Islami Bank Bangladesh financial analysis: 49.65% classified, BDT 846.2bn provision gap, Z category (Oct 2026)

Investment considerations: provision shortfall, capital and deposits

Updated 2-Nov-2026: added the business model and industry forces, the Q3 2026 quarter on its own, the 37 large exposures and their classified share, the IB General account and other-assets fall, Bangladesh Bank borrowings by facility, profit paid by funding source and 2025 deposit rates, the bank's yield and cost of funds beside BB Table-102 system rates and the policy rate, the BB income-adjustment letter, credit-rating history, subordinated bonds, the mCash investor proposal, tax and staffing, and five years of DSE posts.

Islami Bank Bangladesh PLC (IBBPLC) is a DSE-listed Islamic bank. At December 2025 the bank had BDT 1,818.2bn of deposits, BDT 1,861.0bn of investments (Shariah financing) and BDT 2,360.6bn of assets, with 400 branches, 271 sub-branches and 2,788 agent banking outlets [1 p.195] [1 p.196]. It takes Mudaraba (profit-sharing) and Al-wadeeah (current) deposits and lends through Bai-Murabaha, Bai-Muajjal, hire purchase under Shirkatul Melk and other modes [2 p.15]. Its subsidiaries are Islami Bank Securities Limited, Islami Bank Capital Management Limited and, from 2026, mCash Limited, a mobile financial services company [2 p.14] [21]. Remittance handled was BDT 752.2bn in 2025 [1 p.196].

How the bank earns: it collects Mudaraba deposits, on which depositors share in investment income by product weightage, and Al-wadeeah current deposits, which earn nothing; it invests the funds through Shariah modes and keeps the difference between investment income and profit paid [1 p.257] [1 p.59]. At December 2025 Bai-Murabaha was 70.96% of investments, hire purchase under Shirkatul Melk 15.95% and Bai-Muajjal 5.55% [1 p.57]. By sector, industrial investment was 61.57% and trade and commerce 28.09%; the largest industrial line was agro-based industry at BDT 403.4bn, from BDT 231.8bn a year earlier [1 p.57] [1 p.280]. Chattogram division held 41.48% of investments and Dhaka division 37.71% [1 p.57]. In 2025 investment income was BDT 123.9bn, of which Bai-Murabaha BDT 68.8bn and hire purchase BDT 26.8bn; non-investment income was 14.77% of total income [1 p.303] [1 p.196]. Funding at December 2025 was deposits of BDT 1,818.2bn (Mudaraba term BDT 731.8bn, Mudaraba savings BDT 556.4bn, other Mudaraba BDT 336.0bn, Al-wadeeah BDT 186.7bn), BDT 195.6bn borrowed from Bangladesh Bank and BDT 69.6bn of equity [1 p.286] [1 p.231]. Inputs are staff (17,730 at December 2025) and the branch, sub-branch and agent network [1 p.196]. Control: sponsors and directors held 0.18% at December 2025 and institutions 74.84%; the board has been appointed by Bangladesh Bank since August 2024 (see Governance) [1 p.179] [21].

Industry forces, from the filings. Rivalry: the risk report names 'Displaced Commercial Risk', which 'may arise when market competition pressures the Bank to offer returns to depositors that exceed the actual returns generated from underlying assets' [1 p.131]; the bank's own market-share figures are not printed. Funding (supplier) power: profit paid to Mudaraba depositors was BDT 95.2bn in 2025, 76.8% of investment income (derived); all profit paid, including placements, BB borrowing and bonds, was BDT 105.6bn, 85.2% [1 p.304] [1 p.303]; Bangladesh Bank lent BDT 195.6bn at December 2025, including BDT 76.5bn of Quard against BGSP bonds under special liquidity support [1 p.286]. Buyers: 37 clients each above 10% of regulatory capital held BDT 865.5bn, 46.5% of investments (derived) [1 p.280]. Entry barriers: a Bangladesh Bank banking licence and Islamic-banking guidelines (BRPD Circular No. 15 of 2009) [1 p.239]. Substitutes: none disclosed.

This note uses the consolidated accounts as the headline view and shows the bank (separate) figures beside them. The two differ by small amounts: consolidated profit after tax was BDT 1,363.4m in 2025 and the bank's was BDT 1,073.6m [1 p.227] [1 p.233]. Asset quality, provisions and capital are printed on a bank basis, and the five-year history is the bank's own five-year table [1 p.195].

The Daily Star reported that the group took charge of the bank in 2017 and that Bangladesh Bank (BB) dissolved its board on 21-Aug-2024 and formed a five-member board of independent directors the next day [22]. At December 2025, classified investments were BDT 943.2bn; the provision BB and the auditors require is BDT 925.4bn; the bank held BDT 79.2bn. BB allowed the bank to finalise its 2025 accounts without booking the BDT 846.2bn difference [1 p.217] [1 p.218]. Bank equity was BDT 69.6bn [1 p.231]. Equity less the deferred shortfall is BDT -776.5bn, or BDT -482.3 a share (derived, no tax effect) [29]. The auditor states that, without BB forbearance, the bank's aggregated loss on a solo basis would have been Taka 84,507.83 crore [1 p.218].

The auditor states: 'Non-recognition of shortfall in provision has its consequential impact such as overstatement of assets, net profit and equity and understatement of liability.' [1 p.217] Profit/rent/compensation suspense, the income booked on classified investments and not taken to profit, rose from BDT 81.3bn to BDT 115.8bn in 2025 [1 p.282]. The bank is below its capital requirement by BDT 93.5bn, and BB required a board-approved time-bound plan for the provision and capital shortfall within a month of finalising the accounts [1 p.218]. Cash dividends were 10% for 2017-2023 and nil for 2024 and 2025 [11 p.208] [1 p.196] [21].

The story: classified investments from BDT 69.2bn to BDT 943.2bn in two years

From 2017 to 2023 the bank's five-year tables show classified investments of 3.31-4.32% of investments, CRAR of 11.30-13.55%, profit after tax of BDT 4.5-6.1bn and a 10% cash dividend each year [11 p.206] [11 p.207] [11 p.208] [1 p.195] [1 p.196]. The printed investment deposit ratio was 87.80% (2017), 79.74% (2021) and 96.72% (2025) [11 p.206] [1 p.195].

