Business

Turbulent times impact Infinity Trust’s earnings

Unstable business milieu is gradually impacting negatively on earnings margin of Infinity Trust Mortgage Bank Plc. Chris Ugwu writes

 

The housing sector plays a more critical role in a country’s welfare than is always recognised, as it directly affects not only the well-being of the citizenry, but also the performance of other sectors of the economy.

 

Adequate housing provision has for many years engaged the attention of most countries. However, in spite of various efforts, a major area of concern has been housing financing, which has often been fingered as one of the most formidable constraints in the housing sector.

The focus on finance has, however, been very prominent for obvious reasons. This is because housing provision requires huge capital outlay, which is often beyond the capacity of the medium income/low income groups.

 

Limited access to housing and mortgage financing, complications in enforcing mortgage contracts and foreclosure on properties in Nigerian courts, slow bureaucratic procedures in land administration and high cost of land registration have continued to pose serious impediments to adequate housing delivery in Nigeria.

 

Market watchers also identify high rate of population growth, high rate of rural-urban migration and exorbitant cost of construction materials as other problems militating against the robust development of housing and mortgage sectors in the country.

 

High foreign exchange content of imported building materials such as cement, tiles, ceramic wares etc has also made housing unaffordable for the average low income earners, hence affecting the profit margin of the mortgage companies.

 

Following the challenges facing mortgage sectors in the country, Infinity Trust Mortgage Bank’s (ITMB) Plc’s earnings have spiked in the last three quarters of the year as mortgage lenders and property dealers in Africa’s most populous nation continue to grapple with an economic downturn.

 

Notwithstanding the company sustaining profits for a good number of years, due to the volatility in the nation’s economy, the mortgage firm has since the first quarter of this year slide into declining position. When the closing bell rang on Friday, the company’s share price stood at N1.36 per share.

 

Corporate profile

Infinity Trust Mortgage Bank Plc was incorporated on January 28, 2002, as Infinity Trust Savings & Loans Limited. However, it commenced business operations in Abuja, in 2003. As part of its strategic turn-around, the bank was converted to a Public Limited Liability Company on January 25, 2013, and had to change its name to Infinity Trust Mortgage Bank Plc.

 

In 2014, it became a National Mortgage Bank. Currently, the  bank has equity shareholding in the Nigeria Mortgage Refinance Company (NMRC).

 

Following the conversion of the company to a Public Limited Liability Company on in 2013, the company’s shares were listed on the floor of the NSE on December 11, 2013.

 

Financials

 

The Infinity Trust Mortgage Bank Plc’s total assets have grown by three per cent from N10.351 billion in 2018 to N10.644 billion in 2019. The bank, which disclosed this during its 14th Annual General Meeting, also announced that it witnessed 40 per cent growth in its loan portfolio from N3.802 billion in 2018 to N5.338 billion in 2019.

 

Chairman of the bank, Dr. Adeyinka Bibilari, who disclosed this while speaking during the bank’s first-ever virtual AGM, also said the bank’s audited figures showed a 37.6 per cent rise in gross earnings from N 1.005 billion in 2018 to N1.383 billion in 2019.

 

He said further that a 21.2 per cent per cent increase in profit before tax from 366.8 billion in 2018 to N444.4 million in 2019 was recorded, just as the total assets grew by three per cent from N 10.351 billion in 2018 to N10.644 billion in 2019.

 

ITMB however approved a dividend of 3.5 kobo per share for shareholders. ITMB reported a revenue of N1.378 billion and profit after tax of N419.697 million respectively for the year ended December 31, 2019. However, the financial institution began the first quarter of the year 2020 with a decline of 26.49 per cent in profit after tax, from N123,765 million in 2019 to N90.973 million in 2020.

 

Profit before tax stood at N95.761million in 2020 from N134.527 million in 2019, accounting for a drop of 28.82 per cent. Revenue stood at N316.168 million in 2020 from N344.900 million in 2019, representing a drop of 8.33 per cent.

