Banking Industry of Bangladesh

After the independence, banking industry in Bangladesh started its journey with 6
nationalized commercialized banks, 2 State owned specialized banks and 3 Foreign
Banks. In the 1980's banking industry achieved significant expansion with the
entrance of private banks. Of the 56 scheduled banks currently operating in
Bangladesh, 8 are Islamic Shariah based banks (IBs).
Graph
Figure 1: Portion of Islamic Banks in the Industry
The 56 scheduled banks include 39 Private Commercial Banks (PCBs), 4 State
Owned Commercial Banks (SOCBs), 4 Specialized Banks (SDBs) and 9 Foreign
Commercial Banks (FCBs). These banks operate under full control and supervision of
Bangladesh Bank which is empowered to do so through Bangladesh Bank Order,
1972 and Bank Company Act, 1991. As mentioned earlier, Islami Bank Bangladesh
Limited is the first Islamic bank in the country and the last inclusion in the list of
Islamic banks is the Union Bank Limited, which was incorporated recently (2013).
Establishment of Islamic banks in Bangladesh had been portrayed here along with
their year of Incorporation, listing status in stock market and year of listing.
S
L

Name of Bank

1
2
3
4
5

Islami Bank Bangladesh Limited (IBBL)

ICB Islamic Bank Limited (ICBIBL)
Al-Arafah Islami Bank Limited (AAIBL)
Social Islami Bank Limited (SIBL)
Export Import Bank of Bangladesh
Limited (EXIM)
First Security Islami Bank Ltd. (FSIB)
Shahjalal Islami Bank Limited (SJIBL)
Union Bank Limited (UBL)

6
7
8

Year of
Incorporati
on
1983
1987
1993
1993
1997

Listing
Status

Year of
Listing

Listed
Listed
Listed
Listed
Listed

1985
1990
1998
2000
2004

1997
2001
2013

Listed
Listed

2008
2007

Current Performance
Other than Union Bank Limited (as not yet enlisted in the stock market), all the
seven banks have their offered shares in the capital market. Net profit (after tax) of
these seven banks for the last 10 years had been presented here.

Yea
r

IBBL

ICB

AAIBL

SIBL

EXIM

FSIB

SJIBL

200
5
200
6

1,125.
82
1,400.
59

(573.06
)
(4,308.
34)

262.90

13.94

9.89

470.02

57.63

555.3
4
650.2
9

255.5
9
463.2
2

200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4

1,427.
36
2,674.
80
3,403.
55
4,485.
48
4,841.
45
5,338.
91
4948.5
8
3999.0
6

610.88

347.31

150.04

(776.74
)
(2,062.
21)
(1,358.
24)
(1,796.
15)
(1,061.
04)
(680.75
)
(286.53
)

668.24

202.07

858.99

431.52

1959.0
4
2198.7
5
1,945.
41
2276.6
8
2324.9
5

643.02
1,083.
42
1,441.
13
1220.2
1903.7
2

930.8
4
1096.
63
1694.
1
3476.
01
2009.
3
2157.
13
1913.
39
2480.
93

(117.2
2)
30.63
104.2
8
326.8
3
548.6
0
579.9
3
761.8
6
769.1
2
649.2
9

646.9
9
817.7
1
1070.
57
2072.
34
1168.
65
1730.
00
1304.
96
747.2
1

UBL

87.3
4
110.
55

Total
NPAT of
Islamic
Banks
1,650.4
2
1,383.8
1
4,144.0
5
4,786.9
9
5,723.3
5
11,826.
25
10,085.
35
12,313.
40
11,839.
52
11,929.
18

Industr
y
Averag
e
235.77

-197.69
592.01
683.86
817.62
1,689.4
6
1,440.7
6
1,759.0
6
1,479.9
4
1,491.1
5

Here, we see that except the ICB, most of the Islamic banks shows remarkable
increase in their profitability. Islami Bank Bangladesh Limited, the first Islamic bank
of Bangladesh is leading in term of net profit since the last decade. On the other
hand, ICB Islami Bank Limited shows net loss in almost all the years of the last ten
years. This one is an exception. One reason behind this consistent negative figure in
profitability is the change of ownership. Among the recent periods, once it showed
net profit is in the year 2007. The other banks show more or less gradual increase in
their profitability or portray the upward trend in financial performance. Union Bank
Limited, which is the latest incorporation, it has published two official financial
statements.

Industry Average
2,000.00

1,500.00
Industry Average

1,000.00

500.00

0.00
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-500.00

Figure 1: Profitability trend of the Islamic Banks of Bangladesh

On an average, Islamic banking industry presented promising performance over the

last few years. But we can see that in the year 2006, the industry average is
showing a negative figure especially for the large volume of loss by ICB in that
particular year
Now, the contribution of these average net profits to the banking industry of
Bangladesh can be analyzed through measuring their relationship. Here, ROA in the
overall banking industry for the last 10 years had been considered for the analysis.
Average NPAT of Islamic Banks and ROA in the Banking Industry
Year

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014

Average NPAT of
Islamic Banks (Tk.
In billion)
2.36
-1.98
5.92
6.84
8.18
16.89
14.41
17.59
14.80
14.91

ROA
(Banking
Industry)
0.6
0.8
0.9
1.2
1.4
1.8
1.5
0.6
0.9
0.7

ROA (Islami
Bank
Industry)
-2.32
0.90
-0.40
0.70
1.95
1.06
0.12
0.38
0.40
0.75

ROE

8.1

To illustrate the contribution of Islamic banks profitability in the overall industry, a

regression analysis had been conducted considering the NPAT of the Islamic banks
as independent variable and the ROA of the industry as the dependent variable. The
findings of this analysis are presented here.