Standard Islami Bank financial analysis: 29.9% NPI, BDT 59bn provision gap, Q3 loss (Oct 2026)

Investment considerations: deposits held, but a provision gap three times equity and a margin at zero

Standard Islami Bank PLC is a Dhaka-based bank listed on the DSE since 2003 [7]. It ran as Standard Bank PLC and converted to Islamic banking; the DSE approved the new name, Standard Islami Bank PLC, from 1 March 2026 [8]. It takes Mudaraba (profit-sharing) and Al-wadeeah (current) deposits, finances customers through general investments and bills purchased, and owns four subsidiaries: SBL Capital Management, Standard Bank Securities, and exchange houses in the UK and the USA [1 p.15]. At December 2025 the group had BDT 212.7bn of deposits, BDT 209.4bn of investments (financing) and BDT 288.1bn of assets [1 p.16].

The 2025 accounts show a bank whose book has a large hole that has not been booked. Bangladesh Bank (BB), the external auditor and the bank met on 12 April 2026. BB's letters of 26 and 28 April 2026 set the total required provision for investments, off-balance-sheet exposures, shares and other assets at BDT 68.3bn. The bank held BDT 9.3bn, a shortfall of BDT 59.0bn, and BB allowed the accounts to be finalised without it [1 p.4] [1 p.6]. The auditor's opinion is unmodified but carries this as the first emphasis of matter [1 p.4]. Classified investments stood at BDT 61.2bn, 29.89% of the book [1 p.5].

For a shareholder, the usual drivers of return (growth, margin, payout) are all switched off at the same time. Earnings quality is low: the 2025 profit of BDT 0.80bn exists only because BDT 59.0bn of provisions were deferred, and the auditor adds that a further BDT 2.48bn of income was not eligible for recognition [1 p.4]. Cash conversion of booked income is high, but that measure says nothing about the 30% of the book that books no income at all. Capital allocation is constrained: BB's dividend rule ties payout to capital and paid-up size [6 p.1], and BSEC declined to process the bank's Mudaraba subordinated bond in November 2025 [8]. What matters is how much of the BDT 61.2bn classified book comes back in cash, how BB schedules the deferral, and whether new capital arrives and on what terms.

The story: a thin-margin bank whose NPI quadrupled in 2024 and whose margin vanished in 2025

From 2020 to 2023 the bank was small and thinly profitable. Profit after tax ran at BDT 0.78-1.38bn, ROE at 4.6-7.7%, classified investments at 4.8-7.8% and dividends at 2.5-3% cash plus 2.5-3% stock [3 p.209] [3 p.210] [7]. Investments grew in line with deposits and the simple investment/deposit ratio sat at 96-104% throughout [12], high for any bank and far above the 92% IDR ceiling F02 cites for Islamic banks (the BB formula differs from our simple ratio, so this is a direction, not a breach).

2024 was the break. Classified investments jumped from BDT 13.8bn (7.12%) to BDT 59.7bn (29.31%), and gross NPI coverage fell from 38.91% to 13.12% [3 p.210]. Provisions rose almost tenfold to BDT 2.1bn, but profit held at BDT 0.83bn because operating profit almost doubled on fee and exchange income [3 p.209]. 2025 was the year the cost reached the margin: profit paid rose 26% while investment income rose 1%, and net investment income fell to BDT 58m [1 p.18]. The bank booked only BDT 0.61bn of provisions in 2025 and BB deferred the rest [1 p.4].

The 2026 quarters continued the slide. H1 2026 net investment income was minus BDT 452m, operating profit before provisions BDT 128m against BDT 1,355m a year earlier, and EPS BDT 0.03 against BDT 0.34 [2 p.3]. The Q3 announcement on 1 November 2026 reported a quarterly loss per share of BDT 1.43 and an operating loss of BDT 1.23bn for nine months; the bank tied the fall in investment income (down BDT 2.56bn) to BB's BRPD Circular Letter No. 30 of 31 August 2026 on policy support for distressed borrowers [8].

The bank's own explanations to the DSE fill in the 2026 picture. For the half year it cited a BDT 964m fall in profit on investments, a BDT 429m fall in commission, exchange and brokerage, and a BDT 1.23bn fall in operating profit; for cash flow it cited a BDT 2.68bn fall in deposits and BDT 0.30bn of Mudaraba bond repayment [8]. For nine months it cited a BDT 2.56bn fall in profit on investments, a BDT 668m fall in fees, a BDT 14.3bn fall in placements from banks and financial institutions, and an operating loss of BDT 1.23bn against an operating profit of BDT 1.84bn a year earlier [8]. Each of these sits on a line discussed below: investment income, fees, funding and provisions. None of them points to a recovery in the classified book, and none of the announcements mentions recoveries or a capital plan.

