With the novel coronavirus pandemic continuing to sharply impact the most vulnerable income earners in the country, Lasco Financial Services Limited (LFSL) has repositioned its Lasco Microfinance Limited (LML) business to match the risk faced in the current economic climate. This action comes as profits jumped by 100 per cent to $153.9 million for the nine months ending December 31, 2020.

Due to this restructuring and scaling down of general activities for LML, revenue for LFSL declined by 14 per cent to $532.2 million. Although the money services and cambio business has grown by double digits, LML has taken a larger hit over the period with the September quarter recording a 34.5 per cent or $152.5 million decline from the residual impact of the pandemic. This lower business activity led to LFSL’s nine months revenue declining by 12 per cent to $1.69 billion.

“LASCO Microfinance is conscious that it is operating within the context of a pandemic, serving a customer base which is vulnerable to economic shocks. Lending is ongoing, and is risk-based, in line with our customers’ ability to service the loans. Advertising and promotional activity declined sharply, as well as there was a reduction in the ECL [expected credit loss] as qualifying customers took the opportunity for restructuring of their loans or moratoriums,” Managing Director Jacinth Hall-Tracey said when replying to queries by the Business Observer on LML’s business activity.

Total expenses dropped by 36 per cent to $336.5 million, with selling and promotion expenses (S&P expenses) declining by 80 per cent to $52.5 million due to the LFSL’s focus on cutting non-essential expenditure during the financial year (FY).

Most of this decline can be attributed to LML, which when consolidated with LFSL in the 2020 FY saw S&P expenses totalling $1.2 billion, compared to the $475.4 million associated with LFSL as a stand alone entity.

As a result of the drop in expenses, operating profit jumped by 110 per cent to $195.7 million for the quarter. When combined with lower finance costs and taxes, LFSL saw profit rise to $123.8 million compared to the $2.2 million in the prior December 2019 quarter.

This strong quarterly performance drove up the company’s results, and allowed for it to post an earnings per share of $0.1211 versus the $0.0607 for the 9 months. LFSL asset base fell by 4 per cent to $4 billion as loans and other receivables fell, but shareholder’s equity grew by 1 per cent to $1.7 billion by the end of the quarter.

Even with the LML expected to be operating at lower disbursals for the remainder of the FY, along with the junior market tax remission being expired, Hall-Tracey is confident that the company’s push into its business diversification with its Lasco Biz and Lasco Pay products will allow for it to truly transform itself over the near term.

According to the company, customers have been responding very well to the option of loading funds to the cards. Card usage has significantly increased.

“LFSL was able to successfully conduct transactions with a select number of merchants during the pilot review period, which has now ended. Once approved, we will make the service available to the general public. Our business is transforming in response to market influences for digital products. The transformation is enabled by increasingly accessible technology. LFSL is shifting its business model from being a remittance service provider to making payments to consumers, and enabling merchants to receive payments,” the company stated.