Current economic woes to weigh on leasing, finance industry in 2019: PLC CEO

The Colombo Stock Exchange (CSE) in partnership with Daily Mirror is featuring a column on Mirror Business as an Investor Relations initiative. The column, which will be featured in a Q&A format, encourages S&P SL20 companies to bring attention to developments in the industry, the company and discuss growth prospects. Following are the excerpts from the interview conducted with People’s Leasing and Finance PLC (PLC) CEO/General Manager Sabry Ibrahim.

What are the key milestones that PLC has achieved so far in 2019? 
In an year during which the country recorded a growth of only around 3.2 percent, experienced a currency depreciation of nearly 16 percent, effective tax rates on the industry rose to 59 percent and the number of vehicle imports fell sharply, PLC managed to achieve its highest ever profit of Rs.4.42 billion and grew its asset and deposit base to record levels of over Rs.173 billion and Rs.88 billion, respectively.

The other achievements of note were being the first in the market to introduce variable rate leases.

We also added three new savings products: Senehasa Yaalu, Senehasa Future and Super Investment Plan and three new loan products: Shakthi Business Loan, Shasthra Educational Loan and Sanasum Piyasa Home Loan, while our ICT infrastructure was developed to simplify customer on-boarding to enhance productivity, improve operational efficiency and standardise service quality.

On the non-financial side, our corporate website was revamped in all three languages: Sinhala, Tamil and English and we increased our digital presence with digital marketing through social media such as Facebook, YouTube and LinkedIn.

We are also proud of being ranked 13th in Business Today ‘TOP 30’ – (14th in 2018), being recognised as the No. 1 Non-Banking Financial Services Brand – by Brand Finance PLC (Most Valuable Finance Service Brand), being selected as one of the Ten Best Corporate Citizens in the country by the Ceylon Chamber of Commerce and being assessed as having conformed to Gold Standard for Corporate Accountability by Sting Consultants.

Our annual reports also won a number of awards at Annual Reports Awards 2018, hosted by the Institute of Chartered Accountants of Sri Lanka. PLC was selected as one of the Ten Best Corporate Citizens in the Country – presented by the Ceylon Chamber of Commerce.

Please outline the three most important macro trends that you believe will impact the leasing and finance industry in 2019?
The overall slowdown in the economy, following the Easter Sunday attacks, will affect the industry most as it will impact both the demand for transport and reduce disposable incomes, which will affect the debt servicing capacity and lead to an unhealthy increase of delinquencies. 

The balance of payment difficulties experienced by the country resulting in continued restrictions on import of vehicles is another negative for the industry as is the higher tax rates, which have been imposed on the industry. The latter has an adverse effect on capital retention and with the introduction of Basel III regulations will pose a major challenge in growing the business.

What is your outlook for PLC in 2019? What growth initiatives can be expected?
Despite the issues outlined above, we have set fairly challenging goals for ourselves and are confident of achieving them. In order to do so, we will continue to improve and enrich the network of branches by converting the high-performing service centres to fully-fledged branches, roll out our gold loan product to more branches and increase our presence in vehicle dealerships.

On the liability side, we will continue our focus on mobilising public deposits to minimise the funding costs and to reduce liquidity risk. We also plan to develop our IT capabilities to provide value-added services to customers, enhance productivity and reduce operational costs.

In your opinion, what challenges do you anticipate for the industry going forward?
The major challenges we anticipate are intense competition coming from both banks (with their access to low-cost funding) and finance companies that offer similar or substitute product, rapidly changing regulatory and compliance requirements, meeting our growth targets while managing credit quality in slowing economy, recovering our exposures in the current economic downturn and of course, rapid technology growth outpacing the traditional way of doing business and competition from fintechs.

How is your business taking a more sustainable approach?
We have always been mindful of the need for sustainable and responsible growth. In this regard, we focus on all our key stakeholders: customers, employees, investors, business partners as well as local community and environment as we believe all of them play an important role in our operations.

We always encourage a performance-driven culture and recognise and reward the high-performing employees to motivate them to achieve better targets and retain them within the company. We will also consolidate and maintain strong ethical relationships with our business partners to secure mutual benefits. 

Finally, we will continue to invest at least one percent of the company profit on societal priority and environment conservation.

Focusing on the shareholder, what efforts and initiatives are you taking to drive shareholder value? 
We will drive shareholder value first, by growing a sound and stable manner and maintaining a sound dividend policy – we have been paying shareholders a constant dividend throughout the years. This year we are expecting to pay our final dividend in the form of a scrip dividend allowing our shareholders to increase their holding in the company.

We will also continue to maintain transparency and support shareholders to take informed decisions by updating them regularly on company decisions.

Our efforts in these directions have been affirmed by being the best-rated non-banking financial institution in Sri Lanka with AA-(lka) rating by Fitch Ratings Lanka Limited and an international rating of ‘B-’ from Fitch Ratings International. 

Finally, what is your message to the shareholders of PLC?
From its inception, PLC has been committed to increasing shareholder value in a sustainable manner while playing our part in improving financial inclusivity and contributing overall economic growth. We will continue to strongly focus on these objectives into the future.