Asset quality: NPI 29.9%, 93% bad/loss, and a BDT 59.0bn gap BB let the bank defer

Three figures describe the investment book at December 2025. Classified investments were BDT 61.2bn of BDT 204.8bn (29.89%) [1 p.5]. Of these, BDT 56.7bn, or 93%, sat in the bad/loss bucket [2 p.17] [12]. And the provision held against investments was BDT 8.9bn, 15% of the classified book [1 p.7] [12]. Bad/loss requires 100% provision, so the gap is mechanical rather than a matter of judgement.

The filings give three versions of the gap, and they need to be kept apart. The BB/auditor figure for investments and off-balance items is BDT 62.0bn required against BDT 8.9bn held, a shortfall of BDT 53.1bn [1 p.7]. Adding shares, bonds and other assets, the total is BDT 68.3bn required against BDT 9.3bn, a shortfall of BDT 59.0bn [1 p.4]. The bank's own note 7.3, which applies a 'base for provision' after deducting eligible security and profit suspense, shows BDT 43.8bn required and a deferral of BDT 34.9bn [2 p.17]. The capital note uses a fourth number: BB consented to leave BDT 31.6bn of shortfall undeducted from CET-1, subject to a board-approved, time-bound recovery plan [1 p.70].

By June 2026 classified investments had fallen to BDT 49.3bn (24.2%) and the bank's own deferral to BDT 26.0bn [2 p.17]. Specific provisions booked in H1 2026 were only BDT 14m, and the provision held hardly moved (BDT 8.94bn to 8.95bn) [2 p.3] [2 p.17]. A fall in classified balances without matching cash provisions is consistent with reclassification under BB's policy-support circulars rather than recovery, but the H1 notes do not split the movement, so we flag it as a question. Profit suspense rose from BDT 8.7bn to BDT 9.6bn over the half [2 p.24], so unpaid profit on the bad book keeps accumulating.

The auditor raises four more points. Multiple exposures exceeded the single-borrower or group limits [1 p.5]. Sample checks found documentation and security gaps [1 p.6] [1 p.7]. BDT 3.48bn of Mudaraba deposits, perpetual and subordinated bonds placed with other banks sit with 'stressed counterparties experiencing significant liquidity challenges' [1 p.9]. And the fixed-asset register is not properly maintained and lease accounting is incomplete [1 p.10].

Capital: 12.6% CRAR on paper, negative once the deferred shortfall is counted

Reported capital looks adequate and is not. Solo eligible capital was BDT 29.0bn against risk-weighted assets of BDT 230.6bn, a CRAR of 12.59% [1 p.69]. On a consolidated basis it was 12.33% [1 p.70]. Both are above the 10% minimum but at or just below the 12.5% level that includes the 2.5% conservation buffer. CRAR fell from 15.65% as RWA rose 21% in a year when investments grew only 3% [12]; the filings we read do not explain the RWA jump, which is consistent with higher risk weights on classified exposures.

The capital figure counts BDT 31.6bn of provision shortfall as if it were not there, by BB's consent [1 p.70]. Deducted, it would take eligible capital below zero and CRAR to about -1.1% [12]. Using the full BDT 59.0bn shortfall gives a larger negative number. The auditor states that CRAR, CRR and SLR were maintained 'without considering the shortfall' and that the bank's liquidity may be negatively affected by it [1 p.15].

Funding: Mudaraba deposits are 82% of the base and their cost rose 3pp in two years

Funding is overwhelmingly Mudaraba deposits: 82.3% of the base at June 2026 [12]. Mudaraba term deposits alone were BDT 112.6bn (54%) [2 p.1]. Al-wadeeah current deposits, the nearest thing to free funding, were 15.6% and fell by BDT 2.0bn in the half [2 p.1] [12]. Short-term Mudaraba deposits and schemes grew in 2025 while term deposits shrank, a shift toward shorter, more rate-sensitive money [1 p.16].