Classified investments went from BDT 69.2bn (4.32%) at end-2023 to BDT 657.2bn (42.36%) at end-2024 and BDT 943.2bn (49.65%) at end-2025 [1 p.195]. CRAR fell from 12.62% to 7.57% and then 6.42% [1 p.195]. Profit after tax fell from BDT 6.1bn (2023) to BDT 1.0bn (2024) [1 p.196]. The Daily Star reported in August 2024 that documents showed S Alam Group holding about 82% of the bank, a figure the group disputed, and that BB moved to seize its shares [22]. The bank's December 2025 shareholding table lists sponsors and directors at 0.1841% and institutions (excluding foreigners) at 74.84% [1 p.179].

The 2024 statements say how the year-end provision was set: 'decision taken in tripartite meeting amongst Bangladesh Bank Inspection Team, External Auditors and the Management of Islami Bank Bangladesh PLC. and subsequent Bangladesh Bank Letter No.DBI-6/51(1)/2025-376 dated 27 April 2025' [10 p.76]. Note 11.6 counts 32 clients above 10% of regulatory capital at both year-ends: their investments were BDT 499.4bn at December 2023 with classified amount 'Nil', and BDT 716.8bn at December 2024 with BDT 519.0bn classified, 79.0% of all classified investments that year (derived) [10 p.65] [29]. The filings do not name the borrower groups or a BB inspection finding that reclassified them (searched: AR2024 notes 11.5-11.7, 17.1, auditor's report p.2-4; AR2025 notes 11.6-11.7). Provisioning from 2025 follows BRPD Circular No. 15 of 27-Nov-2024 and BRPD Circular No. 29 of 21-Dec-2025 [1 p.251].

Credit ratings moved with the results. ECRL affirmed 'AAA' long term and 'ST-1' short term on FY2023 accounts (DSE post 2-Jul-2024) [30]; ECRL then assigned 'A' and 'ST-2' with a Stable outlook on FY2024 and H1 2025 accounts (29-Dec-2025), and CRISL assigned 'A' and 'ST-3' with a Developing outlook on FY2025 and H1 2026 accounts (25-Aug-2026) [21]. The five-year table prints AAA/ST-1 for 2021-2024 and A/ST-2 for 2025 [1 p.196]. The rating rationales are not in our document set.

The FY2024 accounts took four months longer than the year before. The board could not adopt them on 30-Apr-2025 'due to non-obtention of some vital required decision from Bangladesh Bank', adjourned again on 29-May-2025 and sought three months' extension; they were signed on 26-Aug-2025 [21] [3 p.11]. The 42nd AGM, set for 19-Nov-2025, was postponed and then fixed for 11-Dec-2025 under a High Court order of 07.12.2025 [21].

In 2026 the board changed again. The FY2025 accounts were signed on 29-Apr-2026 by three independent directors and the managing director (current charge) [1 p.226]. Prothom Alo reported that chairman M Jubayedur Rahman resigned on 24-May-2026 and that former BB deputy governor Md Khurshid Alam was appointed independent director and chairman the same day, an appointment that drew customer protests [23]. The bank informed DSE that BB cancelled the appointment of the independent directors by letter dated 14.06.2026 and appointed Mohammad Zahir Hussain, Executive Director of BB, to exercise all the powers and duties of the board [21]. The H1 2026 statements are signed under a 'Single Member Board Authority as per Section 47(3) of the Bank Company Act, 1991' [2 p.3].

Other DSE posts, 2021-2026: BSEC agreed to register the bank as a security custodian (13-Feb-2022); a sponsor, Engr. Mustafa Anwar, sold 226,000 shares (Sep-2022) [31]; the board approved the IBBPLC Fifth Mudaraba subordinated bond of up to BDT 10bn (24-Apr-2024), cut to BDT 5bn after BB's NOC (19-Sep-2024), with BSEC consent for BDT 5,000,000,000 at 'Reference Rate + Coupon Margin' (1-Dec-2024) [30] [21]; BSEC had consented to an earlier subordinated bond by private placement (post 1-Jan-2023), and the board decided to raise the paid-up capital of subsidiary Islami Bank Capital Management Limited from Tk. 30.00 crore to Tk. 60.00 crore, subject to regulatory approval (post 25-Apr-2024) [30]; the 42nd AGM set for 19-Nov-2025 was postponed and held on 11-Dec-2025 [21]; independent director M. Zubaidur Rahman sold his entire 149,622 shares (Sep-2025) [21]; the board approved B100 Holdings LLC, USA, as strategic investor in mCash Ltd. with mCash capital to rise in phases to BDT 500 crore and the bank keeping at least 51% (8-Mar-2026), then postponed the decision 'for completion of necessary due diligence and regulatory clearance' (12-Mar-2026) [21]; and BB cancelled the independent directors' appointments by letter dated 14.06.2026 and appointed Mr. Mohammad Zahir Hussain, Executive Director, Bangladesh Bank, 'to exercise all the powers and duties of the Board of Directors' (post 22-Jun-2026) [21]. The Q3 2026 statements are signed by him as 'Single Member Board Authority as per Section 47(3) of the Bank Company Act, 1991' [9 p.4]. The terms and status of the mCash investment after March 2026 are not disclosed (searched: Q2 and Q3 2026 notes, DSE posts to 2-Nov-2026). mCash Limited is consolidated in the Q3 2026 statements; its capital and result are not printed separately (searched: Q3 2026 notes 8(a), 11(a); AR2025 subsidiary pages) [9 p.15] [9 p.18].

