International Personal Finance PLC (LON:IPF) reported a 6% increase in credit issued for the third quarter but warned that it expects tighter credit rules in Romania to hurt sales volumes.
The National Bank of Romania on Wednesday unveiled limits on debt-to-income for individuals taking loans from banks to reduce indebtedness rates in the country. The rules will come into effect on 1 January 2019.
“We expect some reduction in sales volumes as a result and will update the market at our next scheduled announcement,” IPF said.
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Romania has also proposed an 18% cap on the annual percentage rate for credit. If enacted, IPF said this would have a “material adverse effect on our Romanian business”.
In Poland, a draft law proposing amendments to existing tax legislation is expected to give the company an effective tax rate of around 42% for 2019, up from 34% in 2018.
Third quarter impairments improve
In the third quarter, IPF’s annualised impairment as a percentage of revenue improved 0.3 percentage points to 25.2% since the half-year, led by an improved performance in the digital division's new markets.
Growth in credit issued for the period was driven by a strong performance in its digital and Mexico home credit businesses.
The IPF Digital division delivered a 39% increase in credit issued with a 76% increase in new markets and a 14% gain in established markets.
IPF said it expects the unit to “continue to deliver good credit issued growth for the full-year as we move towards profitability in 2019”.
The Mexico home credit arm posted a 13% rise in credit issue as customer numbers increased by 7%.
However, the company said the stronger-than-expected growth in new customers with lower average issue values means it expects Mexico's credit issued growth for the full year to be around the lower end of the 12% to 15% range previously estimated.
Weak performance in Europe home credit unit
The European home credit business saw a 7% contraction in credit issued for the quarter but that was in line with expectations and IPF said the quality of the loan portfolio “continues to be excellent”.
At the end of September, the group had total debt facilities of £899mln and borrowings of £673mln, with headroom on undrawn bank facilities of £226mln.
“We have delivered a good performance both in Q3 and the year to date, and continue to make strong progress against our strategic objectives,” IPF said.
“We are focused on improving the sustainability of our European home credit businesses to continue providing a good service to our customers and deliver strong returns to reward shareholders and fund growth opportunities in our Mexico home credit and IPF Digital operations."
Shares fell 4.3% to 210p in morning trading.