United Finance sees its 2022 profit plunge
Lending rate cap, inflation shrink its business opportunities
United Finance Ltd has reported a 36 per cent year-on-year drop in profit for 2022, due to increased operating expenses and higher provision against loans.
The listed non-bank financial institution (NBFI) logged a net profit of Tk 142 million in 2022.
Its earnings per share (EPS) dropped to Tk 0.76 in 2022, from Tk 1.19 a year ago, the company said in a regulatory filing on Monday.
The decline in profit compelled the company to cut down on annual cash dividend to 5 per cent for 2022, from 10 per cent paid in the previous four years.
Company Secretary Sharmi Noor Nahar said the NBFI could not generate expected revenue due to the lending rate cap while operating expenses rose amid the inflationary pressure.
Since banks' lending rate has been at or below 9 per cent since April 2020, the NBFIs have had to reduce the lending rate to remain in business.
A major threat of the business of non-bank financial institutions has been the thin gap between the deposit rate and the lending rate.
Moreover, higher provision against loan disbursement impacted the company's profit, said Ms Nahar.
The central bank maintained a moratorium on loan repayment throughout 2020 amid lockdowns due to the pandemic. The relaxed policy has been continued to date.
Borrowers have been given time until December 2022 to avoid their loans being classified as defaulted by paying 25-75 per cent of their installments.
They did not have to repay a single penny back against their loans in 2020 due to the Covid-19 outbreak. The following year, they were given the chance to repay only 15 per cent of their loans to avoid becoming defaulters.
Deposits, meanwhile, declined as people withdraw their savings to meet the rising living expenses. People also have felt discouraged to save up and keep money in banks as well as in non-bank financial institutions for lower deposit rates.
The company in its third quarter financial disclosure said its operating expenses had increased by Tk 105 million in the nine months through September 2022 to Tk 585 million, compared to the previous year.
Total provision also increased by Tk 101.87 million during the period.
Leasing companies have to keep provision on the unrealised loss of investments.
The company's net asset value per share fell slightly to Tk 17.06 in 2022, from Tk 17.30 in 2021 while the net operating cash flow per share was Tk 12.47 in the negative from Tk 5.63.
The consolidated net operating cash flow per share fell due to a slide in interest income and income from investment in securities, and increased borrowing, compared to the previous year.
The stock has been languishing at the floor price of Tk 15.80 since September 18 last year.