Asset quality: BDT 943.2bn classified, 95.9% of it bad/loss

At December 2025 note 11.7 classifies BDT 943.2bn of the BDT 1,861.0bn book: substandard BDT 10.7bn, doubtful BDT 28.4bn and bad and loss BDT 904.1bn [1 p.282]. On that note's total the ratio is 50.68% (derived); the five-year table prints 49.65% [1 p.195] [29]. The auditor gives gross investment of Taka 189,951.52 crore per BB letter BSD-11/43(3)/2026-497 and classified investments of Taka 94,322.59 crore, which give 49.66% (derived) [1 p.217]. Special mention accounts, the stage before classification, rose from BDT 61.0bn to BDT 179.7bn, or 9.66% of the book [1 p.282] [29].

Bad and loss was 85.5% of classified investments at December 2024 and 95.9% at December 2025 [29]. Classified investments on which profit is not charged equal the bad and loss balance, BDT 904.1bn [1 p.282]. Pledged land and buildings fell from BDT 1,177.5bn to BDT 912.8bn [1 p.282]. The auditor reports that 'multiple exposures were found which exceeded the above regulatory thresholds significantly' for single borrowers and groups [1 p.218]. In the Q3 2026 statements the bank refers to 'classified/ non-performing investments mostly due to embezzlement of the fund by the connected parties of large legacy exposures' [9 p.21].

Note 11.6 gives the large exposures. At December 2025, 37 clients each had investments above 10% of regulatory capital, totalling BDT 865.5bn, of which BDT 613.8bn was classified: 65.1% of all classified investments and 46.5% of the investment book (derived) [1 p.280] [29]. The note names no clients and lists 'Action taken' as the recovery measure [1 p.280]. The auditor reports 'instances where advances or loans were sanctioned in excess of the limits prescribed by the Bangladesh Bank, as detailed in note 11.6' [1 p.222].

Other assets fell from BDT 261.3bn to BDT 51.1bn in 2025 (bank). The fall is in the IB General account, the un-reconciled inter-branch entries, which went from BDT 94.0bn (2023) to BDT 242.8bn (2024) and BDT 13.3bn (2025); at December 2024 BDT 116.0bn of it was 3-6 months old [10 p.69] [10 p.70] [1 p.284] [1 p.285]. In the same year Bai-Murabaha investments rose from BDT 1,007.2bn to BDT 1,309.2bn, agro-based industry from BDT 231.8bn to BDT 403.4bn, other industries from BDT 91.5bn to BDT 216.6bn and Chattogram division from BDT 503.5bn to BDT 771.8bn [1 p.57] [1 p.280]. The filings do not state where the IB General balance was cleared to (searched: AR2025 notes 11, 13, 13.3 and the auditor's report). The account was BDT 19.1bn at September 2026 [9 p.16]. Foreign remittance incentive receivable rose from BDT 1.5bn to BDT 12.1bn in 2025 and BDT 16.1bn at September 2026 [1 p.284] [9 p.16].

Rescheduled and restructured balances are not disclosed for 2024 or 2025 (searched: AR2025 notes 11.1-11.9 p.278-283, Pillar 3 p.137-140, and the investment-recovery article p.151-152, which describes rescheduling only as policy). The note states that 'all the investments rescheduled in line with BRPD Circular No. 16/2022 are classified as BL in case of default' [1 p.137]. Of the classified categories, substandard fell from BDT 80.9bn to BDT 10.7bn while bad and loss rose by BDT 342.2bn and special mention rose by BDT 118.7bn [1 p.282]; the filings print no migration table between categories. Profit/rent suspense in other liabilities was BDT 115.8bn at December 2025 and BDT 128.4bn at September 2026 [9 p.16].

Provisions: BDT 846.2bn required and not booked under BB forbearance

The auditor's first emphasis of matter sets out the shortfall line by line [1 p.217]. For classified investments the required provision is Taka 88,898.59 crore and the bank 'has maintained provision of Taka 5,887.56 crore only', a shortfall of Taka 83,011.03 crore. Off-balance sheet exposures need Taka 746.08 crore with Taka 96.90 crore kept. Balances with other banks and financial institutions need Taka 895.57 crore with Taka 205.57 crore kept. Shares and bonds need Taka 448.00 crore with Taka 183.03 crore kept. The auditor prints the total shortfall as Taka 84,615.15 crore (BDT 846,151.5m) and the totals as required 'Taka 92,537.56 crore' and provided 'Taka 7,922.41 crore' [1 p.217].

Provision held was BDT 71.8bn at December 2024 and BDT 72.5bn at December 2025 [1 p.291]. The 2025 charge for investments was BDT 500m; within it, provision for classified investments was reduced by BDT 10.5bn and general provision on unclassified investments raised by BDT 6.7bn [1 p.292]. Provision held covered 7.7% of classified investments (derived) [29].

The 2026 interim notes print the same comparison. At June 2026 the note 11.1.1 table shows required provision for investments including off-balance sheet items of BDT 895,811.9m, maintained BDT 72,471.9m and a deficit of BDT 823,340.0m; the other-assets table shows a deficit of BDT 10,468.1m [2 p.17]. At September 2026 the tables show required BDT 896,991.4m, maintained BDT 72,471.9m and a deficit of BDT 824,519.6m for investments, and a deficit of BDT 12,172.6m for other assets [9 p.17]. Bank equity was BDT 55.8bn at June 2026 and BDT 35.8bn at September 2026 [2 p.21] [9 p.21]. These interim figures are labelled 'shortfall per note', not deferred: the BB permission in the filings covers the FY2025 accounts [1 p.218].

The same BB letter of 27-Apr-2026 ordered an income adjustment. Note 24 reads: 'As per instruction of Bangladesh Bank through Letter No. BSD-11/43(3)/2026-497 Dated 27 April, 2026, we have deducted Tk. 102.96 crore from banks investment income resulting to investment income amount of Tk. 11,004.54 crore. The balancing amount will be adjusted by September 2026 as per instruction of Bangladesh Bank.' [1 p.303] The auditor's second emphasis of matter says 'a portion of the income has been adjusted during the year while the balance amount will be adjusted within the timeframe as stipulated in the letter' [1 p.218]. The total to be reversed and the balancing amount are not printed (searched: AR2025 note 24 and auditor's report; Q2 and Q3 2026 notes on investment income). Q3 2026 investment income was BDT 17.0bn against BDT 30.3bn in Q3 2025 [9 p.4]; the Q3 statements do not say how much of that is the adjustment.

