Finance Ireland grows profit by 27% after record new lending

Non-bank lender says pre-tax profit rose to €10.5m in 2018

Finance Ireland’s headquarters in Dublin. The  lender raised an additional €30 million in 2018 from shareholders Pimco and the Irish Strategic Investment Fund to support its growth. Photograph: Bryan James

Finance Ireland’s headquarters in Dublin. The lender raised an additional €30 million in 2018 from shareholders Pimco and the Irish Strategic Investment Fund to support its growth. Photograph: Bryan James

 

Non-bank lender Finance Ireland grew its pre-tax profit by 27 per cent in 2018 as it produced record new lending of €491 million.

The business led by former Irish Permanent chief Billy Kane grew profit to €10.5 million with new lending 13 per cent higher than in 2017.

Strong growth in the company’s commercial real estate business and its MilkFlex agribusiness loan in addition to strong car finance lending contributed to the profit boost.

Finance Ireland said its motor finance business surpassed €1 billion in lending since its foundation in 2011 while its commercial lending portfolio increased 89 per cent with total lending now in excess of €300 million.

Its car financing business recorded a “bit of a resurgence” last year, according to Frank Donnellan, the managing director of First Auto Finance Ireland and Finance Ireland Leasing. Because it is a prime lender, the group is relatively well insulated against an economic downturn, he noted.

Residential mortgage market

The State’s largest non-bank lender recently entered the residential mortgage market. “I’d expect us to get our relative share of first time buyer business and a disproportionate share of switcher business,” said Donal Doran, the company’s director of corporate development, adding that they expect to benefit by tempting customers away from “rip-off SVRs” (standard variable rate mortgages) of the Republic’s pillar banks.

Rates for the company’s mortgage product vary based on the loan to value ratio of a property.

Finance Ireland raised an additional €30 million in 2018 from shareholders Pimco and the Irish Strategic Investment Fund (ISIF) to support its growth. Asked whether an initial public offering was a prospect, Mr Kane said “it’s certainly something we’d consider but it’s not on the horizon for 2019.

“It’s ideal for companies like ours that need access to capital from a diversified base,” he added noting that the company would have to raise profit after tax to about €25 million in order to consider an IPO.

Mr Kane added that the company doesn’t need to raise any capital this year, although he said “if any acquisitions came along our current shareholder would support us in that”.

Consolidation

Such support may be necessary given his view that there will be consolidation in the non-bank lender market resulting from the small size of the Republic market.

Although not terribly concerned about Brexit, Finance Ireland has seen a fall in SME lending both in the fourth quarter of 2018 and so far this year.

“We’ve done a lot of work to make sure we’re as protected and insulated as we can be and more importantly, we’re not going to stop trading with the UK,” said chief operating officer Jim Hickey.

“Looking ahead, we have had a strong start to 2019 across all our divisions. We are excited by the opportunities we see and we have built up excellent momentum to make the most of these opportunities,” Mr Kane said.