By Rishar Mohamed Saleem
Ceylon Finance Today: A financial analysis carried out by Professor Kennedy D. Gunawardana of University of Sri Jayewardenepura (USJ) indicates that Abans Finance Plc limited has recovered from an unprofitable previous year to a profitable footing in 2015.
His analysis indicates all the vital areas are more towards profits after the declining profit situation it faced in 2014.
He stressed "Even though the company profits declined in year 2014 the profit for year 2015 grown up drastically. Profit before tax stood at Rs 29 million and it was increased up to Rs 109 million, which was 276% growth compared to previous year. Profit after tax also moved from Rs 9 million to Rs 73 Million which was 711% growth than previous year.
Ceylon Finance Today discusses with Professor. Kennedy D Gunawardana, Professor of Accounting Information Systems and Chairman of Board of Management Studies Faculty of graduate studies, coordinator of PhD programme of the faculty of graduate studies of the USJ 'in perspective' the Financial Statement of Abans Finance plc.
His analysis of total operating income indicates the following:
Incomes of the company consist of interest income, fee and commission income, and net gain/loss from trading and other operating Income. Based on the year 2012, as per the horizontal analysis income movement as follows: All the components of income shows gradual growth when compared to the year 2012 except other operating income which showed a sudden decrease in 2015 compared to base year. Other operating income declined in 2013, however grown up in 2014 where it decline drastically in 2015 compared. Fees and commission income showed significant growth when compared with base year amount which is 377.05% growth in 2015. This growth was mainly due to decline of interest rates within the industry.
Composition of Total Operating Income
It can be clearly identified that the company' income mainly consists of Interest income which was around 90% of the total income. Other incomes such as fees and commission income, net gains/losses from trading and other operating income consists of around 10% of the total income.
When comparing interest income and interest expenses between year 2013 and 2014 it showed that interest income rose by 27.24 % and expenses by 17.99%. However when 2014 was compared with 2015, the interest income increased by 24% and interest expenses were only increased by 5.86%.However this high growth of interest income and moderate growth of interest expenses were supported to a growth of Net interest income by 47.31% to a Rs 444 Million.
Profitability
Even though the company profits declined in year 2014 the profit for year 2015 grown up drastically. Profit before tax stood at Rs 29 million and it was increased up to Rs 109 million, which was 276% growth compared to previous year. Profit after tax also moved from Rs 9 million to Rs 73 million which was 711% growth than previous year.
Return on Equity (ROE) and Return of Assets (ROA)
The lease and Hire purchase portfolio showed growth in 2015 than 2014. It was amounting to 40% increase than previous year. This was stood at Rs 2903 Million at 2015. Loan and Advances and Real Estate Stock also decreased to LKR 637 Million and LKR 97 Million respectively in year 2015. The negative impact was mainly due to negative growth in loan portfolio.
For the horizontal analysis year 2012, is selected as the Base year.
There were increases and some declines were identified in some significant items. This was mainly due to growth of company portfolio and decline in interest rates where demand for credit increases during year 2015.
Ceylon Finance Today: A financial analysis carried out by Professor Kennedy D. Gunawardana of University of Sri Jayewardenepura (USJ) indicates that Abans Finance Plc limited has recovered from an unprofitable previous year to a profitable footing in 2015.
His analysis indicates all the vital areas are more towards profits after the declining profit situation it faced in 2014.
He stressed "Even though the company profits declined in year 2014 the profit for year 2015 grown up drastically. Profit before tax stood at Rs 29 million and it was increased up to Rs 109 million, which was 276% growth compared to previous year. Profit after tax also moved from Rs 9 million to Rs 73 Million which was 711% growth than previous year.
Ceylon Finance Today discusses with Professor. Kennedy D Gunawardana, Professor of Accounting Information Systems and Chairman of Board of Management Studies Faculty of graduate studies, coordinator of PhD programme of the faculty of graduate studies of the USJ 'in perspective' the Financial Statement of Abans Finance plc.
His analysis of total operating income indicates the following:
Incomes of the company consist of interest income, fee and commission income, and net gain/loss from trading and other operating Income. Based on the year 2012, as per the horizontal analysis income movement as follows: All the components of income shows gradual growth when compared to the year 2012 except other operating income which showed a sudden decrease in 2015 compared to base year. Other operating income declined in 2013, however grown up in 2014 where it decline drastically in 2015 compared. Fees and commission income showed significant growth when compared with base year amount which is 377.05% growth in 2015. This growth was mainly due to decline of interest rates within the industry.
