First Finance PLC has been unable to fully repay depositors, lenders and regulators since 2021 as nearly its entire loan portfolio has turned distressed, with its external auditor warning that persistent liquidity shortages, mounting credit losses and a deep capital deficit have cast significant doubt over the non-bank financial institution’s financial health.
In its audit of the company’s 2025 financial statements, Kazi Zahir Khan & Co issued a qualified opinion alongside emphasis of matter, other matter and material uncertainty paragraphs, highlighting prolonged financial weaknesses despite regulatory relief from Bangladesh Bank.
The auditor said First Finance has continued to struggle to settle matured obligations to depositors, lenders and regulators over the past four years, even though it reported compliance with the central bank’s cash reserve requirement (CRR) and statutory liquidity ratio (SLR).
The reported liquidity position includes Tk20.30 crore receivable from two distressed non-bank financial institutions—People’s Leasing and Financial Services Ltd and International Leasing and Financial Services Ltd—from which no interest has been realised for years.
Asset quality has deteriorated to one of the weakest levels in the sector. Classified leases, loans and advances stood at 88.24 per cent of the portfolio at the end of December 2025. Excluding loans protected by court stay orders, the classified loan ratio would rise to 96.03 per cent, indicating that almost the entire credit portfolio is under stress.
Loan recovery remained negligible. The company recovered only Tk12.04 crore in principal during the year, equivalent to 1.61 per cent of its outstanding loans and advances. Instead, it has increasingly relied on legal action, filing 975 recovery cases involving Tk646.95 crore, or about 86.6 per cent of its total loan portfolio.
The auditor also questioned the presentation of liabilities in the financial statements. Term deposit receipts payable worth Tk37.11 crore and accrued interest payable of Tk113.07 crore were reported under other liabilities instead of deposits, meaning the disclosed credit-deposit ratio of 99.18 per cent may not accurately represent the company’s lending exposure.
Funding pressures continued to intensify during the year. Deposits carrying relatively high interest rates totalled Tk306.91 crore, almost half the deposit base, while accrued interest payable increased by Tk35.67 crore to Tk113.07 crore.
Outstanding borrowings from banks and financial institutions stood at Tk128.29 crore, but the company repaid only Tk2.67 crore in principal despite incurring Tk13.07 crore in finance costs.
The audit identified the company’s capital position as another critical weakness. After incorporating Bangladesh Bank’s regulatory forbearance, First Finance’s capital to risk-weighted assets ratio (CRAR) stood at negative 71.18 per cent against the regulatory minimum of 12.5 per cent.
The auditor calculated a Tier-1 capital shortfall of Tk591.75 crore and said the company had not taken sufficient measures, including fresh capital injection, to restore compliance with prudential capital requirements.
The auditor also flagged unpaid withholding tax, value added tax (Vat) and excise duty liabilities, possible under-provisioning for income tax and the failure to operationalise the company’s approved gratuity fund.
