Consumer lender International Personal Finance (IPF) is the biggest loser on the FTSE 350 index (24 Feb) as regulatory pressures weigh on its key central and eastern European markets.
The lender is being forced to adjust its business model. This is a result of regulatory change in Poland, which is implementing a banking tax and capping the fees IPF charges to customers; and Slovakia banning the sale by lenders of add-on products,
New product structures are being designed in Poland to comply with the new rules and operations in Slovakia are being wound down at a cost of £18.6 million.
‘We expect the competitive and regulatory environment to remain challenging and these factors will be a major focus for us in 2016,’ says chief executive Gerard Ryan alongside full year results.
‘The regulatory changes announced in 2015 will impact profitability in Poland in 2016 and beyond, and have had a significant impact on our business model in Slovakia.
‘We expect these factors, together with costs associated with employing agents in Romania, the new bank tax in Poland and lower profit from debt sales this year, will reduce group profit before tax in 2016.’
Setting out a new strategy to deal with the new regulatory environment, Ryan outlined a three-pronged approach in 2016 and beyond.
Established businesses, which include operations in Poland, Lithuania, Czech Republic and Hungary will be used as cash cows to fund IPF’s growth businesses in Mexico, Romania and Bulgaria.
Further investment will also be allocated to building out IPF digital, which currently does business in Finland, the Baltics, Poland, Australia and Spain.
Underlying earnings per share (EPS), management’s preferred measure of performance, increased slightly in the year to 31 December 2015 to 38p, up from 37.1p. This is mainly the result of IPF’s aggressive £50 million share buyback in the second half of the year.
Shares in IPF trade 16.1% lower at 223p versus a decline of 1.1% on the FTSE All-Share.