People’s Leasing eyes local consolidation, expanding insurance arm
People’s Leasing and Finance Co. (PLC) says this will be a year of consolidation while exploring expansion into the insurance sector.
Mr. Sabri Ibrahim
“We are the fifth largest general insurer through a subsidiary, People’s Insurance. We have big plans to expand this year,” Sabri Ibrahim, CEO/General Manager PLC told the Business Times in an interview. People’s Insurance accounts for nearly 12 per cent of the group’s total revenue.
Mr. Ibrahim said this year will largely be a year of consolidation for the rest of the operations but PLC won’t be hesitant to tie up with any entity which has synergy with its core businesses. The company was also eyeing expanding outside the region. They had looked at Maldives, but nothing had firmed up. “We would not be looking to expand outside the country this year. This year is going to be a tough one,” Mr. Ibrahim stressed.
PLC’s Finance company in Bangladesh which they started last year with three Bangladeshi partners has broken even. “We own 51 per cent while the Summit Group, Rangs Group and the Green Delta Group own the rest,” Mr. Ibrahim added. He said the Bangladeshi operation is a growing market but it is also very competitive.
With less disposable income, last year the company was hit by the slowdown in the economy. The finance sector is more susceptible to economic downturns than their counterparts in the financial industry. “Taxation is also hitting us. We have to pay about 55 per cent in taxes,” Mr. Ibrahim pointed out.
The recent Loan to Value (LTV] rule has had a double effect on PLC. Now banks are also in the leasing business. They had major competition against traditional leasing companies. But PLC grew by 26 per cent for the first nine months of this financial year posting Rs. 3.1 billion against the Rs. 2.5 billion for the corresponding period last year.
PLC’s net earnings grew by nearly 13 per cent year on year (YoY) to Rs. 1.2 billion in 3QFY19, despite the nearly 10 per cent YoY increase in impairment charges, driven by the 30 per cent YoY increase in Net Interest Income (NII) and the 2 to 3 per cent YoY increase in Non-Interest Income. Earnings for the nine months ending December 2018 grew by nearly 29 per cent YoY to Rs. 3.8 billion.
PLC’s NPL ratio stood at 4 per cent in 3QFY19 against the 3 per cent in 3QFY18 backed by the overall economic slowdown. In the first nine months of last year it was 2.7 per cent. “It is still less than the industry, but we are not happy with it because there is a marked deterioration in our assets. We are now intensifying our recovery efforts,” Mr. Ibrahim noted. He said they have at a few construction related non-performing loans, but they saw such loans across the board. He also mentioned that the legal process should be adjusted so that the finance companies will be better geared to lend more which will in turn translate into a better economy. “We do not have Parate Execution for mortgage actions. Such legal cases take more than 10 years and eventually when the asset is recovered there is hardly any value,” he said.
PLC’s net loan book grew by nearly 15 per cent YoY to Rs. 159.3 billion while interest expenses grew at a slower pace of 10 per cent YoY led by a nearly 15 per cent YoY growth in deposit base.
Lease and Hire Purchase accounted for nearly 52 per cent of gross interest income (up by nearly 13 per cent YoY) and loans contributed nearly 38 per cent to aggregate interest income (up by nearly 32 per cent YoY) in 3QFY19.
PLC’s deposits contributed nearly 53 per cent against the nearly 51 per cent in 3QFY18 to the funding mix accounted nearly 26 per cent against the nearly 23 per cent 3QFY18 and debt securities nearly 21 per cent against the nearly 26 per cent in 3QFY18.
The company is now aggressively marketing short term gold loans in a bid to be less vulnerable to fluctuating interest rates. “We are looking to grow this product this year,”
Mr. Ibrahim added.