 

Infinity Trust Mortgage Bank (ITMB) Plc has reported a 28.81 per cent drop in profit after tax for the half year ended June 30, 2020.

 

The bank’s unaudited accounts in a filing with the Nigerian Stock Exchange (NSE) showed a profit after tax of N150.530 million for the half year 2020 as against N211.458 million reported in 2019, representing a decline of 28.81 per cent. Profit before tax equally stood at N160.138 million from N224.955 million in 2019, accounting for a drop of 28.81 per cent.

 

Turnover dropped by 12.87 per cent from N667.695 million to N587.762 million in 2020. ITMB reported a 5.51 per cent drop in profit after tax for the third quarter ended September 30, 2020.

 

The bank’s unaudited accounts in a filing with the Nigerian Stock Exchange (NSE) showed a profit after tax of N277.280 million for the third quarter 2020 as against N293.456 million reported in 2019, representing a decline of 5.51 per cent.

 

Profit before tax equally stood at N291.874 million from N308.901 million in 2019, accounting equally for a drop of 5.51 per cent. Turnover dropped by 9.36 per cent from N993.856 million to N900.803 million in 2020.

 

On-boarded by DBN

 

Infinity Trust Mortgage Bank Plc was recently on-boarded as a participating financial institution by the Development Bank of Nigeria (DBN). This onboarding enabled the company to access about N2.7 billion to lend to its customers.

 

Commenting on the development, the MD/CEO of the company, Mr. Olabanjo Obaleye, said the partnership was key, as it strengthens the company’s ability to offer different kinds of loan products to individuals and MSMEs that constitute more than 90 per cent of enterprises in the country.

 

The MD/CEO also admitted that the partnership with the DBN would further foster mortgage penetration in the country. “It will help us reach many more customers that are selfemployed and those in the MSME space that want to purchase commercial properties

like shop and offices. This will also improve financial inclusion for mortgage products. It will further broaden the mortgage penetration depth in the Nigerian market,” he said.

 

Outlook

 

Bibilari said he was satisfied with the reports, noting that they were a true reflection of the performance of the bank during the 2019 financial year. According to him, “we remain resolute in our commitment to be an industry leader in the Banking sub sector through innovation, focus and excellent service delivery.

“We shall continuously drive our growth and success story, and improve our efficiency and profitability as we pursue and execute our current and expansionary goals. We are putting in place the right people and technology that will enhance the actualization of our goals.”

 

Obaleye said: “The bank’s key capital and liquidity figures remain well above the regulatory requirements, even after the reporting date of December 31, 2019.

 

“Thanks to our very good capital and liquidity situation with an equity ratio well above the minimum legal requirement as well as its solid business policy. We have continued to develop products, and procedures designed to meet with the evolving business environment.

 

“I am glad that the shareholders will get their dividends this year, this makes it the 14th year we have consistently paid dividends to our shareholders. Creating wealth to our shareholders has been a critical focus of our value addition.”

 

On the 2020 outlook, Obaleye emphasised that the bank would be focusing on the profitable side of the business despite the harsh economic realities especially with the expected impact of Covid-19.

 

“Just as we were able to hold our first virtual Annual General Meeting with the aid of Technology, we would launch products and services that are technology driven which will enhance customer experience.”

 

“We would be targeting expansion of our operating capacity, the optimization and scaling of our internal processes and structures in order to reduce our overhead costs, as well as the generation of additional revenues through new business opportunities,” he added.

 

Last line

 

The Nigerian housing sector today faces some challenges that must be tackled to make the system provide the required services that will accelerate economic development witnessed in other emerging economies.

 

This is because the impact of the operations of the Primary Mortgage Institutions (PMIs) in Nigeria has been below expectation as the institutions lack the wherewithal to mobilise requisite resources for commitment towards fulfillment of their objectives

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