The cost side moved fast. Profit paid on deposits and borrowings rose from 4.8% of average deposits and borrowings in 2023 to 7.3% in 2025 [12]. Investment income per taka of average investments rose less, from 7.1% to 8.2%, because 30% of the book books little or no income [12]. Borrowings (placements from banks plus Mudaraba bonds) rose to BDT 28.4bn [1 p.16]. The H1 2026 cash flow shows placements from other banks and deposits falling; the Q3 announcement adds that placements from banks and financial institutions fell BDT 14.3bn by September 2026 [2 p.4] [8]. The filings we read do not give the Mudaraba distribution ratio or the provisional and final profit rates, so we cannot split the cost rise into rate and mix.

Line items: profit paid passed investment income, and treasury income is what is left

Investment income is the mark-up on Murabaha/Muajjal-type financing plus profit on HPSM and Musharaka. It rose from BDT 13.1bn (2023) to BDT 16.9bn (2024) and BDT 17.0bn (2025) [3 p.209] [1 p.18]. Its drivers are the size of the performing book, the contract mark-up (which reprices only on new disbursements) and the rules on what can be recognised on classified accounts. That last driver is now dominant: BB made the bank reverse BDT 0.90bn of 2025 income, the auditor says BDT 2.48bn more was required to go to suspense [1 p.4], and the bank says nine-month 2026 investment income fell BDT 2.56bn, mainly due to BRPD Circular Letter 30 [8].

Profit paid on deposits and placements rose 26% in 2025 to BDT 16.9bn, equal to 99.7% of investment income [1 p.18] [12]. Its drivers are the Mudaraba provisional rates, which follow market deposit rates, and the mix toward short-term and scheme deposits. In H1 2026 profit paid stayed flat while investment income fell 11%, so net investment income turned negative [2 p.3]. As a history-based sensitivity: each 1pp of the 2025 profit-paid/investment-income ratio was worth BDT 170m of net investment income, about 21% of 2025 profit after tax [12].

Income from shares and securities, mostly government Islamic bonds and sukuk, rose to BDT 2.59bn in 2025 and BDT 1.36bn in H1 2026 [1 p.18] [2 p.3]. It is now the largest positive line: 61% of H1 2026 operating income [12]. Government securities holdings rose from BDT 17.4bn to BDT 27.9bn in 2025 [1 p.21]. Commission, exchange and brokerage fell from BDT 3.30bn to BDT 3.13bn in 2025 and to BDT 1.11bn in H1 2026 (down 28%) [1 p.18] [2 p.3]; the bank says nine-month fees fell BDT 668m [8]. Trade flows are the driver: import business had reached BDT 142.5bn in 2024 [3 p.209].

Operating expenses were stable at BDT 4.3-4.4bn, two-thirds salaries [1 p.18] [12]. Because income fell, cost/income rose from 51% (2024) to 68% (2025) and 94% (H1 2026) [12]. Provisions were BDT 2.10bn in 2024, BDT 0.61bn in 2025 and BDT 14m in H1 2026 [1 p.18] [2 p.3]; they are low because of the deferral, not because the book improved. Tax was BDT 0.58bn in 2025, a 42% effective rate, and the bank carries BDT 484m of deferred tax assets whose recovery depends on future profit [1 p.8] [12].

Cash quality: the performing book pays in cash; the bad book only adds to suspense

The direct cash flow statement lets us test whether booked income is collected. Solo investment income received in cash was BDT 16.6bn in 2025 against BDT 17.0bn booked (98%), after 103% in 2024 [1 p.24] [12]. In H1 2026 the group received BDT 8.9bn against BDT 8.2bn booked [2 p.4]. So the performing book pays. The weakness is elsewhere: the classified book generates suspense, not cash, and the auditor's BDT 2.48bn finding is about income that was booked but was not eligible for recognition [1 p.4].

Operating cash flow swings with deposits and placements, not with profit. It was BDT 12.7bn (solo) in 2025 on deposit inflows and minus BDT 1.6bn (consolidated) in H1 2026 as deposits and placements fell [1 p.24] [2 p.4]. The bank also repaid BDT 0.99bn of Mudaraba bonds in 2025 and BDT 0.30bn in H1 2026 [1 p.19] [2 p.4].

Two cautions apply to the cash test. First, it is solo for the full years and consolidated for the halves, because those are the cash flow statements the filings print on a comparable basis; the subsidiaries are small relative to the bank, so the mix does not change the conclusion. Second, receipts can include profit collected on accounts that were rescheduled under BB policy support, which counts as cash but does not settle the principal. The filings we read do not split receipts by classification status, so we cannot say how much of the BDT 16.6bn came from the classified book. Recoveries on investments previously written off were small: BDT 124m in 2025 and BDT 3m in H1 2026 [1 p.19] [2 p.4].

