The auditor has raised a red flag over the continuation of business of Prime Finance & Investment as the company has been suffering losses for three years and has reported negative retained earnings since 2015.
The company could not maintain required provisions due to irregularities and mismanagement in loan disbursements.
High classified loans, negative retained earnings, and excess liabilities have put Prime Finance in trouble, leading to significant doubts about its recovery, said the company's auditor after reviewing its financial statements for 2023, published on Wednesday.
The non-bank financial institution's cumulative losses stood at Tk 2.52 billion for the three years to 2023, as per the latest financial results.
The company has also failed to declare dividends for shareholders for five years. It last declared a 2 per cent cash dividend in 2019.
The company's total classified loans stood at Tk 7.66 billion, which was 67.90 per cent of its outstanding loans as of December 2023, the auditor said.
Moreover, the loans given to subsidiary and associate companies amounted to Tk 8.84 billion as of December 2023, which represents 75.76 per cent of the company's total loan portfolio, exceeding the single borrower exposure limit of 30 per cent.
The auditor has expressed serious concern about the recoverability of the loans given in breach of regulations.
"These financial challenges raise significant doubt about their ability to bear the cost of funds associated with these loans," said the auditor.
The associate company of Prime Finance has not generated any profit since 2007, and the subsidiary since 2014.
Due to higher non-performing loans, Prime Finance incurred a loss of Tk 1.53 billion in 2023, compared to a net loss of Tk 838 million the year before.
Over the last five years, its average profitability before provisions has been negative Tk 71.86 million. The average annual provision requirement was Tk 243.57 million, significantly exceeding the profitability trend.
"Even if the company manages to maintain these provisions in the future, the resulting losses will likely continue to increase significantly," said the auditor.
Moreover, Prime Finance failed to comply with the minimum capital requirements. The company maintained capital of Tk 285 million, against the required Tk 1.60 billion, as of 2023.
Its capital adequacy ratio was 1.78 per cent, significantly below the regulatory requirement of 10 per cent.
A lower capital adequacy ratio implies that the company may not have sufficient capital to handle a certain amount of losses. That exposes the entity to higher insolvency risk.
Trading suspension at PFI Securities
Share trading at PFI Securities, a member brokerage house of the Dhaka Stock Exchange, has been suspended since July 2024 due to mismanagement of client funds.
The Bangladesh Securities and Exchange Commission (BSEC) found a Tk 292 million deficit in its consolidated customer account (CCA).
The auditor's report says amounts payable by PFI Securities to clients reached Tk 295.78 million by the end of 2023, whereas the balance in the CCA account was only Tk 3.92 million.
The BSEC also uncovered significant financial irregularities during a routine inspection of Prime Finance and its affiliates. A subsequent in-depth investigation last year revealed that a sum of approximately Tk 2.96 billion had been siphoned off through large-scale misuse of margin loans.
According to the findings, former directors and managing directors of Prime Finance and its two subsidiaries - PFI Securities and Prime Finance Capital Management - were primarily responsible for the scam. The matter was forwarded to the Anti-Corruption Commission (ACC) for legal action.
Dropped from liquidation list
In November last year, the Bangladesh Bank planned to liquidate nine NBFIs, including Prime Finance & Investment.
However, after two days of hearings in January, three companies - Prime Finance, GSP Finance, and BFIC - were given three to six months' time to improve their financial performance.
"If the three institutions fail to recover or show meaningful progress, they will be added to the liquidation list," said an official of the central bank after a board meeting last month.
babulfexpress@gmail.com
© 2026 - All Rights with The Financial Express
