Abans Finance ups FY17 pre-tax profit by 51% to Rs. 197.4 m

Raises current FY18 capital adequacy to one of the highest in the industry of Rs. 1.12 b

Abans Finance, a member of the prestigious Abans Group, has registered a pre-tax profit of Rs. 197.4 million for the period ended 31 March, compared to Rs. 130.5 million recorded in the corresponding year of 2016, achieving a YoY growth of 51.29%. The post-tax profit of the company for the period under review has also improved by 48.2%, from Rs. 90.1 million in 2016 to Rs. 133.6 million in 2017.

The Abans Group consists of a large diversified set of companies and divisions overlooking the sales and financing of consumer durables/household appliances, motor vehicles, environmental services, logistics, hospitality and finance. The Abans Group places a strong emphasis on customer care and focuses on the paradigm of ‘Customer for life’. 

Abans Finance has also enhanced its stated capital from Rs. 382.3 million to Rs. 844 million during 2016/17 and further to Rs. 1,121.4 million during the current financial year of 2018. Ironwood Investment Holding Ltd. has invested in Abans Finance and currently holds 41.89% equity of the company with the conclusion of the mandatory offer closed in July 2017. Ironwood is a private equity firm that successfully raised a Sri Lanka-focused private equity fund of up to $ 30 million in long term (eight year) capital commitments. 

The company has continued to increase its profitability amidst external challenges such as increasing interest rates and slowdown in consumption. The increase in profitability was mainly due to favourable growth in net interest income.

Fund based income (FBI): A slight shrinking of Net Interest Margins (NIM) had an adverse impact 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. 162.98million or 23% during the period under review from Rs. 708 million in 2016 to Rs. 871 million in 2017, aided by the significant expansion of the asset-base of the company since 2016, coupled with prudent liability management strategies.

Non-fund based income (NFBI): Net fee and Commission income which mostly comprises of fees, commissions and other fee based income decreased to Rs. 19.4 million from being Rs. 34.7 million during the year 2016, reflecting a decline of 44.2%. 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 to retain margins in a period of rising interest costs. 

A 22.5% growth was recorded in other operating income for the period under review as compared to the corresponding period in 2016. Other operating income earned during the year 2017 amounted to Rs. 20.7 million, whereas in 2016 it was Rs. 16.9 million. 

Operating expenses: Operating expenses of the company which stood at Rs. 372.6 million for the year of 2016, increased to Rs. 470 million during the year of 2016, reflecting a YoY increase of 26.1%. This increase was mainly due to the rise in personnel costs. The Cost to Income ratio without VAT and NBT on Financial Services in 2017 has increased to 51.5% from 49.0% recorded in the previous year. The company expects to gain the benefits of the business expansion in the coming years and intends to improve on this ratio. 

Impairment Loss on Loan and Receivables: The impairment charge on loans and receivables for the year 2017 amounted to Rs. 189.3 million which is a decrease of Rs. 36.4 million as compared to Rs. 225.8 million impairment charges recorded for the previous year. Recently implemented portfolio monitoring mechanisms including both single loan level monitoring and overall portfolio level monitoring improved the portfolio quality, which in turn supported the reduction of impairment charges during the year.   

Business Growth: The year 2017 exposed the company to a challenging environment caused by intense competition, increasing funding costs coupled with the resultant pressure on NIM. Despite these challenges, the company’s total asset base grew by 21.8% during the year and stood at Rs. 7,486.2 million as at 31 March. The loans and receivables also increased by 21.8% during the year to Rs. 5,825.6 million as at 31 March. The total deposits showed a growth of 22.3% during the year to record a figure of Rs. 5,550.5 million as at the Balance Sheet date.

Performance Ratios: ROE (after tax) declined to 14.64% as at 31 March compared to 15.82% recorded as of 31st March 2016 while ROA (before tax) improved to 1.96% compared to 1.65% recorded in 2016. The Basic Earnings per share for the year 2017improved to Rs. 2.75 compared to Rs. 2.29 recorded for the previous year reflecting a growth of 20%.

Capital Adequacy: The Capital Adequacy Ratio improved during the year under review and was supported by an equity infusion of Rs. 461.7 million (by way of Rights Issue and a Private Placement) and by improvement in internally generated reserves. The total Risk Weighted Capital Adequacy Ratio was at 19.37% compared to 11.59% in 2016 and whereas the Core Capital Ratio stood at 19.41% compared to 11.59% in 2016, making Abans Finance one of the highest capitalised companies in the NBFI Sector. The sector total Risk Weighted Capital Adequacy Ratio and the Core Capital Ratio records at 11.82% and 11.31% respectively. 

Diversity in Product Offerings and Collections: The company has also diversified its lending to include Leasing for 4 wheeler business, business loans, and Personal loans. Plans are under way to include and integrate technology to further add convenience and products for customers. The company has a branch/service channel network of 23 centres in addition to over 400 collections points spread throughout the country, giving itself the largest collection network in the industry.