AB Bank PLC, a publicly listed commercial bank, has come under scrutiny after its audited financial statements for 2025 revealed significant financial weaknesses, including a massive provision shortfall, capital inadequacy, liquidity shortages and several regulatory compliance issues.

The bank’s auditor, M.M. Rahman & Co. Chartered Accountants, highlighted the concerns through “Emphasis of Matter” and “Other Matter” paragraphs in its audit report.

According to the auditors, a review of 88.05 percent of the bank’s loan portfolio initially identified classified loans worth Tk 28,446.83 crore, equivalent to 79.30 percent of total outstanding loans. In contrast, AB Bank reported classified loans of Tk 18,196.30 crore, leaving an additional Tk 10,250.53 crore in non-performing loans unaccounted for.

Based on the initial assessment, the bank required provisions of Tk 22,413.36 crore but had maintained only Tk 2,297.54 crore, resulting in a provision deficit of Tk 20,115.82 crore.

Following a four-party meeting on April 16, 2026, the bank submitted additional documents, leading to adjustments of Tk 4,783.10 crore, including loans under court injunctions, down payments and management revisions. After the adjustments, total classified loans were revised to Tk 23,663.73 crore, representing 65.96 percent of total loans.

The revised required provision stood at Tk 20,351.43 crore, while actual provisions remained unchanged at Tk 2,297.54 crore, leaving a final provision shortfall of Tk 18,053.89 crore.

The audit report also identified a Tk 135.50 crore provision deficit against the bank’s investment in Singapore-based Pinnacle Global Fund Pte Ltd.

In addition, the bank incurred a mark-to-market (MTM) loss of Tk 397.21 crore from repo transactions involving government securities. Auditors noted that the loss was recorded as a “Deferred MTM Loss” rather than being recognized in the profit and loss account, contrary to Bangladesh Bank regulations and financial reporting standards.

Concerns were also raised regarding the treatment of non-banking assets (NBAs). Auditors said that Tk 32.24 crore of the bank’s Tk 326.60 crore in non-banking assets had been recognized in a manner inconsistent with Bangladesh Bank guidelines. Questions were also raised about the legal validity of some assets due to insufficient documentation related to property registration and tax payments.

AB Bank’s exposure to Beximco Limited’s zero-coupon bonds was another area of concern. The bank holds investments worth Tk 276 crore in the bonds but has not received any interest income over the past six months. Meanwhile, Tk 20.70 crore in accrued interest remains unrealized, and no provision has been maintained against the amount.

The audit report further noted that the bank’s subsidiary, Cashlink Bangladesh Limited, has remained inactive since 2017 and accumulated losses of Tk 15.07 crore. Against AB Bank’s investment of Tk 21.42 crore, the subsidiary’s net asset value stands at only Tk 8.23 crore, implying an impairment gap of Tk 13.19 crore for which no provision has been maintained.

On the liquidity front, AB Bank failed to maintain the required Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) set by Bangladesh Bank. The bank also could not maintain the mandatory 13 percent SLR against its average demand and time liabilities.

The bank’s capital position remains particularly weak. While Bangladesh Bank requires a minimum Capital to Risk-Weighted Assets Ratio (CRAR) of 12.5 percent, AB Bank reported a negative CRAR of 3.78 percent at the end of 2025, indicating a severe capital shortfall.

The report also noted that the bank’s negative capital position has effectively prevented compliance with Bangladesh Bank’s single borrower and group exposure limits, although the loans were reportedly within regulatory limits when approved.

The auditors further mentioned that Bangladesh Bank issued a regulatory relaxation on April 29, 2026, allowing banks greater flexibility in maintaining provisions against loans, investments, other assets and off-balance-sheet exposures. AB Bank prepared its financial statements under this special regulatory framework.

Despite the serious findings and financial concerns highlighted in the report, the auditors did not modify their audit opinion and issued an unqualified opinion on the bank’s financial statements.