Abans Finance Q-1 profits grow 31%
Abans Finance, a member of the Abans Group, has registered a pre-tax
profit of Rs.51.5 million for the quarter ended 30 June 2016, compared
to Rs.36.3.million recorded in the corresponding period of 2015,
achieving a year-on-year growth of 41.86 %. The post-tax profit of the
company for the quarter under review has also improved by 31.1%, from
Rs.26.12 million in Q1 2015 to Rs.34.24 million in Q1 2016.
The company has continued to increase its profitability amidst
external challenges such as increasing interest rates and slow down 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, NII of the company recorded a remarkable increase
of Rs. 58.8 million or 37.7 % during the period under review from
Rs.155.9 million in Q1 2015 to Rs.214.7 million in Q1 2016, aided by the
significant expansion of the asset-base of the company since Q1 2015,
coupled with prudent liability management strategies.
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%. 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 motor
cycle credit market in order to retain margins in a period of rising
interest costs.
A 380.1% 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 Q1 2015 was only Rs.0.95 million.
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%. This increase was
mainly due to the increase in personnel costs. However, the Cost to
income ratio without VAT and NBT on financial services in Q1 2016 has
improved to 47.1% from 47.8% recorded in the first quarter of the
previous year. Maintaining the cost-to-income ratio below 48% 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 NIM. Despite these challenges, the company's total asset
base grew by 2.53% during the quarter (annualized 10.13%) and stood at
Rs.6, 304.37 million as at 30 June 2016. The loans & receivables
increased by 7.0 % during the quarter (annualized 28.1 %) to Rs. 5,120.3
million as at 30 June 2016. The total deposits showed a growth of 7.1 %
during the quarter (annualized 28.58%) to record a figure of Rs.4,863.6
million as at the Balance Sheet date. |