Top-level corruption eats up Peoples Leasing

Peoples Leasing faced a huge loss of over Tk1,000 crore in 2015, putting its depositors at risk. The loss has been attributed to massive corruption allegedly committed by its board of directors, according to sources. This is the first in kind that a non-bank financial institution ever incurred such a big loss. Bangladesh Bank dissolved the earlier board by removing five directors on a charge of financial corruption last year and formed a new board thereafter. But the new board members also followed suit and was found guilty. The central bank found that the new board had tendency to hide real information and manipulated balance sheet to conceal losses. The net loss of the company shown in the balance sheet of 2015 was Tk84 crore, a massive fall from its net profit of Tk19.66 crore in 2014. An another loss of Tk923 crore was put in other assets stated in the balance sheet last year while no explanation was offered for this. If the loss had been brought into the profit-loss calculation, the net loss would stand at Tk1,007 crore. Though the balance sheet suggested a total provision shortfall of Tk503 crore, the Bangladesh Bank investigation found that the provision shortfall stood at Tk1,600 crore at the end of 2015, 279.52% higher from the previous year. The company showed Earning Per Share (EPS) negative 3.03. If the real picture was reflected, EPS would have been much worse, according to an observation report of Bangladesh Bank. The company came down to “Z” category by declaring no dividend for the shareholders in the year 2015 from “A” category with 10% stock dividend deceleration in 2014. Shareholders in the capital market faced a huge loss as the company took a nosedive. Its share price went down to around Tk7 from over Tk15 over the last one year. All financial indicators of the institution went into the negative territory including returns on investment at 4.86, returns on assets 3.27 and net income per share 3.03, according to the balance sheet. The non-bank financial institution poses a huge risk for depositors if the individuals call their money back at this moment, a central bank high official apprehended. The total deposit of the company stood at over Tk1,600 crore as of December 2015 while its provision shortfall was also Tk1,600 crore. The company lent 93% of its deposits, of which a major portion turned into bad loans since it had a huge loss in earning through interest last year. The company made a loss of around Tk100 crore from interest income last year while it bagged profit of Tk40 crore in 2014. Though Bangladesh Bank still doubts the authenticity of company balance sheet and suspects that the loss amount may shoot up if a detailed investigation is conducted. Of the last six years from 2010 to 2015, the Chartered Accountants firm, Rahman Mostafa Alam, prepared the balance sheet of Peoples Leasing for five years, but the report prepared by Hoda Vasi, another Chartered Accountant firm, reveled that massive corruption in the institution had been rampant since 2009. In this perspective, a Bangladesh Bank observer suggested the board to appoint any other auditor except Rahman Mostafa Alam firm in 2016 to reflect the real situation. According to the central bank’s observation report, Peoples Leasing is making overvaluation of its assets and devaluation of liabilities. Moreover, despite having more than 60% of default loans, the leasing company management is not maintaining provision against its bad loans. The Bangladesh Bank observer for Peoples Leasing, AKM Amjad Hussain, said in his review report that a detailed investigation is necessary to bring to light all previous irregularities to take the institution forward. The previous directors of the company purchased a piece of land measuring 66.5 katha at Green Road in the capital with the company fund of Tk123 crore. The amount of money was not adjusted, nor even kept as provision against what it terms Tk123 crore a loss, according to the balance sheet. The directors who were removed on the charge of corruption in 2015 are Khabir Uddin Miah, Khabir Uddin Miah, Arafin Shamsul Alamin, Nargis Alamin and Humaira Alamin. Former Chairman Moazzam Hossain resigned while Uzzal Kumar Nandi was appointed as new chairman.