Abans Finance, a member of the Abans group, has registered a pre-tax profit of Rs.51.5 million for the quarter ended June 30, 2016, compared to Rs.36.3.million recorded in the corresponding period of 2015, achieving a year-on-year growth of 41.86 percent. The post–tax profit of the company for the quarter under review has also improved by 31.1 percent, from Rs.26.12 million in 1Q 2015 to Rs.34.24 million in 1Q 2016.
The company has continued to increase its profitability amidst external challenges such as increasing interest rates and slowdown in consumption. The increase in profitability was mainly due to favourable growth in net interest income and other operating income.
Fund-based income (FBI), which experienced slight shrinking of net interest margins (NIM), adversely impacted on the net interest income (NII) of the entire NBFI sector and Abans Finance was no exception to this trend. Nevertheless, the NII of the company recorded a remarkable increase of Rs.58.8 million or 37.7 percent during the period under review from Rs.155.9 million in 1Q 2015 to Rs.214.7 million in 1Q 2016, aided by the significant expansion of the asset-base of the company since 1Q 2015, coupled with prudent liability management strategies.
The non-fund based income (NFBI), which mostly comprises of fees, commissions and other fee-based income, decreased to Rs.12.9 million as opposed to Rs.15.0 million earned for the first three months of the year 2015, reflecting a decline of 13.8 percent. The company introduced a number of unique value additions to its Hero Motor cycle leasing offerings during the period under review in order to remain competitive in view of the fact that most competitors have now made moves to the two-wheeler motorcycle credit market in order to retain margins in a period of rising interest costs.
A 380.1 percent growth was recorded in other operating income for the period under review as compared to the corresponding period in 2015. Other operating income earned during the first quarter of 2016 amounted to Rs.4.5 million whereas 1Q 2015 was only Rs.0.95 million.
The operating expenses of the company, which stood at Rs.82.4 million for the first quarter in 2015, increased to Rs.109.5 million during the same period in 2016, reflecting a YoY increase of 32.8 percent. This increase was mainly due to the increase in personnel costs. However, the cost-to-income ratio without value-added tax (VAT) and Nation Building Tax (NBT) on financial services in Q1 2016 has improved to 47.1 percent from 47.8 percent recorded in the first quarter of the previous year. Maintaining the cost-to-income ratio below 48 percent despite having one of the youngest branch networks in comparison to its closest competitors is considered a significant achievement. The company intends to improve on this ratio as it grows its portfolio further.
Impairment charge on loan and receivables for the first quarter of the year 2016 amounted to Rs.60.2 million, which is an increase of Rs.10.4 million as compared to Rs.49.7 million impairment charges recorded for the first quarter of the previous year. The increase of collective impairment provision requirement due to growth of the loan book and prudential provisions made against individually significant impaired customers are the main reasons for the said increase in impairment charge.
The year 2016 exposed the company to a challenging environment caused by intense competition, high funding cost coupled with the resultant pressure on the NIM. Despite these challenges, the company’s total asset base grew by 2.53 percent during the quarter (annualized 10.13 percent) and stood at Rs.6, 304.37 million as at June 30, 2016. The loans and receivables increased by 7.0 percent during the quarter (annualized 28.1 percent) to Rs.5,120.3 million as at June 30, 2016. The total deposits showed a growth of 7.1 percent during the quarter (annualized 28.58 percent) to record a figure of Rs.4,863.6 million as at the balance sheet date.
The ROE (after tax) improved to 16.72 percent as at June 30, 2016 compared to 15.53 percent recorded as of March 31, 2016 while ROA (before tax) stood at 3.14 percent. The basic earnings per share for the first quarter of the year 2016 improved to Rs.0.77 compared to Rs.0.71. recorded for the corresponding period of the previous year. This records a growth of 8.4 percent. Statutory liquid asset ratio (17.40 percent) was above the mandatory requirement of 10 percent, and the total capital adequacy ratio (CAR) was at 14.33 percent as against 11.45 percent for the previous period.
The Abans group consists of a large diversified set of companies and divisions involved in the sale and financing of consumer durables/household appliances, motor vehicles, environmental services, logistics, hospitality and finance. The Abans group places strong emphasis on customer care and focuses on the paradigm of ‘Customer for life’.
