Union Capital Limited, a prominent financial institution in Bangladesh, is grappling with severe financial distress, as indicated by its last financial statements and the auditor's report of 2023.
The auditor has raised significant concerns about the company's ability to continue, highlighting substantial losses and regulatory capital shortfalls.
This issue came to light through the auditor’s opinion and Emphasis of Matter published on the Dhaka Stock Exchange (DSE) website on Sunday following a review of the company’s financial report for the year that ended on December 31, 2023.
The auditor said that according to the Bangladesh Bank's circular No 05, dated July 4, 2011, and DFIM circular No 14, dated December 28, 2011, the company is mandated to maintain regulatory capital amounting to Tk 1,401,442,806.
However, as of December 31, 2023, the company's eligible capital stands at a loss of Tk 8,504,935,690, resulting in a staggering shortfall of Tk 9,906,378,496.
The auditor has also issued a "Qualified Opinion" on the financial statements, referencing Note 2.10, which outlines the dire financial condition of Union Capital Limited. As of December 31, 2023, the company reported a loss of Tk 602.83 crore and negative Earnings per Share (EPS) of Tk 34.93. The accumulated loss has soared to Tk 1,086.47 crore, which constitutes 68 per cent of the total assets, it added.
The company's financial health is further compromised by the alarming status of its loan portfolio. Approximately 86.94 per cent of the total loans, advances, and lease portfolios are categorised as non-performing. This deterioration has led to a 31 per cent increase in total liabilities compared to the previous year. Currently, the company's liabilities are 155 per cent of its total assets, read the auditor’s note.
The financial statements also reveal a dramatic decline in the Net Assets Value (NAV) per share, which is now negative Tk 50.34, compared to negative Tk 15.41 in the previous year.
The consistent losses over the past five years paint a bleak picture, with the company recording losses of Tk 98.84 crore in 2019, Tk 49.87 crore in 2020, Tk 143.58 crore in 2021, Tk 193.66 crore in 2022, and Tk 602.83 crore in 2023.
Q1 performance
Union Capital Limited has reported a narrowed consolidated EPS loss of Tk 1.20 for the first quarter of 2024, a significant improvement compared to the negative Tk 1.48 recorded in the same period of 2023, showed the report on the DSE website.
This reduction in losses is attributed to increased investment income, higher revenues from fees, commissions, exchange and brokerage, and a reduction in required provisions against loans, advances and leases compared to the previous year.
However, the company's consolidated NAV per share remains negative, standing at Tk 52.23 as of March 31, 2024, down from Tk 51.03 as of December 31, 2023.
The decline in NAV during Q1 of 2024 is primarily due to a net loss after tax of approximately Tk 20.66 crore.
The main factors contributing to this loss include decreasing interest income and the need to maintain extra provisions for the downgrading of non-performing loans (NPLs).
Dividend
Union Capital Limited's Board of Directors has also announced that there will be no dividend distribution for the year ending on December 31, 2023.
This decision came amid substantial financial challenges faced by the company, as evidenced by the latest financial results.
The company’s Annual General Meeting (AGM) is scheduled to take place on September 10. The meeting will be conducted using a hybrid system, allowing shareholders to participate both physically and digitally. The record date for the AGM has been set for July 28.
