People’s Leasing 4Q hurt by sharp drop in leases, compressed margins and higher VAT

9 May 2017 12:00 am - 0     - {{hitsCtrl.values.hits}}

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People’s Leasing & Finance PLC (PLC), a licensed finance company with an asset base of Rs.150 billion, saw its performance for the March quarter being impacted by narrowing margins, slower growth in loans and leases and higher provisions for possible bad loans. 
But the largest impact came from the higher financial services value added tax (VAT) as full impact of the VAT increase felt on the company’s 
bottom-line. 
According to the interim financial results, the PLC group reported earnings of 71 cents a share or little over a billion rupees for the January - March quarter (4Q17), down 8.0 percent from the same quarter last year. 
The VAT & NBT financial services rose sharply to Rs.377 million from Rs.261 million during the corresponding quarter in 2016. 
The leasing giant had given only Rs.1.3 billion in loans and leases during the quarter as the restrictions on vehicle leasing were tightened while the interest rates also shot up.  
Meanwhile, for the full year ended March 31, 2017, the PLC group reported earnings of Rs.2.81 a share or Rs.4.26 billion, roughly a 10 percent decline from the last year.  
For the full year, PLC on a standalone basis grew its loans and other receivables by Rs.24.2 billion or 22 percent. Nevertheless this was more than twice the Rs.11.5 billion growth during the last financial year.  
During the quarter, the company made Rs.188 million as provisions against possible bad loans from a provision reversal of Rs.24 million a year ago. 
The net interest margin (NIM) appears to have taken a dent during the financial year as reflected by close to 60 percent increase in interest expenses compared to just under 40 percent rise increase in interest income. 
Licensed finance companies are prone to compressing margins than the banks as their leases, which account for a larger share of their asset portfolio, is unable to re-price even if the interest rates rise. 
However in general their NIM is higher than of the banks because they charge higher interest rates. 
According to the segmental results of the company, only the loans segment had recorded positive results. 
The net fee and commission incomes also fell by 8.0 percent year-on-year (YoY) for the quarter probably as a result if lackluster growth in loans and leases. 
Personal expenses rose from Rs.561 million to Rs.823 million for a quarter. 
Meanwhile, during the year, the company’s deposit base grew by little under Rs.11 billion while the short-term borrowings from banks rose by Rs.9.2 billion. 
In April, the Central Bank extended the company the time till March 31, 2018 to complete the amalgamation of its associate company, People’s Merchant Finance PLC. The merger was first announced in July 2016. 
The company also has a fully owned insurance subsidiary, People’s Insurance Limited among others. 
On May 15, 2016, PLC bought 51 percent stake of Alliance Leasing and Finance Company Limited, a finance company in Bangladesh.
The company in November 2016 appointed Ahamed Sabry Ibrahim as its Chief Executive Officer Designate.
As at March 31, 2017, People’s Bank held 75 percent stake of PLC while the state controlled private sector pension fund, Employees’ Provident Fund, held 5.43 percent stake.

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