CLC 2Q profit soars on robust loan growth

Commercial Leasing & Finance PLC (CLC), which became an investor favourite as of late, reported strong top and bottom line performance for the three months to September as the company defied the pandemic-induced challenges to expand its loans at a much faster clip. 

The LOLC Holdings subsidiary reported net interest income of Rs.2.53 billion for the July-September period, its fiscal second quarter, rising 25 percent from the same period last year. 

The company reported a net profit of Rs.1.29 billion or 20 cents a share for the three months compared to earnings of Rs.122.38 million in the corresponding period last year. 

This marked a 951 percent increase in earnings between the two quarters.  For the six months to September, the company reported earnings of 29 cents a share or Rs.1.84 billion compared to 3 cents a share or Rs.189.3 million in the same period last year, which translated into 870 percent surge.

The company’s share added Rs.13.60 or 19.15 percent to end at Rs.84.90 at Friday’s market close, helping it to become the first company to surpass Rs.500 billion market capitalisation and clinch the highest market valued company title eclipsing Expolanka Holdings PLC.  

CLC became the main talking point recently among traders and investors as a result of the wild run of its share from as low as Rs.6.10 a share by the end of the June quarter to Rs.84.90 by last Friday. 

CLC share almost single handedly helped push the benchmark All Share Price Index of the Colombo Stock Exchange to fresh all-time highs and higher than average daily market turnover.

The company in the six months to September 2021 gave nearly Rs.14 billion in new loans and leases. This translated into a mammoth 25.79 percent growth in loans, recording an annualised 50 percent growth in loans and leases for the full financial year.  The company had an asset base of Rs.85.09 billion by the end of September, up 16.7 percent from the financial year ended March 31, 2021. 

Although weakened during the last five years, the company has been maintaining its asset quality well above industry average. As at March 31, 2021, its reported gross non-performing ratio was at 6.49 percent whereas the industry average was 13.87 percent. 

However, equity analysts question whether the meteoric rise in the company share price is truly warranted 
despite its robust business and financial performance.

As at September 30, 2021, the company’s net asset per share was Rs.3.65, while the public float was only 0.45 percent held by only 1,324 shareholders.

CLC remains well capitalised with both its Tier I and total capital ratios significantly above the regulatory minimums. The company also maintains a comfortable level of liquidity, but may be required to tap new funding if it chooses to maintain the current level of growth. 

The company last year raised Rs.5.0 billion via a five-year senior debenture. 

LOLC Holdings PLC has 98.92 percent stake in CLC, while subsidiary Browns Investments PLC has another 
0.62 percent.