Auditor finds ILFSL has only Tk417cr collateral against Tk4,139cr loans

International Leasing and Financial Services Limited (ILFSL) continues to grapple with severe financial distress, despite a court-ordered restructuring and the appointment of a new board.

According to the auditor's qualified opinion, as of 31 December 2024, the company held a mere Tk417 crore in eligible collateral against total loans and advances amounting to Tk4,139 crore. The company had sanctioned Tk3,011 crore in loans to 246 borrowers, with the majority now classified as non-performing.

The auditor noted that many of these issues originated before 2019 and still cast significant doubt on ILFSL's ability to operate as a growing concern. Although the High Court appointed a new board to restore financial discipline and rebuild depositor confidence, recovery efforts have remained slow and challenging.

As of the reporting date, ILFSL posted negative retained earnings of Tk4,976.93 crore. In 2024 alone, the company incurred a net loss of Tk865.35 crore, largely due to income reversals and provisions against non-performing loans, including those issued to subsidiaries.

Additionally, total liabilities rose by Tk895.53 crore during the year due to unpaid expenses and accrued interest. The company's total loans, leases, and advances stood at Tk4,139.34 crore, of which a staggering 97.72% has been classified as non-performing. Of this, Tk4,029.01 crore (97.33%) falls under the 'Bad' loan category.

The crisis has deepened further due to ILFSL's significant exposure to distressed financial institutions. As of 2024, the company held fixed deposits of Tk1,334.07 crore with FAS Finance, Tk1,405.55 crore with Peoples Leasing, and Tk528.74 crore with Premier Leasing – all of which are in financial trouble. These deposits have been classified as non-performing, and no interest income has been recognised. The company also reported Tk145.65 crore in income receivables from these investments, but no cash recovery has been recorded since 2018.

Moreover, ILFSL is facing a significant capital shortfall. Financial regulations require the company to maintain a paid-up capital of at least Tk100 crore and a Capital Adequacy Ratio (CAR) of 10% based on risk-weighted assets (RWA). However, by the end of 2024, ILFSL reported a negative eligible capital of Tk4,637.35 crore, while the required capital stood at Tk395.44 crore. This resulted in a capital shortfall of Tk5,032.80 crore. Its CAR has plunged to negative 117.27%, far below the regulatory threshold.

A company official, speaking on condition of anonymity, told TBS, "We are aware of the auditor's qualified opinion. The Bangladesh Bank has already instructed the board to address these issues, and several board meetings have been held to discuss mitigation strategies."

Despite regulatory interventions and board restructuring, ILFSL remains engulfed in financial turmoil. With capital erosion, massive loan defaults, regulatory breaches, and ongoing legal battles, the company's path to recovery appears uncertain without strong external support and structural reforms.