IPF feels quality as profits treble

Leeds-based IPF, which was spun out of Bradford-based doorstep lender Provident Financial three years ago, reported a pre-tax profit of 30.5m in the six months to June 30, up from 9.1m a year earlier.

The improvement reflected improved credit quality, with impairment charges falling to 32 per cent of revenues from 36 per cent a year earlier.

The company, which operates in Poland, Slovakia, the Czech Republic, Hungary, Romania and Mexico, lends small cash sums mostly to women juggling the household budget.

Bad debts in Europe were higher than analysts had expected as a result of the extreme snow conditions at the start of the year in Poland.

Impairments in Central Europe climbed to 31.5 per cent of revenues from 30.6 per cent a year ago. But this was due solely to the poor weather. Impairments leapt to 45 per cent in the first quarter but fell to 17 per cent in the second.

IPF said impairments will return to more normal levels of around 25 per cent in the second half.

Analysts said that worries over the economic outlook for Hungary and Romania, where Governments are imposing austerity measures to reduce public debt, have weighed on IPF's shares this year.

IPF's chief executive John Harnett said that the measures introduced in Hungary were relatively small, certainly by UK standards, but Romania is a much bigger worry as the economy is continuing to decline.

"The Romanian Government has reduced public sector wages by 25 per cent and put VAT up by five per cent," he said. "Clearly that will have a broader impact. We are being very careful on lending, particularly to Government employees. We are being very cautious."

He added that the Polish, Czech Republic, Slovakian and Mexican

markets, which account for 80 per cent of revenues, all look very positive.

Mr Harnett said the company's improved profit performance reflected a rebound from the recession that engulfed the global economy in the first half of 2009.

"The first phase of the credit crunch is over," he said. "We are seeing improvement in all economies except Romania."

IPF is not planning to enter any more new markets until the world economy stabilises.

However it will look again next year and may consider Ukraine, Bulgaria and possibly India.

The group is optimistic it can raise 450m in bond and bank finance by the end of the year to fund its lending.

IPF needs to raise new money before its existing facilities expire in October 2011, but debt market turmoil in the wake of the Greek sovereign debt crisis has prevented it from selling bonds.

The group is hoping market conditions will improve in the second half.