Audit: unmodified opinions for FY2024 and FY2025 with emphasis of matters on provisions, capital and going concern

The FY2025 opinion is unmodified. The auditors, A. Wahab & Co. and Mahfel Huq & Co., signed on 29-Apr-2026 [1 p.226]. The opinion reads: 'In our opinion, the accompanying consolidated financial statements of the Group and separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December, 2025, and of its consolidated and separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as explained in note 2.1.' [1 p.217] The emphasis of matters section opens 'Without modifying our opinion, we draw attention to the following matters:' and closes 'Our opinion is not modified in respect of the above matters.' [1 p.217] [1 p.218] The six headings, as printed, are 'Provision Shortfall', '2. Investment Income', '3. Capital Adequacy', '4. Credit Concentration Risk', '5. Liquidity & Statutory Compliance' and '6. Other Assets & Recoverability Concerns' [1 p.217] [1 p.218].

The key audit matters are 'Measurement of provision for investments', 'Recognition of investment income', 'Recognition of investment' and 'IT systems and controls' [1 p.219] [1 p.220]. The provision KAM states: 'Due to the high level of judgment involved and the use of the manual process in estimating the provision for investment, we considered this to be a key audit matter.' and the response includes 'Finally, compared the amount of provision requirement as determined by the Bangladesh Bank inspection team to the actual amount of provision maintained.' [1 p.219] The investment income KAM states: 'We identified recognition of Investment income as a key audit matter because this is one of the key performance indicators of the Bank, and therefore, there is an inherent risk of fraud and error in the recognition of Investment income by management to meet specific targets or expectations.' [1 p.219] The investment KAM states: 'We have identified Investment as a key audit matter because there is an inherent risk of fraud and misstatement in the disbursement of investment by management to meet specific targets or expectations.' [1 p.220] The IT KAM states that 'Our audit procedures have a focus on IT systems and controls due to the pervasive nature and complexity of the IT environment, the large volume of transactions processed in numerous locations daily, and the reliance on automated and IT-dependent manual controls.' [1 p.220] The IB General account in other assets was BDT 13,349.0m at December 2025 and BDT 18,274.6m at June 2026 [2 p.16].

The FY2024 opinion, by Mahfel Haq & Co. and A. Wahab & Co. signed on 26-Aug-2025 [3 p.11], reads: 'In our opinion, the accompanying consolidated financial statements of the Group and separate financial statements of the Bank give a true and fair view of the consolidated financial position of the Group and the separate financial position of the Bank as at 31 December 2024, and of its consolidatedand separate financial performance and its consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as explained in note 2.1.' Its emphasis section opens 'Without qualifying our opinion, we are drawing attention to the following facts:' under the headings '1. Provision Shortfall:', '2. Capital Adequacy:', '3. Credit Concentration Risk:', '4. Liquidity & Statutory Compliance:' and '5. Other Assets & Recoverability Concerns:', and closes 'Our opinion is not modified in respect of the above matters.' [10 p.2] [10 p.3] The FY2024 report states a total shortfall in provisions of 'Taka 69,770.90 crore', permitted by BB letter 'DOS (CAMS)1157/41(Dividend)/2025-3101 dated 21 May 2025', and under liquidity: 'the Bank failed to maintain the required CRR and SLR for regulatory periods, incurring a penalty of Taka 568 crore, for which a provision has been made during the year.' It records LCR 'ranging from 22.21% to 94.97%' during 2024 and IB General Accounts of 'BDT 24,280 crore' [10 p.2] [10 p.3].

Capital: CRAR 6.42% and a BDT 93.5bn shortfall before the provision gap

The auditor's paragraph 3 reads: 'the required capital of the Bank as at 31 December 2025 was Taka 19,200.91 crore of Risk Weighted Assets against which the Bank's reported capital is Taka 9,855.19 crore as at the balance sheet date. Thus, the Bank's reported capital shortfall negative is Taka 9,345.72 crore as at the balance sheet date. If the shortfall in provision of Tk. 84,615.19 crore as stated in para 1 above is considered, the Regulatory capital shortfall of the Bank would have been Tk 93,960.92 crore as disclosed in note. 20.2.' [1 p.218]

Risk-weighted assets rose from BDT 858.4bn in 2023 to BDT 1,329.2bn in 2024 (54.8%) and BDT 1,536.1bn in 2025 [1 p.195] [29]. Regulatory capital moved from BDT 108.4bn to BDT 98.6bn over the same two years. Tier-I capital to RWA was 4.79% at December 2025 (derived) [29]. Capital surplus or deficit printed in the five-year table went from BDT 1,072.2m (2023) to BDT (65,480.6)m (2024) and BDT (93,457.3)m (2025) [1 p.195]. The table prints statutory capital (paid-up capital and statutory reserve) of BDT 38,835.4m [1 p.195].

The 2025 Pillar 3 table gives the minimum capital requirement of BDT 153,607.4m (solo): investment (credit) risk BDT 143,359.4m, market risk BDT 1,145.5m and operational risk BDT 9,102.4m; CET1 was 4.07%, Tier-1 4.79% and Tier-2 1.63% [1 p.136]. The disclosure adds: 'If there is no forbearance from Bangladesh Bank, the CRAR would be (48.67%).' [1 p.136] The 2024 split is not in the corpus: ISLAMIBANK_ANNUAL_2024 holds the audited statements only, without the Pillar 3 report, so the cause of the 54.8% rise in risk-weighted assets in 2024 is not disclosed.

