The Finance revival efforts go south as firm mounts losses amid shrinking loan book

The losses at The Finance Company PLC (TFC) widened many-fold during the period ended in March 31, 2018, as the troubled licensed finance company saw the hole in its balance sheet deepening with over Rs.16 billion in negative shareholder funds.

The former ill-famed Ceylinco group entity suffered a net loss of Rs. 571. 2 million for the three months ended March 31, 2018 (4Q18), compared to a loss of Rs.94.9 million in the same quarter, last year. 

The company had a net interest expense of Rs.258.5 million instead of a net interest income for the quarter as the loans and advances book contracted while the deposits showed a growth. 

Meanwhile, for the year ended March 31, 2018 (FY18), The Finance suffered a Rs.2.26 billion net loss, up from Rs.1.3 billion. 

The full year net interest expense stood at Rs.958.9 million, up 146 percent (YoY). 

Continued losses increased the company’s balance sheet hole as the shareholder funds had a whopping Rs.16.2 billion negative balance by the end of March, 2018. 
TFC along with other Ceylinco group entities started facing problems 10 years ago when Golden Key—an unregulated credit card issuing company within the over-expanded group—failed to honour Rs.26 billion of unauthorized customer deposits taken at exponentially higher rates. 

The whole fiasco triggered a run on the deposits at TFC, and loans turned bad.

The Central Bank took control of the company through a management agent and started restructuring by way of converting Rs.2.0 billion worth of deposits into non-voting shares in 2010. 

A further Rs.1.6 billion was raised via a public offer. 

The Employees’ Provident Fund (EPF) invested in 5.1 million shares in the company and today EPF is the fifth largest shareholder of TFC with 8.43 percent stake.  
The company’s share is now trading on the Colombo bourse at Rs.4.50, down from around Rs.37 in March 2011.

Meanwhile, during FY18, the company’s total loans and receivables book shrank but the impairments rose to Rs.469.5 million from Rs.228 million. 

The higher purchase portfolio dropped to Rs.4.4 billion from Rs.5.1 billion and the leasing book fell to Rs.635 million from Rs.982 million. 

The loans grew by about 10 percent to Rs.4.2 billion. TFC had a pre-crisis loan book of Rs.19 billion. Customer deposits grew by Rs.1.8 billion during the year. 
TFC also has a real estate portfolio under investment properties, which now stands at Rs.1.9 billion. 

The senior management and the employee union at TFC were believed to have written to the Central Bank recently over certain efforts to dispose some of the lands belonging to TFC below latest valuations.

The Finance is currently on a Central Bank approved 5 – year strategic plan, ending in 2019/20. 

The present TFC director board, which comprises of five directors led by Chairman Wasantha Kumarasiri, was appointed with effect from January 1, 2017 by the Monetary Board of the Central Bank.  Interestingly, this is the fifth director board appointed by the Central Bank since 2008 to revive TFC.

As at March 31, 2018, high net worth investor, Dr. T. Senthilverl held about 22 percent in TFC as the single largest shareholder.