Ratios: ROE 4-8% even before the break; spread from 2.7% to 0.03%

ROE averaged 5.5% over 2021-2025 and was 4.3% in 2025 [12]. ROA never exceeded 0.57%. Equity/assets fell from 7.6% to 6.6% as the balance sheet grew faster than retained profit [12]. The net investment spread (net investment income / average investments) fell from 2.71% in 2021 to 0.03% in 2025 [12]. Credit cost was 0.1-0.3% a year except 2024 (1.1%) [12], which says more about the deferral regime than about losses.

Payout was 20-41% of EPS in cash in 2020-2023, half paid in shares, and nothing for 2024 or 2025 [7] [12]. The stock dividends grew the share count from 1,006m to 1,116m [3 p.210], which kept EPS flat while profit fell.

Peers: NPI 25.4pp above Shahjalal and 12.7pp above Al-Arafah

Against two Islamic peers, on figures each bank reports for 2025, STANDBANKL has the highest NPI. Its reported 'NPI ratio' of 29.89% (BB letter basis) compares with 17.16% at Al-Arafah Islami Bank (also a BB-letter figure) and 4.46% at Shahjalal Islami Bank ('Non-Performing Investment/ Total Investment') [1 p.4] [5 p.2] [4 p.80]. The gap to Shahjalal is 25.4pp and to Al-Arafah 12.7pp. On reported CRAR, STANDBANKL's 12.59% sits between Al-Arafah's 10.72% and Shahjalal's 14.19% [1 p.69] [5 p.54] [4 p.80]. STANDBANKL's figure excludes BDT 31.6bn of shortfall under BB's consent [1 p.70]. Shahjalal proposed a 13% cash dividend for 2025; the other two paid none [4 p.80] [5 p.2] [8].

A note on what the peer comparison can and cannot show. The three banks print their ratios under different headings and on different bases, so the table quotes each label as printed and footnotes the CRAR basis. STANDBANKL's and Al-Arafah's NPI ratios both come from Bangladesh Bank letters issued after tripartite meetings in April 2026, so they are the closest pair [1 p.4] [5 p.2]. Shahjalal's ratio is the bank's own key-ratio figure [4 p.80]. Shahjalal also reports cost/income of 32.31% and an investment-deposit ratio of 81.59% [4 p.80]; STANDBANKL does not print the same measures for 2025, so we do not set our computed ratios against them. The comparison therefore rests on asset quality and reported capital. On both, STANDBANKL sits at the weak end of the group, and it is the only one of the three whose 2026 quarters show net investment income below zero [2 p.3].

Governance and dividends: sponsor board with new chairman and MD, Z category, no cash payout allowed

Sponsors and directors held 33.08% at December 2025 and 33.53% at September 2026; institutions held 29.78% and the public 36.69%; there is no foreign or government holding [7]. In June 2026 sponsor director Ferozur Rahman received 5.06m shares by gift from family members [8], and on 21 August 2026 the board elected him chairman for two years [8]. Management changed twice: an acting MD from 30 January 2026 and Riad Mahmud Chowdhury as MD from 15 June 2026 with BB approval [8]. In the DSE announcements we read for October 2024 to October 2026 there is no notice of a BB-appointed board or administrator [8].

The auditor's report covers four subsidiaries. SBL Capital Management and Standard Bank Securities are audited and carry unprovided losses of BDT 2.51bn and BDT 0.47bn, deferred under BSEC directives to 31 December 2030; the bank's investments in them are BDT 1.50bn and BDT 0.80bn [1 p.4] [1 p.10]. The two exchange houses' statements were unaudited [1 p.15]. NCR rated the bank AA (long term) and ST-2 with a developing outlook on its 2025 statements [8].

Dividends: none for 2024 or 2025; the DSE moved the share to Z category on 30 April 2026 for two years without a dividend, and under BSEC margin rules brokers may not extend margin credit against the share from the same date [8]. Under SPCD Circular 06 of 23 May 2026, banks with paid-up capital below BDT 20bn (2,000 crore) may not pay any cash dividend, and capable banks may pay at most 50% of a declared dividend in cash; it applies from the year ending 31 December 2026 [6 p.1]. STANDBANKL's paid-up capital is BDT 11.2bn [1 p.21].

