IDLC profits pounded by topsy-turvy financial markets

IDLC Finance, a listed non-bank financial institution, took another hit to its profit last year thanks to the bearish stock market and volatile money market.

In 2019, its profit dropped 21.65 per cent, or Tk 47 crore, to stand at about Tk 170 crore in.

"Growth in revenues from our core lending business was not sufficient to counter the fall in capital market returns, so profits fell," said Arif Khan, chief executive officer of IDLC Finance.

IDLC's net interest income was up 10 per cent from the previous year to Tk 467 crore in 2019. The company's income from stock market investment tumbled a staggering 82.81 per cent to Tk 46.31 crore.

Fee income of the company stood at Tk 85 crore at the end of the year, registering de-growth of 18.35 per cent. It mainly resulted from declines in brokerage fees and fund management fees in the stock market.

DSEX, the benchmark index of the Dhaka Stock Exchange, descended about 17 per cent in 2019. And the average daily turnover stood at Tk 480 crore, dropping 12.8 per cent from the previous year.

Thanks to the downtrend scenario of the capital market, IDLC Finance have reduced its stock market investment already.

It restructured the asset composition of its lending business over the year, with investments in marketable shares composing 9.88 per cent of equity at the close of 2019, down from 19.63 per cent at the start of the year.

For its subsidiaries, it is focusing more on foreign clients and high net-worth individuals through the research teams in its brokerage and investment banking subsidiaries.

The year 2020 would be more challenging for money market, stock market and all businesses due to the impact of COVID-19, Khan told The Daily Star yesterday.

"If the economy tanks and loan disbursement drops, we will also face a problem though IDLC Finance is the most profitable NBFI now," he added.

Return on asset of IDLC Finance is 1.50 per cent, which is the highest in the industry.

In 2019, the NBFI industry saw a de-growth in deposits due to the liquidity crisis following the bankruptcy of People's Leasing and Financial Services, which created a negative perception for depositors regarding the sector.

However, IDLC's term deposits grew 7.34 per cent, with non-bank deposits rising 17.29 per cent.

The company's lending portfolio grew 10.02 per cent, reaching Tk 9,235 crore in 2019.

At the end of the year, its default loan ratio stood at 3.07 per cent, up from 2.20 per cent a year earlier.

Stocks of IDLC, which got listed with the DSE in 1992, traded at Tk 41.90 on March 25, the last day of trading before the bourses shut for the countrywide shutdown.

It announced 35 per cent cash dividend for shareholders for the year ended on December 31, 2019 which was same in the previous year.