2.56 = 13.14. The 80/20 blend is BDT 11.20, which is 3.0x FY2026F and 5.4x FY2027F EPS [12]. The two legs reconcile: both use ROE 9.9%, g 4.3% and a 57% payout; the P/E leg is higher because it capitalises normalised earnings on today's book, while the residual-income leg charges the FY2026–28 years at their lower forecast profit.

Reverse check. The price of 17.0 implies a sustainable ROE of about 13.0% at our cost of equity and growth rule; Bank Asia's reported ROE was above 12% once in five years (2025) [1 p.36]. Other DSE banks with ROE near 10% also trade around half of book: MTB at 0.50x and Dhaka Bank at 0.47x on the screener's consolidated figures [7].

Funding cost is the biggest risk: a 1-point rise takes fair value to BDT 7.0

Each risk below moves a model line; the values come from recalculating the workbook with that change, keeping everything else at the base case. Upside risks are a tax rate nearer the 34% that exempt treasury income alone would give, faster repricing of fixed deposits, and recoveries from the BDT 39.9bn of written-off loans (BDT 236mn recovered in 2025 [1 p.158]). The Bank Alfalah deal could change capital (goodwill against Tier-1) once its terms close; it is not in the numbers.

Catalysts and signposts. Q3 2026 earnings programme on 3 November 2026; Bangladesh Bank and SBP decisions on Bank Alfalah; the FY2026 dividend declaration (stock only under the rule) around April 2027; the June 2026 NPL and rescheduled-loan figures in the next full report; the issue of the BDT 8bn subordinated bond; and the fixed-deposit rate against T-bill yields each quarter.

FAQ

What is Bank Asia's (BANKASIA) fair value?

We estimate BDT 6–19 a share, base 11 and probability-weighted 12, against 17.0 on 29-Oct-2026. It blends residual income on adjusted book (80%) and a justified P/E (20%), with a sustainable ROE of 9.9% and a 15.8% cost of equity.

Can Bank Asia pay a cash dividend for 2026?

No. Bangladesh Bank's SPCD circular 06 of 23 May 2026 bars cash dividends for banks with paid-up capital below Tk2,000 crore from the FY2026 dividend onward, and Bank Asia's is Tk1,391.5 crore. It needs 44% more capital, through stock dividends or a rights issue; authorised capital is already Tk3,000 crore.

Does Bank Asia have a provision shortfall or a Bangladesh Bank deferral?

No. The 2025 audit opinion is unmodified, the classified-loan disclosure shows no provision shortfall, and the auditor checked provisions against BB's inspection letter of April 2026. Gross NPL was 8.38% at Dec-25 after BDT 12.9bn of write-offs.

Why is Bank Asia's net interest income negative?

The bank funds a BDT 285bn bond book with deposits. The deposit interest is in interest expense, but the bond income is in investment income. In 2025 net interest income was BDT -1.38bn while investment income was 26.4bn.

How big is Bank Asia's agent banking business?

5,057 outlets, 7.53 million accounts (89% rural, 64% women) and BDT 67.8bn of deposits at Dec-25, up 22%. The bank reports 24% of Bangladesh's agent outlets and BDT 1.65bn of agent-banking profit.

What is the Bank Alfalah deal?

Bank Asia agreed to acquire Bank Alfalah's Bangladesh operations (seven branches) for a base price of Tk580 crore. Shareholders approved it in April 2026; it awaits Bangladesh Bank and State Bank of Pakistan approval. We will model it when it closes.

Sources

1. Bank Asia PLC Annual Integrated Report 2025 (year to 31-Dec-2025), standalone and consolidated; page numbers are PDF pages (printed page = PDF page - 1) · link · accessed 2026-10-31
2. Bank Asia PLC un-audited consolidated and separate financial statements, half year to 30-Jun-2026 · link · accessed 2026-10-31
3. Bank Asia PLC un-audited financial statements, quarter to 31-Mar-2026 · link · accessed 2026-10-31
4. Bank Asia PLC un-audited consolidated financial statements, third quarter to 30-Sep-2026 (one-page published statement; figures read from the page image) · link · accessed 2026-10-31
5. Dhaka Stock Exchange news archive for BANKASIA, Nov-2024 to Oct-2026 (dividends, capital, bonds, Bank Alfalah, Hong Kong subsidiary, Q1-Q3 2026 results) · link · accessed 2026-10-31
6. Bangladesh Bank SPCD Circular No. 06, 23-May-2026, dividend declaration policy for banks (Bangla) · link · accessed 2026-10-31
7. AnalystBro market data: DSE prices (BANKASIA, DSEX) and bank screener, 29-Oct-2026 · link · accessed 2026-10-31
8. Bangladesh Bank call money and treasury auction pages, 29-Oct-2026 (10-year bond cut-off 9.2680% on 25-Oct-2026) · link · accessed 2026-10-30
9. Bangladesh Bank, Scheduled Banks Statistics Apr-Jun 2026 (Table 102) · link · accessed 2026-10-30
10. The Business Standard, 'Bank Asia to acquire Bank Alfalah Bangladesh for Tk580cr', 29-Mar-2026 · link · accessed 2026-10-31
11. The Financial Express, 'Bank Asia to acquire Bank Alfalah's Bangladesh operations for $47.5 million', 28-Mar-2026 · link · accessed 2026-10-31
12. AnalystBro model (workbook on this page) · accessed 2026-10-31