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 around 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.

Social Islami Bank's 100 crore shares held by general and institutional investors had a face value of Tk 1,000 crore, with a market value of Tk 301 crore.

Asif Khan, president of CFA Society Bangladesh, opposed the notion that the process is a merger. "This is not a merger, but rather a taxpayer-funded bail-out to depositors."

He said the banks do not have sufficient assets to cover their combined liabilities and are now eventually bankrupt. Depositors will be prioritised for repayment, in accordance with the law.

According to Khan, the government also does not have the fiscal capacity to support shareholders, as it is operating under an International Monetary Fund (IMF) programme with strict targets.

Exim Bank's 97 crore shares held by investors have a market value of Tk 293 crore. Global Islami Bank's 84 crore shares are valued at Tk 142 crore, while general and institutional investors hold 47 crore shares of Union Bank with a market value of Tk 293 crore, according to DSE data.

Mizanur Rahman, a stock investor, said the government bears some responsibility for the situation of the banks and should compensate investors.

The market had already been affected by negative news about the banks, he added.

"If investors do not get any shares in the new bank, it will hit the market further," said Rahman, adding that while the government plans to return a portion of deposits to savers, stock investors have been overlooked.

Preferring anonymity, a senior official at a merchant bank said stock investors should understand the difference between shares and deposits. Depositors always get priority if a bank falls into trouble.

"After depositors, staff salaries, and bond repayments will be settled. Only if anything remains will shareholders receive funds. These banks cannot even repay depositors, and with negative net asset value per share, shareholders are legally entitled to nothing," he said.

He added that any additional government funds, such as a Tk 20,000 crore recapitalisation, should go to depositors rather than shareholders.