Digital growth boosts credit lender IPF

IPF's head office in Leeds
IPF's head office in Leeds
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Credit lender International Personal Finance said its digital arm has made very good progress with credit growth of 25 per cent.

The Leeds-based group said this helped to offset a 6 per cent fall in its European operations which are operating in a challenging market.

IPF's CEO Gerard Ryan said: "In Europe we are seeing intense competition from banks, which are now looking at our best quality customers. We are also seeing competition in digital. Because of increased regulation, payday lenders are moving into standard loans."

He estimated that half of the European slippage is due to regulatory changes and the other half is due to increased competition.

"Despite this, our collections performance was excellent," said Mr Ryan.

Group pre-tax profit from ongoing businesses increased by £12.6m to £56.5m in the six months to June 30.

IPF provides unsecured consumer credit to more than two million customers across 11 markets. It operates the world’s largest home credit business and a leading fintech business, IPF Digital.

Overall, the group saw a 2 per cent increase in credit issued.

In Mexico, the group's investment in expansion delivered growth and the group saw a 3 per cent increase in customer numbers and 7 per cent growth in credit issued.

"The first half was very good in Mexico," said Mr Ryan.

"We added a further five branches bringing the total to 74. We are investing in micro-business lending. These micro-businesses borrow four times as much as consumers - it's around £620 for micro-businesses and around £160 for consumers," said Mr Ryan.

Mexico has a lot of these tiny start-ups, and a typical micro-business is a family who have converted a room in their house to sell tacos.

Mr Ryan said: “I am pleased to report that we delivered a good financial performance and made excellent progress against our strategic objectives.

"While we expect the regulatory and competitive landscape to remain challenging, we are on track to deliver good returns from our European home credit operations, achieve our medium-term growth strategy in Mexico home credit and IPF Digital, and continue to deliver long-term value for our key stakeholders.”

Analyst Gary Greenwood at Shore Capital said: "IPF’s interim results demonstrate continued strong momentum in the business, particularly in IPF Digital and Mexico, albeit with persistently more competitive market conditions holding back growth in Europe.

"The regulatory landscape, a key concern for investors, has seen relatively few developments in the first half with the only notable news being in Romania where plans to introduce a price cap continue to be debated.

"We expect to leave our full year forecasts largely unchanged having recently upgraded these to reflect better than expected post field collections performance in Europe."

Analyst James Hamilton at Numis added: "We continue to believe the home credit model is a viable and inclusive product, allowing customers to manage expenses they cannot afford out of regular income.

"Large proportions of the population in emerging markets are excluded by the banks and, while IPF’s APR is high, it is reflective of the impairment risk of the underlying customers.

"Furthermore, the approval rating of IPF amongst its customers is exceptionally high in comparison to other lenders. Assuming the populist wave that is sweeping politics does not cover the entire globe, excluding large swathes of the population from access to finance, we believe IPF has a future of long-term growth.

"With the ongoing political risk, we acknowledge that IPF will continue to trade at a substantial discount valuation. Assuming there is no further substantially negative legislation, the shares are compellingly cheap. That is, however, a very large assumption."