Multiples: 0.26x reported NAV, while adjusted equity is negative

At BDT 4.0 the share trades at 0.26x September 2026 NAV per share of BDT 15.53 [11] [8]. Year-end P/B was 0.29x-0.63x in 2020-2025 and year-end P/E 6.8x-14.4x [12]. On nine-month 2026 EPS of BDT -1.40, P/E is not meaningful. Against equity after the BDT 59.0bn shortfall, which is negative, a price-to-adjusted-book ratio has no meaning either. Market cap is BDT 4.46bn. These are facts about the price, not a view on it. Turnover is modest: most sessions in October 2026 traded 0.2-3.3m shares [11].

What's next and risks: the FY2026 provision letter and capital decide the outcome

What already happened and what comes next, in direction only. The Q3 2026 statements, published on 1 November 2026, show the loss of BDT 1.43 a share and NAV of BDT 15.53 [8]; the full notes are not yet in our corpus, so the required-versus-held provision at September is unknown. The bank also had its Q2 2026 statements audited for a planned Mudaraba subordinated certificate issue [8]; BSEC's response is not known (an earlier private-placement bond was not processed [8]). New capital or Tier-2 debt would move the capital line up; its absence keeps CRAR exposed to any booking of the deferral.

LDC graduation: the UN General Assembly adopted the move of Bangladesh's graduation date from 24 November 2026 to 24 November 2029 on 29 October 2026 (30 October in Dhaka) [9] [10]. For this bank the channel is trade: fees and exchange income depend on import and export volumes, so the later date postpones any tariff-related hit to that line.

FAQ

How large is Standard Islami Bank's provision shortfall?

BDT 59.0bn at December 2025 on all assets (BDT 53.1bn on investments and off-balance items), against BDT 18.9bn of equity; BB allowed it to be deferred [1 p.4] [1 p.7].

What is the bank's NPI ratio?

29.89% at December 2025 per BB's letter, and 24.2% at June 2026 on the bank's own note [1 p.5] [2 p.17].

Did the bank pay a dividend for 2025?

No. It paid none for 2024 or 2025 and was moved to Z category on 30-Apr-2026 [8].

Why did Q3 2026 show a loss?

The bank cites lower investment income after BRPD Circular Letter 30 of 31-Aug-2026 and lower fee income; nine-month EPS was BDT -1.40 [8].

What is the bank's capital adequacy?

CRAR 12.59% solo and 12.33% consolidated at December 2025, without deducting BDT 31.6bn of shortfall that BB allowed to stay in CET-1 [1 p.69] [1 p.70].

Why is it now called Standard Islami Bank?

The DSE approved the name change from Standard Bank PLC with effect from 1-Mar-2026 [8].

Which results does this report use?

Audited 2025 statements, the 2024 annual report (five-year data from 2020), unaudited H1 2026 statements and the DSE Q3 2026 announcement. Q3 2026 notes are not yet in our corpus.

Sources

1. Standard Islami Bank PLC audited consolidated and separate financial statements, year to 31-Dec-2025, incl. auditor's report (Khan Wahab Shafique Rahman & Co.) · link · accessed 2026-11-01
2. Standard Islami Bank PLC unaudited financial statements, six months to 30-Jun-2026 · link · accessed 2026-11-01
3. Standard Bank PLC Annual Report 2024 (five-year financial highlights 2020-2024) · link · accessed 2026-11-01
4. Shahjalal Islami Bank PLC Annual Integrated Report 2025 (key ratios) · link · accessed 2026-11-01
5. Al-Arafah Islami Bank PLC audited financial statements 2025, incl. auditor's report · link · accessed 2026-11-01
6. Bangladesh Bank SPCD Circular No. 06, 23-May-2026, dividend declaration policy for banks (Bangla) · link · accessed 2026-11-01
7. Dhaka Stock Exchange, STANDBANKL company page (category, shareholding, dividend history, interim EPS) · link · accessed 2026-11-01
8. Dhaka Stock Exchange news archive for STANDBANKL, Oct-2024 to 1-Nov-2026 (company announcements) · link · accessed 2026-11-01
9. The Daily Star, 'Bangladesh gets 3 more years for LDC graduation' (30-Oct-2026) · link · accessed 2026-11-01
10. The Business Standard, 'Bangladesh gets 3 more years for LDC graduation' (30-Oct-2026) · link · accessed 2026-11-01
11. AnalystBro price data (TradingView feed): DSE:STANDBANKL daily bars to 29-Oct-2026 · link · accessed 2026-11-01
12. AnalystBro model for this report (workbook tabs below) · link · accessed 2026-11-01