After FSIB and Union Bank, Global Islami Bank accepts merger, EXIM declines

Business Report :

As part of the government’s ongoing banking sector reform and consolidation process, Global Islami Bank has agreed to a merger, announced its Chairman Mohammad Nurul Amin following a Bangladesh Bank hearing on Thursday.

According to Amin, the bank’s current loan portfolio stands at Tk14,000 crore, of which Tk12,000 crore was borrowed by S Alam Group through various entities. Most of these loans have been defaulted, with collateral covering less than 25 percent of the exposure. Different opinions have emerged within Social Islami Bank Ltd (SIBL) regarding its possible merger under Bangladesh Bank’s restructuring plan as Chairman Mohammad Sadiqul Islam said the matter rests with the central bank, Director Major (retd) Dr Md Rezaul Haque opposed the idea, arguing the bank’s condition does not justify a merger during the final hearing yesterday.

Bangladesh Bank held its final round of preliminary meetings with SIBL after earlier discussions with four other Islamic banks, including Global Islami Bank, whose representatives expressed agreement in principle with any central bank decision on merger.

Several deputy governors attended the meeting in person, while Governor Ahsan H Mansur joined online.

Speaking to journalists after the meeting, Chairman Sadiqul said, ” the meeting did not directly address bank mergers. We presented our financial condition, and Bangladesh Bank shared its financial stability report with us.

“We are in principle aligned, but the final decision lies with the Bangladesh Bank.”
However, Director Rezaul took a different position, telling the central bank in a written statement that SIBL could recover without a merger if given interest-free liquidity support to the entrepreneur shareholders. Earlier, Union Bank and First Security Islami Bank had also consented to mergers. Together, the two banks reportedly disbursed nearly Tk66,000 crore to S Alam Group, much of which has also been defaulted.

The crisis-ridden First Security Islami Bank (FSIB) accepted Tuesday the merger option rolled out by the central bank, while Union Bank agreed to the revival plan on Wednesday, officials informed.

EXIM Bank, however, has opted out of the immediate merger process. Its board stated that the bank would require at least two more years before considering such a move. EXIM’s board was previously chaired by Nazrul Islam Majumdar.

Bangladesh Bank has initiated week-long hearings with five financially weak banks as part of the merger drive. So far, Union Bank, First Security Islami Bank, EXIM Bank, and Global Islami Bank have participated. During the hearings, the chairmen highlighted their banks’ financial positions. It was revealed that the combined capital shortfall and non-performing loans of the five banks exceed Tk2.86 lakh crore.

To support the merger process, Bangladesh Bank is planning to create a special fund of around Tk35,000 crore. Subject to government approval, the fund will be financed by various state-owned enterprises.

Earlier in June this year, the central bank decided to merge the five troubled lenders due to their weak financial health revealed by a forensic audit conducted by global audit firms KPMG and Ernst & Young. The asset quality review found their non-performing loans were four times higher than previously reported.The banks will be placed under temporary government control once the merger begins.

The move is part of the interim government’s wider effort to stabilize the banking sector, for which it passed the Bank Resolution Ordinance giving the BB expanded powers to resolve distressed financial institutions.