Subordinated debt: the Mudaraba bond line was BDT 26.4bn at December 2025 and BDT 26.2bn at September 2026, with the Mudaraba perpetual bond at BDT 11.0bn [2 p.2] [9 p.2]. The 2025 accounts state that five subordinated bonds remain outstanding 'including IBBPLC 5th Mudaraba Redeemable Non-convertible Subordinated Bond which is issued in the year 2025'; the 2024 accounts print the same sentence with 'issued in the year 2024' [1 p.251] [10 p.36]. 2025 redemptions were Tk. 100 crore on the first Mudaraba subordinated bond, Tk. 140 crore on the second and Tk. 120 crore on each of two tranches of the third [1 p.251]. The Pillar 3 notes count Tk 11,400 million of the subordinated bonds in Tier-2 and Tk 11,000 million of perpetual bonds in Additional Tier-1 [1 p.136]. Profit paid on subordinated bonds was BDT 1.9bn in 2025 [1 p.304]. Tier-2 capital was 1.63% of risk-weighted assets [1 p.136].

Deposits and liquidity: deposits BDT 1,657.2bn at September 2026, from BDT 1,816.4bn

Consolidated deposits were BDT 1,595.0bn at December 2024, BDT 1,816.4bn at December 2025 and BDT 1,643.3bn at June 2026 [1 p.225] [2 p.2]. In the first half of 2026 Mudaraba savings deposits fell from BDT 556.3bn to BDT 466.5bn and Al-wadeeah current deposits from BDT 186.7bn to BDT 144.6bn [2 p.2]. The bank's own explanation of the lower operating cash flow is a 'decrease in deposits during the 2nd quarter ended 30 June 2026' [2 p.21], and in the Q3 2026 DSE post 'a decline in deposits for unusual circumstances during the third quarter of 2026', with solo NOCFPS of Tk. (36.54) for nine months [9 p.21]. At September 2026 deposits were BDT 1,657.2bn, Al-wadeeah current deposits BDT 169.0bn and Mudaraba savings deposits BDT 461.2bn [9 p.2].

Placement from banks & other financial institutions was BDT 292.3bn at December 2024, BDT 195.6bn at December 2025, BDT 441.0bn at June 2026 and BDT 373.2bn at September 2026, 16.2% of liabilities at September 2026 (derived) [2 p.2] [9 p.2] [29]. Investments to deposits on a simple basis were 114.8% at June 2026 (derived; not the BB formula) [29]. The printed investment deposit ratio was 96.72% at December 2025 [1 p.195]. Prothom Alo reported that BB provided Tk 25 billion on 14-Jun-2026 and that the bank sought Tk 100 billion in total after withdrawals rose [23].

Note 14.3 shows the placement line is borrowing from Bangladesh Bank. At December 2025 it was BDT 195.6bn: Quard against BGSP bond under special liquidity support BDT 76.5bn, Bangladesh Government Islamic Investment Bond BDT 57.0bn, Bangladesh Government Investment Sukuk BDT 31.0bn and pre-finance funds BDT 31.2bn; a BDT 55.0bn special liquidity support line and a BDT 23.1bn restructuring overdraft facility outstanding at December 2024 were nil [1 p.286]. The interim statements print only the totals of BDT 441.0bn (June 2026) and BDT 373.2bn (September 2026), without a breakdown, rate or tenor [2 p.2] [9 p.2]. Profit paid on placement was BDT 5.5bn and on BGIS and other bank borrowing BDT 2.3bn in 2025 [1 p.304].

The five-year table prints cost of fund of 6.17% (2021), 8.77% (2024) and 11.10% (2025) [1 p.196]. Profit paid on deposits took 54.9% of investment income in 2017, 61.2% in 2021 and 85.2% in 2025 [29]; in H1 2026 consolidated profit paid was 106.8% of investment income [2 p.4] [29]. The printed liquidity ratios for December 2025 are CRR 4.66%, SLR 6.81%, LCR 201.29% and NSFR 100.12% [1 p.196].

Profit paid in 2025 by source: Mudaraba term deposits BDT 59.4bn (from BDT 46.0bn), other Mudaraba deposits BDT 23.9bn, Mudaraba savings BDT 11.9bn, placement BDT 5.5bn, BGIS and other bank borrowing BDT 2.3bn and subordinated bonds BDT 1.9bn, total BDT 105.6bn [1 p.304]. Mudaraba term deposits rose from BDT 623.0bn to BDT 731.8bn [1 p.286]. The 2025 final profit rates were 3.25% on Mudaraba savings, 9.77% on three-month and 10.25% on 12-month term deposits, and 11.76-11.92% on five-year monthly-profit schemes [1 p.59] [1 p.60]. The 2026 product rates are not printed in the interim statements. Deposit insurance premium is included in an insurance line of BDT 1,025.5m [1 p.306].

The bank's spread beside the system. On one basis across years (investment income over average investments, profit paid over average deposits, both derived), IBBL's yield was 6.59% in 2021, 7.65% in 2024 and 7.26% in 2025, its profit paid on deposits 3.51%, 5.73% and 6.18%, and the derived spread 3.09, 1.92 and 1.08 points [29]. The printed cost of fund was 6.17%, 8.77% and 11.10% [1 p.196]. Across all scheduled banks, BB's Table-102 weighted-average lending rate was 7.43% (June 2021), 11.70% (June 2024), 12.33% (June 2025) and 12.13% (June 2026), and the deposit rate 4.14%, 5.51%, 6.31% and 6.21% [32]. These are contractual rates on outstanding balances at end-June and are not comparable one-for-one with the bank's income-based ratios. The rate regimes were the 9% lending cap from April 2020, SMART-based pricing from July 2023 (BRPD Circular No. 09 of 19-Jun-2023) and market-based rates from 8-May-2024 (BRPD Circular No. 10) [34]. The BB policy rate (IMF series) was 4.75% in December 2021, 7.75% in December 2023 and 10.00% in December 2024 and December 2025 [33]. Bangladesh Bank's website showed a policy rate of 9.50% (last updated 15-Feb-2026); the IMF series shows 10.00% to June 2026, and we could not reconcile the two. The printed spread in the five-year table, on the bank's own basis, was 2.62% (2023), 3.64% (2024) and 4.34% (2025) [1 p.196].

