‘Satisfactory performance’ from IPF

INTERNATIONAL Personal Finance (IPF) today said it had delivered a “satisfactory” trading performance in the third quarter.

IPF said it had achieved another strong performance in Mexico, and strong progress has also been made by the firm’s digital business. It is on track to start lending in Spain by the year end.

The statement added: “As previously announced, new legislation was passed into law in Poland which introduces a cap on all non-interest costs associated with the granting of consumer credit, together with certain other restrictions. The law becomes effective on March 11 2016 and will apply to all loans issued from that date.

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“We anticipate that there will be an on-going impact on the profitability of the Polish business and that this will affect the results of the business progressively during 2016 and 2017. The final impact on profitability will be determined by a range of factors including customer behaviour, the response of competitors and wider market dynamics, none of which may be determined with any certainty at this stage.

“Were the book of lending that we made in the twelve months to June 2015 all to have been made with our new expected product structure and pricing, but without other mitigating actions to have been taken, we estimate that the reduction in the profit of our Polish business would have been approximately £30m.

“We have developed strategies which in part are expected to mitigate the adverse financial impact of the legislation. These are likely to include testing the appetite of customers for larger loans and longer loans, reviewing the positioning of our money transfer product, and targeting cost reductions throughout the business.

“At this stage, our expectation is that the effect of our mitigating strategies could offset up to approximately a half of this negative pricing impact although..there can be no assurance that the final profit impact will be in this range. From a phasing perspective, we anticipate that our results in 2016 will reflect approximately half of this financial impact, with the full impact arising in 2017. In addition, now that debt sales are established on a flow basis in Poland and our old written-off books have been sold, we expect to generate approximately £5m less profit from debt sales in 2016.

“As we gain experience of issuing loans in this new environment, we will continue to work on our strategies to mitigate the anticipated reduction in profit. In any event, we anticipate that the Polish business will remain as being of high quality, with not only impairment as a percentage of revenue remaining in our target range of 25 per cent to 30 per cent but also the return on equity of the Polish business remaining above the average for the group.”

IPF said it expected to deliver continued strong growth in Mexico and in its digital businesses, and it will continue its strategy of targeted marketing and introducing new products in the European home credit operations to achieve further growth. The statement said: “Notwithstanding the challenges in growing the top line in our European home credit business, we are confident that the result for the year as a whole will be broadly in line with consensus.”