First Finance gets 12 weeks to hold 2018 AGM

First Finance Ltd has secured a High Court order to hold its 2018 annual general meeting (AGM) within 12 weeks from 23 February. 

"After holding the AGM, we will hold the 2019 AGM as well because the High Court also granted us permission to arrange the subsequent AGMs," said Maksumul Mahmud, executive vice-president of the company who is now serving as the head of recovery.

The 2018 AGM was postponed following a shareholder's petition seeking a stay order citing improper accounting.

The company – burdened with almost half of its total loans going bad – was also running short of mandatory provisions, while there had been loan balance mismatches between its financial statements and the general ledger, according to the emphasis of matter paragraph.

The emphasis of matter paragraph is a paragraph included in the auditor's report that refers to a matter appropriately presented or disclosed in the financial statements that, in the auditor's judgment, is of such importance that it is fundamental to users' understanding of the financial statements.

The Bangladesh Bank granted First Finance several years to adjust the Tk46 crore provision shortfall and the Tk20 crore loan balance mismatch between the published and internal documents.

Maksumul told The Business Standard his company is doing better now as the team has already recovered a portion of non-performing loans (NPLs) and the trend is positive in terms of loan recovery and liquidity.

In 2017, First Finance's NPL reached 50% despite the fact that the company did not lend a lot to its directors, unlike some other non-bank financial institutions (NBFIs) that had suffered notorious scams in the last couple of years, he said.

"As the business of some of our major clients was down, our loans were stuck," he added.

In 2019, First Finance recovered Tk93 crore of such loans, and Tk60 crore the following year, which helped its NPL ratio drop below 30%, according to Maksumul.

The ratio could have been even lower had the company continued lending over the 2018-20 period.

First Finance's loan portfolio squeezed to around Tk800 crore from more than Tk1,250 crore a few years ago, mainly due to deposit encashment pressure. 

It suffered deposit withdrawal pressure due to a confidence crisis in small NBFIs, especially those that had irregularities.

Also, the tight money market over the 2017-2019 period gave NBFIs a hard time as they borrowed a large portion of funds from commercial banks, which themselves were recalling their money for the sake of their own liquidity. 

"However, as we managed liquidity at the cost of loan book expansion, interested depositors got their money back. Confidence in us is much better now. Clients now believe that their money is safe at First Finance," said Maksumul.

First Finance is borrowing at single-digit interest nowadays and has also begun processing new loan applications, according to the senior official.

The NBFI, which began its journey in 1993, came to the stock market in 2003.

As it embraced diversified financial products alongside lease financing, it later changed its name from First Lease International Ltd to First Finance Ltd.

Over the last five years, First Finance saw many new faces in its board of directors as its control had changed thrice during this period.

According to the Dhaka Stock Exchange (DSE), First Finance's loss per share was Tk3.29 for the first nine months of 2019.

On top of that, the gradual adjustment of provision and other shortfalls dragged its net asset value per share to Tk4.1 at the end of September 2019 from Tk7.72 a year ago.

At the DSE, First Finance shares, with a face value of Tk10 each, closed at Tk6.1 on Wednesday.

More than a third of the company's shares are held by the general public, while nearly 24% are owned by institutional investors and over 41% by the company's sponsors and directors.