IDLC earnings likely to increase riding on vibrant capital market

The investment figure of IDLC Finance, the country’s leading non-bank financial institution (NBFI), put in the capital market represents Tk354 crore or 59.73 per cent of its total investment, a large chunk in terms of investment fractions than those of many other listed companies.

As the capital market remains largely in a positive territory in the 3rd quarter of the current year, investment income of the listed company and income from its subsidiaries are expected to soar in the next quarter, said an equity note, prepared by EBL Securities Limited, a leading stockbroker in the country.  

The loans and deposits of the publicly-traded company grew by 9.1 per cent and 2.7 per cent respectively at the end of the first half of the current year, the equity note read.

The compound annual growth rates (CAGRs) of the non-bank financial institution’s loans and deposits in the last five years were 6.4 per cent and 5 per cent respectively, compared to the industry’s overall CAGRs with 3.7 per cent in loans and negative 1.2 per cent in deposits in the same period.

The non-performing loan (NPL) ratio of IDLC, however, jumped to 3.49 per cent in June 2022 from 2.77 per cent in 2017, said the EBL Securities.

As of July 2022, the weighted average loan and deposit spread of the company declined to 3.1 per cent from 4 per cent in 2017.

The cost of the listed company’s funds may have risen due to an increased inflation rate the country has been suffering from.

Besides, Bangladesh Bank has directed all NBFIs to charge a maximum interest rate of 11 per cent on loans, the study said. As a result, the net interest margin of IDLC may get squeezed in the days ahead.

The current IDLC portfolio reflects a balanced exposure in SME, corporate and retail segments. As of December 2021, the company registered a 37.54 per cent exposure in SME loans, 33.71 per cent in retail loans, and 28.75 per cent in corporate loans.

The publicly-traded company paid a 20 per cent dividend – 15 per cent cash and 5 per cent stock – for its shareholders for the year 2021.

According to the financial statement, the company has achieved a strong balance sheet growth (12.64 per cent in 2021) with a sustainable portfolio size. It plans to continue the similar growth momentum in the future.

“The board of directors believes in the company is prudent to conserve capital to put fresh funds for the further business expansion,” said IDLC.

IDLC’s balance of retained earnings as of December 2021 amounted to Tk726 crore, which is sufficient to cover the dividend payout, the financial statement of the company read.

The net profit of the company, however, declined to Tk212 crore in 2021 compared to Tk254 crore in the previous year.

Its earnings per share (EPS) also declined to Tk5.34 in the year, which was Tk6.42 in the previous year.

The company’s per share price stood at Tk50 on the Dhaka bourse on Thursday.

Currently, IDLC has presence in over 24 cities, represented by 39 branches and booths with over 1,500 employees, serving over 45,000 clients.

Its three subsidiaries include IDLC Securities, IDLC Investments and IDLC Asset Management Limited.