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IDLC Finance endures 29pc plunge in profit for interest rate caps

FE REPORT | May 16, 2023 00:00:00

IDLC Finance saw a 29 per cent year-on-year decline in profit in the first quarter of this year, mainly for low net interest income.

It gained a marginal rise in interest income on loans to Tk 2.99 billion in January-March, compared to the same quarter of the previous year. But the interest expense on deposits and borrowings rose 23 per cent year-on-year during the period.

As a result, the company's net interest income dropped 9.35 per cent to Tk 1.26 billion in Q1 this year, compared to Q1 last year.

In January-March 2022, the non-bank financial institution (NBFI) charged interest on home loans at more than 11 per cent. The interest rate was 13-14 per cent for SME loans while the rate was 10-11 per cent for corporate loans.

In July 2022, the central bank imposed interest rate caps; 11 per cent on loans and 7 per cent on deposits.

Accordingly, the NBFI disbursed fresh loans at or below 11 per cent. Moreover, the interest rates on previous loans were cut down to abide by the new provision.

Mohammad Masud Karim Majumder, chief financial officer (CFO) of IDLC Finance, said the interest rate caps still remain effective for the non-bank financial institutions, the main reason why profit plunged.

An increase in deposit rates also escalated the cost of loans, he added.

IDLC Finance has reported a consolidated net profit of Tk 344.09 million for January-March this year against Tk 482.70 million a year earlier.

Its income generated in the form of brokerage commission also dipped in the first quarter of this year, compared to the previous year, as investor participation remained very low in the sluggish market.

Income in brokerage commission comes through the operations of two subsidiaries -- IDLC Investments and IDLC Securities.

The company's investment on listed securities also did not give returns as expected against the backdrop of poor economic indicators.

It, however, saw an improvement in the operating cash flow in January-March compared to the previous year though the value still remains negative.

The consolidated net operating cash flow per share (NOCFPS) was Tk. (6.69) for January-March this year, up from Tk (24.64) for January-March 2022.

NOCFPS has gone up due to a rise in cash generation from loans and advances, according to a disclosure.

The consolidated NAV per share was Tk. 44.39 until March, increased from Tk. 43.56 at the end of last year.

The IDLC Finance, presently an 'A' category company, was listed on the stock exchange in 1992.

Its sponsor-directors hold 56.66 per cent shares, institutes 27.90 per cent, foreigners 1.16 per cent and general investors 14.28 per cent, according to data available until April.

The foreign stake in the company has slid significantly since December 2021.

Foreign investors held 5.48 per cent shares of the company in December 2021, which gradually declined to 1.16 per cent by March this year.

The stock came down to the floor price of Tk 46.50 in the third week of October last year. It has traded at the same price on the Dhaka Stock Exchange since then.

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