Global Islami Bank (GIB) showed a remarkable 28 per cent year-on-year surge in profit in 2021, the year before its listing, while its cash flow was negative.
Negative cash flow from operations was almost double the profit earned that year. Then the year after the listing, the lender's income plunged 27 per cent despite the addition of Tk 4.25 billion raised through the second largest IPO in the banking sector.
The financial health of the GIB pre- and post-IPO raises questions about the business performance shown to get the regulatory approval of the proposal to collect public money.
"Many companies in our capital market showed inflated financial results before listing. GIB also gave manipulated numbers," said Al-Amin, associate professor of the Department of Accounting & Information Systems, of Dhaka University.
"Basically, companies like GIB listed their shares to steal money," added Mr Amin.
That became palpable when the lender sought liquidity support from the Bangladesh Bank soon after the 2022 listing. The GIB's financial health was destined to deteriorate against the backdrop of political influence used by S Alam Group's Chairman Mohammed Saiful Alam to acquire the bank.
His company allegedly looted nearly Tk 5.74 billion from GIB. Some bank officials believe that the actual amount of money laundered from the bank is even higher than what has been revealed so far.
On receiving the IPO proceeds, the bank's cash flow got a boost to 3.06 billion in the positive in 2022 only to get back into the red (Tk 157 million in the negative) in 2023.
However, GIB reported an increase in income for 2023.
On the simultaneous negative cash flow and profit growth, Mr Amin said that for financial institutions it is highly unlikely.
"A higher profit at a time of negative cash flow is possible for manufacturing firms for they often have higher amounts of account receivables.
"I believe the bank should be properly investigated with forensic accounting to identify where the money went," added Mr Amin.
The immediate past Shibli-led securities commission allowed GIB to raise public funds.
Mr Alam, who worked for Sheikh Hasina as one of her trusted persons until the downfall of the Awami League led government on August 5, was overly influential in the banking sector.
Global Islami Bank made headlines for granting large volumes of loans in violation of banking regulations and for not maintaining the required capital reserve ratio.
Instead of securing high interest income, the bank saw a significant amount of loans turn sour, leading to negative cash flow.
However, its non-performing loans were disclosed as only 1.72 per cent of the total loans that the bank disbursed up until 2023, which is much lower than the average NPL rate - 5.93 per cent -- of local private commercial banks as of 2023.
"Global Islami Bank has kept its non-performing loans rate low by loan rescheduling strategy," said a leading banker wishing not to be named.
Banks calculate profits on an accrual basis even when it has not received all the cash. When default loans rose, GIB did not receive more of the due interest payments. So, the profit shown does not portray the reality.
The bank is still facing a deficit in their current account with the central bank despite special liquidity support for more than 18 months. GIB's deficit stood at Tk 320 million as of August 7 this year.
All banks are supposed to maintain a current account with the central bank for payment clearance.
"The shortfall means the lender is in deep crisis," said a senior official of the central bank seeking anonymity.
The new Bangladesh Bank Governor Ahsan H Mansur recently said people who had deposited money into the bank and other Shariah-compliant banks would be given their money back after selling off S Alam Group's assets.
He also urged people not to buy assets of S Alam Group's owner Saiful Alam.
GIB and six other banks, which had been under the grip of Mr Alam until the fall of Hasina's regime, witnessed restructuring of their boards by the interim government.
Mohammed Nurul Amin, former managing director of Meghna Bank, has been appointed as an independent director and chairman of the GIB's board. The central bank constituted the new board just two days after it had dissolved the previous board.
"We will try to help banks stand on their own feet and then hand them over to private ownerships," Mr Mansur said, while addressing a press conference recently at the central bank.
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