Reverse provision helps Midas Finance return to profit in Q2

Infograph: TBS

Midas Financing Ltd returned to profit from loss in the April-June quarter this year as the non-banking financial institution added excess provisioning against classified loans to its balance sheet as income.

At the end of this quarter, its net profit stood at Tk14.68 crore, which was a loss of Tk2.52 crore at the same period a year ago.

Mustafizur Rahman, managing director of the company, told The Business Standard, "In the January- March quarter we had to maintain excess provision against the classified loan as per the central bank's instruction. But in the second quarter our combined efforts recovered some classified loans. That is why we could reverse the provision to the balance sheet as income."

Like its industry counterparts, Midas Financing deferred the loan classifications since the first lockdown in late March 2020 as instructed by the central bank.

The Bangladesh Bank has extended the ongoing moratorium on the repayment of loan instalments for non-bank financial institutions till 31 December this year.

The central bank further adds that such loans will not be considered classified if borrowers repay 50% of their instalments within 31 December 2021. In such a case, loan recipients have to repay the remaining loan instalments within the next one year.

"Despite the negative interest income, we could manage net profit in the second quarter," he added.

But in the first quarter, the company incurred a loss of Tk52.51 crore due to keeping additional provision as its classified loans surged.

That is why, at the end of the first half of this year, its net loss stood at Tk37.83 crore and loss per share was Tk2.72.

The big quarterly loss pushed the net asset value per share down to Tk8.97 at the end of June this year, which was Tk11.69 as on 31 December 2020.

The managing director said, "We have a loan portfolio of Tk950 crore but our client number is above 3,500. Most of our clients are from the SME sector, which suffered badly because of the pandemic. Due to this, it is very difficult for us to recover the loan from these clients."

Midas Financing paid 2.5% cash and 2.5% stock dividends for 2020 against a moderate profit disclosed alongside the net asset value of over Tk11 per share at the end of December last year, according to the stock exchanges. 

The board of directors also decided to transfer the ownership of a 3,790 square-foot floor space and three car parking spaces at its Dhanmondi building in Dhaka in favour of its sponsor Micro Industries Development Assistance and Services at a cost of Tk1.71 crore.

The asset transfer plan was also approved by the shareholders in an extraordinary general meeting held on 20 September this year.

Midas Financing Ltd began its operation as an NBFI at the end of 1999 and it got listed on local bourses in the early 2000s.

Midas Financing's shares were down by 1.31% on Wednesday to close at Tk22.60 at the Dhaka Stock Exchange.