Funding costs hamper People’s Leasing December profits

People’s Leasing and Finance PLC (PLC), the finance arm of state-owned People’s Bank, saw its performance being affected by higher cost of funds during its December quarter (3Q17) as the earnings narrowed by 16.9 percent year-on-year (YoY) to 67 cents a share or Rs.1.0 billion, the interim accounts showed. 
The net interest income grew by 7.5 percent to Rs.2.7 billion although the interest income grew by 31.6 percent because the expenses grew by a sharp 62.2 percent—more than double the rate at which the income grew. 
For the nine months ended December 31, 2016, the PLC group made an earning of Rs.2.11 a share or Rs.3.2 billion. The net interest income grew by 1.3 percent YoY to Rs.7.9 billion.     
The country’s largest non-bank finance company saw its loans and receivables book growing by little under 21 percent or Rs.23.1 billion to Rs.134.3 billion. 
Although the growth in the loan book has slowed down, the 21 percent growth is considered as a considerable growth, given the challenging conditions prevailed during the period. 
Meanwhile, the customer deposits grew by 25.9 percent or Rs.8.5 billion to Rs.42.4 billion. 
The balance funding was met by a debenture issue and bank borrowings. PLC raised Rs.8.0 billion in November 2016 via a senior debenture issue. During the period the company redeemed 10 million preference shares at Rs.10 each.  
The PLC group is comprised of People’s Leasing Property Development Limited, People’s Leasing Fleet Management Limited, People’s Insurance PLC, People’s Leasing Havelock Properties Limited, People’s Microfinance Limited and its associate People’s Merchant Finance PLC. 

Meanwhile, in May last year, PLC acquired a 51 percent stake in Alliance Leasing and Finance Company Limited, a company incorporated in Bangladesh to carry out finance business. 
The segmental results showed that the group’s leasing and hire purchase business pre-tax profit narrowing but the loans and Islamic finance businesses making gains. 
The group insurance business recorded a profit before tax of Rs.837 million, slightly missing the last year’s profit of Rs.886 million. 
As of December 31, 2016, the state-controlled private sector pension fund, the Employees’ Provident Fund (EPF), held a 5.43 percent stake in PLC, while the parent company, People’s Bank, had a 75 percent stake in the company, being the largest shareholder.