Pre-tax profit surges by 257% or $144.9 million to reach J$201.3 million

Durrant Pate/Contributor

Jamaica-based regional micro lender Dolla Financial Services is having its best year ever with its loan book and portfolio quality having reached an all-time high.

In addition, year-to-date (YTD) income has surpassed the J$200-million mark, in fact doubling it to reach J$475.2 million, an increase of $298.9 million, or 170 per cent, for the nine months ended September 30, 2022. Total income for the September quarter was $176.9 million, representing a $108.8 million or 160 per cent increase year-over-year (YoY).

In its just released nine months financials, Dolla posted a consolidated pre-tax profit of J$201.3 million, which represents a 257 per cent, or J$144.9 million, increase over the corresponding period in 2021. Pre-tax profit for the September quarter was J$70.2 million, an increase of J$47.8 million or 214 per cent over 2021.

Dolla recorded net interest income before expected credit losses (ECL) of J$164.2 million in the third quarter, an increase of J$110.5 million or 206 per cent YoY and $435.9 million YTD. This increase was driven by the growth in its loan portfolio, which positively reflected in both balance sheet and interest income.

Flat interest expenses

Interest expense remained relatively flat for the review period, increasing by J$2.0 million or 12 per cent YOY. The management and the board reports that, “the effective use of debt to drive growth in the loan book has impacted the movement in interest expense”.

Operating expenses for the quarter totalled J$95.9 million, representing an increase of J$15.5 million or 19 per cent quarter on quarter and J$50.2 million or 110 per cent increase YoY. The increase was primarily attributed to increased staff costs, as Dolla continues to build capacity to support the company’s growth.

ECL for the period also increased by $4.7 million or 28 per cent over last quarter. This results from the growth in Dolla’s loan book as well as a marginal increase in non-performing loans (NPL) from 6.0 per cent to 8.7 per cent quarter over quarter.

While NPLs have increased, the overall arrears remain within budgeted expectations. Management has implemented several strategies to bolster collections to contain delinquency. These strategies will result in a reduction in the company’s arrears balances in the short term.

However, Earnings Per Share (EPS) for the quarter amounted to $0.04, a reduction from the J$1.36 posted in September 2021. This is due to the increase in shares issued from the initial public offering.

The company’s efficiency ratio stood at 47 per cent, a four-point increase from the 43 per cent reported last quarter and remains relatively low. The management has taken an active approach in maintaining its lean operating expenses, ensuring maximum profitability and return to shareholders.

Loan portfolio data

As at September 30, 2022, business loans accounted for 73 per cent of the total loan portfolio with personal loans accounting for the remaining 27 per cent. Furthermore, secured loans represented 72 per cent of the total loan portfolio, while unsecured loans accounted for the remaining 28 per cent.

The increase in secured loans continued to have a positive effect on the quality of the loan book and the maintenance of low ECL. The company recorded total liabilities of J$644.8 million for the review period, an increase of J$109.2 million or 20 per cent quarter on quarter and J$103.7 million or 19 per cent YoY.

The increase is directly related to the increase in the funding of debt during the quarter. Loans payable and Short Term Borrowings increased to J$532.1 million from J$429.9 million in the quarter due to a bridge loan received from First Rock Private Equity (FRPE).

Shareholders’ Equity was J$715.4 million as at September 30, 2022, representing a nine per cent or J$61.9 million increase quarter on quarter and J$655.1 million or 1321 per cent increase YoY. The increase stems from the J$250.0 million received from the issuance of shares from the IPO in June 2022 as well as the increase in profits throughout the period.