Islami Bank in Turmoil: Vice chairman removed

Ahsanul Alam

Syed Ahsanul Alam, vice chairman of Islami Bank, has been removed from his executive post at yesterday's board meeting, a move considered by many as an attempt to muffle dissent.

Earlier, Chairman of the bank Arastoo Khan had alleged that Alam violated his oath of office by spreading propaganda about the bank.

The private commercial bank, the largest and most profitable in the country, has plunged into a bout of infighting around five months after going through a wholesale restructuring of the board of directors and top management.

Alam, who joined the bank in May last year, was elevated to the position of vice-chairman, and Arastoo, a retired bureaucrat, was made chairman in January.

Alam, also an independent director, was not present at yesterday's board meeting, held immediately after the bank's 34th annual general meeting (AGM) at the capital's Kurmitola Golf Club.

After the board meeting, Arastoo told reporters that Alam would remain in the board in his capacity as an independent director.

Contacted, Alam said it's impossible for the directors to carry out responsibilities properly if they have no power to fight mismanagement at the bank.

He alleged that the bank management hired people to make up numbers at the AGM and “make noise against the board members”.

At the AGM, it was decided that the bank would have one vice chairman, instead of two.

This means, Alam will not be replaced.

Arastoo said Yousif Abdullah Al-Rajhi, representative of Saudi-based Al-Rajhi Co for Industry & Trading, will retain the other post of vice chairman.

One more director representing Al-Rajhi Co was included in the Islami Bank board, taking the number of board members to 20.

In recent weeks, there have been disputes among the directors.

On May 11, Alam posted on his Facebook page that he was being hassled to resign.

More than a week later, a group of seven directors threatened to step down if any of them has to resign under pressure.

Some of the directors were also furious that the bank declared 10-percent dividend on April 2 for 2016 against a net profit of Tk 450 crore.

They believe that the board announced the “meagre dividend” to see the bank's share price go on a “free fall” so that a Chittagong-based big business group can buy the shares on the cheap.

The business group had allegedly bought shares of the bank in the name of seven companies that got registered with the Registrar of the Joint Stock Companies and Firms last year.

At present, the seven companies hold 14.02 percent shares in the bank and have seven directors, including Arastoo, in the board.

The Arastoo-led board disbursed loans of over Tk 1,400 crore -- some of which went to subsidiaries of the Chittagong-based business group -- in just three months.

Many of the loans were approved without maintaining proper rules and regulations, according to a Bangladesh Bank report.

Yesterday, this correspondent went to the AGM and found the hall largely empty. The attendees were mostly bank employees, not shareholders.

While the AGM was in progress, the Islamic Development Bank, one of the founding members of Islami Bank, declared it would sell 8.70 crore shares out of its total holding of 12.08 crore shares in Islami Bank at current market price.

The company will sell the shares within the next 30 working days, according to the posting on the Dhaka Stock Exchange website.

In a parallel development, Excel Dyeing and Printing Limited, one of the seven companies of the Chittagong-based business group, announced its intent to buy 32.04 crore shares in Islami Bank within the next 30 days.

Given the current market rate, Excel Dyeing and Printing will have to put in more than Tk 105 crore to acquire its declared quantity of shares.

Following the AGM, Al-Rajhi told reporters that the pace of changes in Islami Bank had left the foreign investors concerned.

“But we are no longer worried,” he added.

Areef Suleman, IDB's representative in Islami Bank, said there has been a misconception that the Saudi-based development lender wants to pull out of Islami Bank entirely.

“But it's not true. We are not leaving -- we are only reducing our share holdings with the bank.”

After disposal of 8.70 crore shares, IDB's holding in Islami Bank will come down to 2.1 percent from 7.5 percent -- the bare minimum for a seat in the board.

About the changes in the board, Suleman said, “Everything was done with the consent of the board and following the rules of the country. We stand by the board.”

Islami Bank's shares closed at Tk 32.80 each yesterday, up by 5.13 percent from the previous day.