Composition of Total Operating Income
It can be clearly identified that the company' income mainly consists of Interest income which was around 90% of the total income. Other incomes such as fees and commission income, net gains/losses from trading and other operating income consists of around 10% of the total income.
When comparing interest income and interest expenses between year 2013 and 2014 it showed that interest income rose by 27.24 % and expenses by 17.99%. However when 2014 was compared with 2015, the interest income increased by 24% and interest expenses were only increased by 5.86%.However this high growth of interest income and moderate growth of interest expenses were supported to a growth of Net interest income by 47.31% to a Rs 444 Million.
Profitability
Even though the company profits declined in year 2014 the profit for year 2015 grown up drastically. Profit before tax stood at Rs 29 million and it was increased up to Rs 109 million, which was 276% growth compared to previous year. Profit after tax also moved from Rs 9 million to Rs 73 million which was 711% growth than previous year.
Return on Equity (ROE) and Return of Assets (ROA)
Impairment Charge
Impairment charge had been drastically grown in 94% in 2013 and 4268.33% in 2014 and 2015 respectively. The main reason for this was the disposal of repossessed vehicles at a loss to prevent the decline of market value of asset and considering time value of money.
Impairment charge on accommodations increased mainly due to adverse age movements in Lease, Hire Purchase and other lending products such as Failure on Property Mortgages.
Also failure of corporate customers were affected due to downgrade of their asset quality.
Total operating expenses were increased in 2015 when compared with base year 2012. The majority of increase was due to increase in personnel expenses which was increased by 102.36%. However the personnel cost were only amounted to 12.38 % and other operating cost were 16.71% when compared with total income of year 2015.
Total operating expenses were increased in 2015 when compared with base year 2012. The majority of increase was due to increase in personnel expenses which was increased by 102.36%. However the personnel cost were only amounted to 12.38 % and other operating cost were 16.71% when compared with total income of year 2015.
The operating expenses has grown due to growth of business. Other than that company increased allocation of money in staff development, infrastructure development and promotional campaigns conducted by the company.
When compared to previous year company has declined the cost income ratio even though the operating expenses of the company increased during the 2015. This was mainly due to increase in income.
Total Asset
Total Asset
The lease and Hire purchase portfolio showed growth in 2015 than 2014. It was amounting to 40% increase than previous year. This was stood at Rs 2903 Million at 2015. Loan and Advances and Real Estate Stock also decreased to LKR 637 Million and LKR 97 Million respectively in year 2015. The negative impact was mainly due to negative growth in loan portfolio.
Due to growth of company's public deposits, company borrowings had been declined. Compared with the base year 2012 the company borrowings stood at 1.27% which was LKR 156 Million. Company had not borrowed money using other debt instruments and other instruments in year 2015. This was mainly due to increase in public deposits. Compared to the base year 2012 deposits from customer increased up to 136.38% and it consist of 75.24% of the total asset of year 2015.
As per the Debt to equity ratio specify that the company has higher liabilities than total shareholders' funds. The gradual increase in Debt to Equity ratio was mainly due to increase in customer deposit.
As per the Debt to equity ratio specify that the company has higher liabilities than total shareholders' funds. The gradual increase in Debt to Equity ratio was mainly due to increase in customer deposit.
Abans finance PLC is incorporated on 08 April 2005 under Companies Act, No 17 of 1982 and reregistered on 15 June 2009 under Companies Act, No 07 of 2007. Company registered under Finance Leasing Establishment Act, No 56 of 2000 and as a Finance Company in terms of the Finance Companies Act No 78 of 1988.Company is a subsidiary of Abans (Pvt) Ltd which holds the 89.26% (as per 2013/2014 annual report) of the stake of the company.
This report mainly focuses to conduct analysis of Abans Finance Plc. Significant items in the Statement of Financial Position and Statement of Comprehensive Income were considered to this analysis using 5 year historical data. Horizontal Analysis, Vertical Analysis, Trend Analysis and also ratio analysis carried out using tables and graphs to analyze the company.
This report mainly focuses to conduct analysis of Abans Finance Plc. Significant items in the Statement of Financial Position and Statement of Comprehensive Income were considered to this analysis using 5 year historical data. Horizontal Analysis, Vertical Analysis, Trend Analysis and also ratio analysis carried out using tables and graphs to analyze the company.
For the horizontal analysis year 2012, is selected as the Base year.
There were increases and some declines were identified in some significant items. This was mainly due to growth of company portfolio and decline in interest rates where demand for credit increases during year 2015.
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