Earnings: net investment income turned negative in H1 2026

Consolidated investment income was BDT 120.5bn in 2024 and BDT 123.9bn in 2025; profit paid on Mudaraba deposits rose from BDT 89.6bn to BDT 105.4bn, and net investment income fell from BDT 30.9bn to BDT 18.5bn [1 p.227]. Commission, exchange and brokerage income fell from BDT 18.0bn to BDT 6.1bn [1 p.227]. Total operating income was BDT 40.6bn, operating expenses BDT 35.4bn and provisions BDT 1.5bn, leaving profit before tax of BDT 3.7bn; tax was BDT 2.4bn and profit after tax BDT 1.4bn, consolidated EPS 0.85 [1 p.227].

In H1 2026 consolidated investment income was BDT 48.6bn and profit paid BDT 51.9bn, a negative net investment income of BDT 3.3bn [2 p.4] [29]. Other income lines added BDT 10.4bn and operating expenses were BDT 19.9bn; the loss before provision was BDT 12.9bn and the loss after tax BDT 13.2bn, consolidated EPS (8.18) [2 p.4] [2 p.21]. The bank gives the reasons as 'Profit Paid on Deposits (PPD) expenses, lower investment income due to increase of non-performing investments, and reduced income from Placement to other Bank' [2 p.21]. No provision was charged by the bank in H1 2026 [2 p.9]. The Q3 2026 statements print, for the nine months, a consolidated attributable loss of BDT 32,866.6m (EPS (20.41)) and a bank loss of BDT 33,025.7m (EPS (20.51)); consolidated net assets were BDT 38,060.6m (NAV per share 23.64) and bank net assets BDT 35,847.0m (22.27) at 30-Sep-2026; consolidated NOCFPS was (36.12) and bank NOCFPS (36.54) [9 p.21]. The bank attributes the decline to 'the continuing high level of classified/ non-performing investments mostly due to embezzlement of the fund by the connected parties of large legacy exposures' [9 p.21].

The third quarter on its own (July-September 2026, consolidated): investment income BDT 16,952.6m against BDT 30,273.3m a year earlier, profit paid BDT 31,939.7m against BDT 27,231.2m, net investment income BDT (14,987.1)m, other operating income BDT 4,730.2m, operating expenses BDT 9,252.5m and a loss after tax of BDT 19,701.8m, EPS (12.24) [9 p.4]. No provision for investments was charged in the quarter [9 p.4]. Consolidated equity fell from BDT 58.0bn at June to BDT 38.1bn at September 2026 [2 p.2] [9 p.2].

Commission, exchange and brokerage income: exchange income was BDT 13.0bn in 2024 and BDT 2.5bn in 2025, and commission income BDT 5.0bn and BDT 3.6bn [1 p.305]. The note prints no exchange loss in either year and gives no reason for the fall. Investment income from the Off-shore Banking Unit fell from BDT 15.9bn to BDT 3.4bn [1 p.303].

Tax took 90.5% of bank profit before tax in 2024 and 67.3% in 2025 (derived) [29]. The H1 2026 bank tax charge of BDT 133.2m was booked on a pre-tax loss of BDT 13.1bn; note 11.3 shows a provision 'as per minimum tax' [2 p.9] [2 p.18]. Derived ROE was 11.55% in 2018, 8.93% in 2022, 8.77% in 2023, 1.38% in 2024 and 1.54% in 2025, bank basis [29]; the five-year table prints 1.54% for 2025 [1 p.196].

The 2025 reconciliation shows why tax exceeded the 37.5% rate: non-deductible expenses added 60.57 points and the charge was set at the minimum tax of BDT 2,271.4m, 69.26% of profit before tax [9 p.18]. Assessments are complete to accounting year 2022, with appeals and writ petitions on disputed issues for which 'Adequate provisions ... have been made' [1 p.295]. Staff fell from 21,864 to 17,730 in 2025 and bank salaries and allowances from BDT 25.4bn to BDT 23.7bn [1 p.196] [1 p.306]; the filings give no reason for the fall in headcount and no severance figure (searched: directors' report and HR pages, salary note).

Ratios: ROE from 8.9% to 1.5%, equity to assets at 2.95%

The five-year history, bank basis, puts the 2024-2025 figures beside 2021-2023 [1 p.195] [1 p.196] [29]. Investments grew 22.7% in 2022 and 20.0% in 2025, and fell 3.1% in 2024 (derived). Derived cost/income (expenses over total income less profit paid) was 48.9-62.7% in 2017-2023 and 88.3% in 2025; the five-year table prints a cost income ratio of 0.88 for 2025 [1 p.196]. Equity to assets went from 5.59% in 2017 to 2.95% in 2025 [29]. For 2020, 2021 and 2022 the printed total income exceeds investment and non-investment income by BDT 8.0m, BDT 2,304.8m and BDT 2,701.5m; the model uses the printed total income, which reproduces the printed profit [29]. For 2021 the AR2021 table prints non-investment income of BDT 14,846.92m and the AR2025 table BDT 12,542.13m; both print total income of BDT 88,257.01m [11 p.207] [1 p.195].

The FY2021-FY2022 five-year tables print total income above the sum of investment and non-investment income by BDT 2,304.8m and BDT 2,701.5m, and FY2021 non-investment income differs between AR2021 (BDT 14,846.9m) and AR2025 (BDT 12,542.1m) with the same total [11 p.206] [1 p.195]. Neither report explains the difference (searched: both five-year tables and their footnotes).

Peers: classified ratio 50.68% (derived) beside 17.54% and 4.46%

The peer set is the two Islamic banks with published AnalystBro notes: Al-Arafah Islami Bank and Shahjalal Islami Bank [26] [27]. All figures are company (separate) basis for the year to 31-Dec-2025, each taken from the peer's own filing. Classified investments are divided by each bank's printed total investments in its classification note, the same definition for all three (derived) [29]. Al-Arafah's classified investments were BDT 88,522.0m of BDT 504,566.1m [19 p.45], its CRAR 10.72% [19 p.54], and BB allowed deferral of a BDT 5,393.19 crore shortfall; its auditor wrote 'Our opinion is not modified in respect of above matters.' [19 p.3]. Shahjalal's classified investments were BDT 13,080.2m of BDT 293,078.4m, with a provision surplus of BDT 16.0m [20 p.259] and CRAR of 14.19% [20 p.78]; its checked published note records an unmodified opinion with an emphasis of matter [27].

