People’s Leasing June profit dents 3.2% over higher funding cost, overheads
EPF accumulates shares to become second largest shareholder
Sri Lanka’s largest nonbank financial sector entity, the People’s Leasing and Finance PLC (PLC) group saw its June quarter (1Q’17) net profit edging down by 3.2 percent to Rs.1.07 billion or 70 cents a share from a year earlier due to rising funding costs and the significant increase in personnel costs, the interim results released to the Colombo Stock Exchange showed.
The PLC group expanded its loans and receivables by 4.8 percent or Rs.5.3 billion during the quarter to Rs.116.5 billion but that little helped to have a positive impact on the net interest income (NII).
The NII narrowed by 1.0 percent year-on-year (YOY) to Rs.2.6 billion as the interest expenses rose by 20.3 percent YOY when the interest income had risen by only 8.3 percent YOY.
The PLC group consists of its 75 percentowned insurance subsidiary, People’s Insurance PLC, the microfinancing arm, People’s Microfinance Limited and its associate company People’s Merchant Finance PLC among others.
The company last week announced that the board of directors had taken a decision to amalgamate People’s Merchant Finance PLC during the current financial year subject to certain provisions.
Meanwhile, in May, the company announced it had entered into an agreement with Bangladesh-based Alliance Leasing and Finance Company Limited to buy a 51 percent stake in the latter making the company’s first cross border acquisition.
PLC on a standalone basis has an asset base of Rs.130.4 billion, up 4.8 percent during the three months from March 31, 2016.
During the quarter the group deposits have grown by only 3.0 percent or Rs.1.0 billion to Rs.34.7 billion.
The group largely funds its asset growth through debt securities and other bank borrowings but the shortage in liquidity in money markets will force the company to aggressively seek for customer deposits.
Meanwhile, in April, the company redeemed Rs.50 million worth of preference shares.
Despite the dent in NII, the company increased its net operating income by 13.4 percent YOY to Rs.3.72 billion largely supported by the fee and commission incomes.
However, the personnel expenses rose by 41.5 percent YOY to Rs.689 million while the other operating expenses rose by 23.1 percent to Rs.608 million weighing on the group bottom line.
The state-controlled private sector pension fund, the Employees’ Provident Fund (EPF) had bought a 1.63 percent stake in the company during the three months to become the second largest shareholder from previous third. Now the EPF holds a 5.39 percent stake.
The parent company, People’s Bank had a 75 percent stake in the company being the largest shareholder.