Islami Bank Bangladesh PLC, the country’s first Shariah-based financial institution, posted a loss of Tk 89 crore in the third quarter of 2024, marking a significant downturn and the bank’s first quarterly loss in decades.

This stark contrast to a profit of Tk 94 crore recorded during the same period last year has been primarily attributed to a sharp increase in provisioning against classified loans.

The bank’s loss per share for the July-September period stood at Tk 0.55, a notable decline from earnings per share of Tk 0.59 in the corresponding quarter of 2023. In its financial disclosure, Islami Bank stated, “The earnings per share of the company dropped due to an increase in total provision against investments compared to the previous period.”

Provisions for classified loans surged dramatically by 205% year-on-year, reaching Tk 364 crore in the third quarter. This rise in provisioning reflects heightened concerns over the bank’s loan portfolio quality and the necessity to buffer against potential credit risks.

The financial distress of Islami Bank has worsened since S Alam Group, led by Chairman Mohammad Saiful Alam, took control of the bank’s board. Reports indicate that Alam leveraged political influence to secure control, leading to a change in the narrative surrounding the bank, including unproven allegations of financing terrorism.

However, the more significant issue has been using the bank’s resources by S Alam Group for loans taken in the names of various companies. This Chattogram-based conglomerate is now linked to over half of Islami Bank’s outstanding loans, contributing to the bank’s financial instability.

As of the end of June, Islami Bank’s total outstanding credit stood at Tk 174,000 crore, according to internal records. In response to growing concerns, the Bangladesh Bank intervened by reconstituting Islami Bank’s board on August 22, appointing Md Obayed Ullah Al Masud, the former managing director of Rupali Bank, as chairman. Four independent directors were also installed to stabilize the bank and restore investor confidence.

Despite these challenges, there were some positive developments. The bank’s net investment income rose 24% year-on-year in the quarter to Tk 1,123 crore. However, this improvement was offset by a 1% decline in other operating incomes, including commissions, which totaled Tk 545 crore. Operating costs increased by 11% to Tk 1,193 crore, further impacting overall profitability.

Over the first nine months of 2024, Islami Bank recorded a cumulative profit of Tk 267 crore, though this figure represented a 63% decline compared to the same period last year. The market’s reaction to the bank’s performance was mixed, as shares rose 4% to Tk 53 on the Dhaka Stock Exchange on Wednesday, reflecting a cautious optimism among investors.