Bangladesh Bank Governor Ahsan H. Mansoor stated that shares held by the sponsoring directors and general shareholders of five merged Islamic banks are now valued at zero.
He noted that “Shareholders won’t receive any compensation since the net asset value of each bank has plummeted to a negative maximum of Tk 450, while the face value is Tk 10.” This indicates a total loss in value for all shareholders, both sponsors and individuals, which he explained at a press conference on November 5.
On the same day, the boards of directors for these five banks were disbanded, and Bangladesh Bank appointed new administrators to oversee the transition.
Reassuringly, the governor mentioned that no employees at these banks would lose their jobs during this transition. Although the government administers the banks, they are still functioning as private entities until they fully merge into a single institution.
When asked last month about compensation for retail investors, financial advisor Salehuddin Ahmed acknowledged the potential for investors to regain their rightful funds, but was non-committal regarding the specifics for stockholders. “What will happen in their case? I won’t comment on that right now,” he said.
Mohamed Nurul Amin, independent director and chairman of Global Islamic Bank, added that in bank mergers, depositors and preferred shareholders typically receive priority. Common shareholders and public investors often walk away empty-handed. Nevertheless, he indicated that rules exist to possibly compensate public investors.
He also mentioned that investors are looking for either compensation or shares in the new bank that will be created, with ongoing discussions aimed at addressing these concerns.
Commenting on the declining stock prices, Amin observed, “Banks unable to reimburse depositors are currently only alive through liquidity support from the central bank, support that has recently been rescinded due to these mergers. Moreover, these banks have struggled to retrieve defaulted loans, with some nearly ceasing operations. Under such circumstances, a drop in stock prices is inevitable.”
A central bank official pointed out that according to the Banking Companies Act, there’s no provision allowing for the return of funds to capital market shareholders during a bank merger.
The official also mentioned that recent discussions involved the chairman of the Bangladesh Securities and Exchange Commission, the governor of Bangladesh Bank, and representatives from the Bank Resolution Authority.
