B Mirror Report:  Audit reports of three listed banks in Bangladesh the Premier Bank PLC, Standard Bank PLC, and Al-Arafah Islami Bank PLC have revealed severe provision shortfalls, weak capital positions, rising non-performing loans, and major inconsistencies in financial reporting, raising fresh concerns over the true financial condition of the banks.

According to the auditors’ “Emphasis of Matter” and “Other Matter” disclosures, all three banks failed to maintain adequate provisions against classified loans, investments, and other risky assets, despite regulatory requirements.

The audit report of The Premier Bank showed that the bank had a total provision shortfall of Tk 9,799 crore as of December 31, 2025. The bank required Tk 7,286 crore in provisions against classified loans but maintained only Tk 1,196 crore. Additional shortfalls were identified in unclassified loans, off-balance sheet exposures, gratuity funds, and investment in shares.

The report also revealed a severe capital crisis. While the bank required Tk 4,495 crore in regulatory capital under Basel III guidelines, it reported negative capital of Tk 4,835 crore. Auditors warned that the bank’s Capital to Risk-Weighted Assets Ratio (CRAR) could fall to negative 13.45 percent if full provisions were recognized.

Meanwhile, Standard Bank reported a provision deficit of Tk 5,904 crore, equal to nearly 30 percent of its total investments. Auditors said the bank continued to recognize income from classified investments that should have been transferred to suspense accounts, potentially overstating profits.

The audit also highlighted weaknesses in the bank’s subsidiary businesses, including SBL Capital Management and Standard Bank Securities, where delayed provisioning and falling share prices raised concerns over the actual net asset values.

Al-Arafah Islami Bank also came under scrutiny after auditors identified a total provision shortfall of Tk 5,393 crore. Although the bank reported a net profit of Tk 86.5 crore for 2025, auditors stated that full provisioning would have resulted in a loss exceeding Tk 5,300 crore.

The bank’s non-performing investment ratio rose to 17.16 percent, while its capital adequacy ratio remained below the regulatory minimum. Auditors further warned that large-scale rescheduling facilities and extended grace periods could increase liquidity pressure in the future.

Bangladesh Bank allowed all three banks to finalize their financial statements without fully adjusting the provision deficits through special regulatory approvals issued in April 2026.

However, auditors cautioned that the financial statements may not fully reflect the actual risks and potential losses faced by the banks, intensifying concerns among investors and market observers over transparency and financial stability in the banking sector.