Premier Leasing’s classified loans surge 114pc
Listed non-banking financial institution (NBFI) Premier Leasing and Finance witnessed a staggering 114 per cent year-on-year increase in classified loans in 2019.
The previous year it had stood at Tk 19.35 crore or 25.63 per cent of its total loans.
According to the company's audit report, classified loans accounted for 29.31 per cent, or Tk 41.51 crore, of the total loans, leases and advances disbursed in 2019.
This is far above the NBFI sector's average non-performing loan (NPL) rate of 10.50 per cent.
Bangladesh Bank gave the Premier Leasing and Finance until 2022 to secure an adequate loan loss provision.
However, the provisioning required was Tk 338.66 crore, of which the company maintained just Tk 45.96 crore as of December 31, 2019. And so now the company, which had a paid-up capital of Tk 132.9 crore that year, now faces a Tk 292.7 crore shortfall in its provision on leases, loans, and advances.
In 2018, the Premier Leasing and Finance maintained a provision of Tk 44.33 crore against its Tk 150.16 crore requirement.
"Some big borrowers were struggling to repay loans so their loans were classified," said Abdul Hamid Mia, managing director of the Premier Leasing and Finance.
Besides, the sector is suffering from a liquidity shortage and so the company failed to enhance its loan portfolios, he added.
Whenever there is a cash crunch in the banking sector, the rate of loan and advance disbursements falls, Hamid told The Daily Star recently.
At the end of 2019, the Premier Leasing and Finance reported that its total loan, advance and lease disbursements dropped 2.41 per cent to Tk 1,238.58 crore.
During the same period, the company's profits plunged 80.78 per cent to Tk 1.96 crore.
Meanwhile, as per an audit report, the Premier Leasing and Finance did not maintain a workers' profit participation fund for 2019 due to a shortage of funds for the required provision on loans.
There is also a tremendous lack when it comes to the NBFI's ability to collect receivables from margin clients for its securities subsidiary, most of which was provided during the stock market crisis in 2010.
A number of securities houses that lent money to beneficiary accounts holders are facing the same problem as the stock market crash greatly reduced values of shares.
The margin loan holders are not looking around seeking assistance from brokerage firms, for which the latter are struggling.
Premier Leasing Securities has receivables from margin clients amounting to Tk 19.13 crore, or 51.89 per cent of its total assets, and that is significant, as per the auditor.
Employees' benefits provident fund, gratuity and income taxes and deferred taxes are not provided in the financial statements.
The company has six branches and three subsidiaries, namely Premier Leasing Securities, Premier Leasing Capital Management and Premier Leasing Securities Broking, which were audited by other auditors.
The Z category company provided 5 per cent stock dividends in 2018, when its short-term loans amounted to Tk 132 crore and long-term loans Tk 161.4 crore.
The ongoing Covid-19 pandemic has only added to the woes of Premier Leasing as the government allowed borrowers to delay repayment of loans, Hamid said.
"To reduce classified loans, we need to increase our loan portfolio and debt collection but the pandemic impacted both sides," he added.
The single digit ceiling on interest rates has also had an impact as borrowers go to banks rather than the NBFIs to get loans at even lower rates.
About their plans for the future, the managing director said they would attract deposits to enhance their loan portfolio.
"On the other side, we have already strengthened our recovery team," he said.
The company's stock price rose 2.99 per cent to Tk 6.90 on the Dhaka bourse yesterday.