Governance: Bangladesh Bank board actions, 2024-2026

At December 2025 the board was five independent directors appointed under BB letter dated 22.08.2024: Professor Dr. M. Zubaidur Rahman (chairman), Mr. Mohammad Khurshid Wahab (chairman, executive committee), Mr. Md. Abdus Salam FCA, FCS (chairman, audit committee), Professor Dr. Mohammed Masud Rahman (chairman, risk management committee) and Mr. Md. Abdul Jalil [1 p.86]. In 2025 they attended 28 of 28, 37 of 37, 37 of 37, 37 of 37 and 37 of 37 board meetings respectively; former chairman Mr. Obayed Ullah-Al Masud attended 16 of 17 [1 p.86]. The Daily Star described the 2024 appointees: Khurshid Wahab as a former Bangladesh Bank executive, Abdul Jalil as a former deputy general manager of Al-Arafah Islami Bank, Masud Rahman as a former finance professor at the University of Dhaka and Abdus Salam as a chartered accountant [22]. None of the directors held shares [1 p.87].

Key management at December 2025: Md. Omar Faruk Khan, Managing Director; Md. Habibur Rahman, Company Secretary; Mohammad Abdur Rahim, FCA, Senior Vice President & CFO; and Khondaker Md. Munirul Alam Al-Mamoon, Deputy Managing Director & Head of Internal Control & Compliance Wing [1 p.87]. DSE posts record Omar Faruk Khan as managing director (current charge) from May 2025 and managing director from August 2025, and Md. Altaf Hossain as Managing Director (Acting) from 1-Jun-2026 [21]. The audit committee report lists two members, Md. Abdus Salam (chairman) and Professor Dr. Mohammed Masud Rahman, and 23 meetings in 2025 [1 p.199].

Ownership at December 2025: local sponsors/directors 2,964,125 shares (0.1841%), Government of Bangladesh 20,317 (0.0013%), institutions excluding foreigners 1,204,968,897 (74.84%), foreign shareholders 287,974,637 (17.8867%) and general public 114,062,692 [1 p.179]. The public percentage is printed as 7.2506%, the same figure printed for 2024; the share count gives 7.08% (derived). The table footnote states that the government shares 'have already been sold by the Government of Bangladesh but no transfer has been made in share register of the Bank' [1 p.179].

Z category and dividends: no dividend for two years, Z from 30-Apr-2026

The bank paid a 10% cash dividend for each year from 2017 to 2023 and declared no dividend for 2024 and 2025 [11 p.208] [1 p.196] [21]. On 30-Apr-2026 DSE moved the shares from 'A' to 'Z' category 'as the company has failed to declare any dividend for a period of 2 (two) consecutive years', and brokers and merchant bankers were asked to stop margin loans on the shares from the same day under rule 11(8) of the BSEC (Margin) Rules, 2025 [21]. The H1 2026 statements note that 'The Board of Directors of the Bank already proposed no dividend for the year 2025' [2 p.13]. The 43rd AGM was moved from 25-Jun-2026 to 28-Jun-2026 and then to 16-Sep-2026 [21]; the DSE archive to 2-Nov-2026 has no post on the AGM outcome.

Multiples: 0.96x the September 2026 NAV; earnings-based multiples n/a

At BDT 22.7 on 29-Oct-2026 the market capitalisation was BDT 36.5bn [28] [29]. Price to consolidated NAV per share was 0.63x on the June 2026 NAV of BDT 36.03 and 0.96x on the September 2026 NAV of BDT 23.64 [2 p.21] [9 p.21]. Price to earnings is n/a: trailing earnings are negative. Equity less the deferred shortfall is negative; a price to adjusted book multiple is n/a. The 52-week range of daily closes is BDT 22.7 (29-Oct-2026) to BDT 54.2 (3-Feb-2026) [28]. The year-end 2025 close was BDT 32.8 [28]. The five-year table prints the highest market value per share as BDT 70.40 in 2024 and BDT 50.90 in 2025 [1 p.196].

What's next and risks: the FY2026 accounts and the forbearance letter

Dates below are inferred from the bank's own precedents unless stated. Board authorisation or statement signing dates for the annual accounts were 30-Mar-2017 (FY2016), 25-Apr-2018 (FY2017), 24-Apr-2019 (FY2018), 27-Jun-2020 (FY2019), 27-Apr-2021 (FY2020), 26-Apr-2022 (FY2021), 27-Apr-2023 (FY2022), 24-Apr-2024 (FY2023), 26-Aug-2025 (FY2024) and 29-Apr-2026 (FY2025) [16 p.242] [15 p.20] [14 p.111] [13 p.14] [12 p.115] [11 p.234] [5 p.15] [4 p.9] [3 p.11] [1 p.226]. Q1 statements were authorised or approved by the board on 13-May-2017, 27-Apr-2021, 26-Apr-2022, 27-Apr-2023, 24-Apr-2024, 31-Aug-2025 and 12-May-2026 [18 p.12] [17 p.13] [8 p.13] [7 p.13] [6 p.13] [21]; the Q1 2018-2020 statements in the corpus do not print a board date on their authorisation pages. The outliers are 30-Mar (FY2016), 27-Jun (FY2019) and the 2025 dates (26-Aug and 31-Aug), which followed the adjourned meetings described above. No board date for FY2026 has been notified. Two dates have passed with no notice in our sources: the board-approved plan BB required within a month of finalising the FY2025 accounts [1 p.218], and the outcome of the AGM set for 16-Sep-2026 [21]. Bangladesh's LDC graduation date is 24-Nov-2029 [24] [25].

The time-bound plan Bangladesh Bank requires for the provision and capital shortfall is not disclosed: the filings say only that going concern 'is dependent on the ongoing policy support of Bangladesh Bank' [1 p.218] (searched: AR2025 notes 2 and 20, auditor's report; Q2 and Q3 2026 notes; DSE posts to 2-Nov-2026).

