AHSAN HABIB

Shareholders of five shariah-based troubled lenders, which are being merged into a large Islamic bank, lost hundreds of crores as the central bank announced that the shares now carry no value.

Their total loss amounts to Tk 4,500 crore, representing the face value of the stocks -- the value assigned when the shares were issued.

At market value, the loss is around Tk 1,022 crore as the shares had been trading well below their face value.

Following the merger order by the Bangladesh Bank (BB), the Dhaka and Chattogram stock exchanges suspended trading of the bank shares yesterday.

The lenders are First Security Islami Bank, EXIM Bank, Social Islami Bank, Union Bank and Global Islami Bank. The central bank said it has no legal obligation towards shareholders, though any government intervention would be a separate matter.

According to Dhaka Stock Exchange (DSE) data, the banks issued around 582 crore shares with a face value of Tk 10 each, giving a paid-up capital of Tk 5,820 crore.

General and institutional shareholders hold 76 percent of the shares, or 443 crore. Thus, these investors are losing shares with a face value of Tk 4,433 crore, while the market value stood at Tk 1,022 crore.

Last month, the finance ministry issued a circular saying, “A rumor had been spreading that share market investors will be impacted [due to the merger]. But the government will not take any decision that will hamper investors.”

However, BB Governor Ahsan H Mansur announced on Wednesday that shareholders of the five banks will not receive any stake in the new bank, as the net asset value per share is already negative by Tk 350 to Tk 420.

In other words, assets held by the banks are worth less than what they owe.

Saiful Islam, president of the DSE Brokers’ Association of Bangladesh (DBA), said there is no chance to challenge the governor’s statement, in line with international best practices.

He said many investors had relied on financial statements that were allegedly fraudulent, prepared by sponsors in association with regulators and auditors.

“The government could consider giving some shares to small investors as a special measure,” he said.

Shareholders also bear responsibility, he said, adding that the poor health of these banks was widely known and investors had opportunities to sell their shares over the past year.

Of the five banks, First Security Islami Bank had the largest number of shares on the market.

Its 113 crore shares had a face value of Tk 1,130 crore, while their market value was Tk 215 crore.