FAQ

How large is Islami Bank Bangladesh's provision shortfall?

Taka 84,615.15 crore (BDT 846.2bn) at 31-Dec-2025, not booked under BB letter BSD-11/43(3)/2026-508 of 28-Apr-2026 [1 p.217] [1 p.218].

What share of Islami Bank's investments is classified?

49.65% as printed at December 2025, BDT 943.2bn, of which BDT 904.1bn is bad and loss [1 p.195] [1 p.282].

What is Islami Bank's capital adequacy ratio?

6.42% at December 2025 against 12.50% required; the auditor puts the capital shortfall at Taka 9,345.72 crore [1 p.218].

Why is ISLAMIBANK in the Z category?

DSE moved it from A to Z on 30-Apr-2026 after no dividend for two consecutive years (2024 and 2025) [21].

Who runs the Islami Bank board?

BB cancelled the independent directors by letter dated 14.06.2026 and appointed its executive director Mohammad Zahir Hussain to exercise the board's powers [21].

Which results does this note use?

The FY2025 annual report and the FY2021 five-year table (history from 2017), the FY2024 auditor's report, the unaudited H1 2026 and nine-month 2026 statements, and DSE posts to 2-Nov-2026.

Sources

1. Islami Bank Bangladesh PLC Annual Report 2025 (year to 31-Dec-2025), incl. auditors' report and five-year table · link · accessed 2026-11-02
2. Islami Bank Bangladesh PLC unaudited financial statements, half year to 30-Jun-2026 · link · accessed 2026-11-02
3. Islami Bank Bangladesh PLC audited financial statements 2024 (signing page) · link · accessed 2026-11-02
4. Islami Bank Bangladesh PLC audited financial statements 2023 (signing page) · link · accessed 2026-11-02
5. Islami Bank Bangladesh Limited audited financial statements 2022 (signing page) · link · accessed 2026-11-02
6. Islami Bank Bangladesh PLC unaudited statements Q1 2024 (board approval note) · link · accessed 2026-11-02
7. Islami Bank Bangladesh PLC unaudited statements Q1 2023 (board approval note) · link · accessed 2026-11-02
8. Islami Bank Bangladesh Limited unaudited statements Q1 2022 (board approval note) · link · accessed 2026-11-02
9. Islami Bank Bangladesh PLC unaudited financial statements, nine months to 30-Sep-2026 (scanned; read from page images) · link · accessed 2026-11-02
10. Islami Bank Bangladesh PLC Annual Report 2024, independent auditors' report · link · accessed 2026-11-02
11. Islami Bank Bangladesh Limited Annual Report 2021 (five-year table FY2017-FY2021; signing page) · link · accessed 2026-11-02
12. Islami Bank Bangladesh Limited Annual Report 2020 (signing page) · link · accessed 2026-11-02
13. Islami Bank Bangladesh Limited Annual Report 2019 (signing page) · link · accessed 2026-11-02
14. Islami Bank Bangladesh Limited Annual Report 2018 (authorisation note) · link · accessed 2026-11-02
15. Islami Bank Bangladesh Limited Annual Report 2017 (authorisation note) · link · accessed 2026-11-02
16. Islami Bank Bangladesh Limited Annual Report 2016 (authorisation note) · link · accessed 2026-11-02
17. Islami Bank Bangladesh Limited unaudited statements Q1 2021 (board approval note) · link · accessed 2026-11-02
18. Islami Bank Bangladesh Limited unaudited statements Q1 2017 (authorisation note) · link · accessed 2026-11-02
19. Al-Arafah Islami Bank PLC audited financial statements 2025 (auditor's report p.3, classification p.45, capital p.54) · link · accessed 2026-11-02
20. Shahjalal Islami Bank PLC Annual Integrated Report 2025 (capital p.78, classification and provision p.259) · link · accessed 2026-11-02
21. DSE news archive for ISLAMIBANK, 31-Oct-2024 to 2-Nov-2026 (old_news.php, criteria=3) · link · accessed 2026-11-02
22. The Daily Star, 'BB forms new board for Islami Bank' (22-Aug-2024) · link · accessed 2026-11-02
23. Prothom Alo, 'Bangladesh Bank dissolves Islami Bank board amid ongoing turmoil' (15-Jun-2026) · link · accessed 2026-11-02
24. The Daily Star, 'Bangladesh gets 3 more years for LDC graduation' (30-Oct-2026) · link · accessed 2026-11-02
25. The Business Standard, 'Bangladesh gets 3 more years for LDC graduation' (30-Oct-2026) · link · accessed 2026-11-02
26. AnalystBro published note: Al-Arafah Islami Bank financial analysis (31-Oct-2026) · link · accessed 2026-11-02
27. AnalystBro published note: Shahjalal Islami Bank initiation (31-Oct-2026) · link · accessed 2026-11-02
28. AnalystBro price data (TradingView feed): DSE:ISLAMIBANK daily bars to 29-Oct-2026 · link · accessed 2026-11-02
29. AnalystBro model for this report (workbook tabs below) · link · accessed 2026-11-02
30. DSE news archive for ISLAMIBANK, 1-Nov-2022 to 30-Oct-2024 (old_news.php, criteria=3) · link · accessed 2026-11-02
31. DSE news archive for ISLAMIBANK, 1-Nov-2021 to 31-Oct-2022 (old_news.php, criteria=3) · link · accessed 2026-11-02
32. Bangladesh Bank, Scheduled Banks Statistics Apr-Jun 2026 (posted 14-Sep-2026), Table-102: weighted-average deposit and lending rates, all scheduled banks, end-June · link · accessed 2026-11-02
33. IMF SDMX MFS_IR, Bangladesh policy (repo) rate, monthly (Bangladesh Bank-reported), MFS172 · link · accessed 2026-11-02
34. Bangladesh Bank BRPD Circular No. 10, 'Interest/Profit Rate of Loan/Investment', 8 May 2024 (withdraws SMART; cites BRPD Circular No. 09 of 19 June 2023) · link · accessed 2026-11-02