Microcredit company Dolla Financial Services Limited is looking to further diversify its loan book and the collateral that secures its loan book as more borrowers continue to feel the economic pinch and wrestle to repay their obligations.

Dolla Financial’s first quarter (January to March) consolidated net profit dipped by 17 per cent from $139.99 million to $116.60 million as it identified loans on the books that carried a higher probability of default. That higher risk of default was confirmed by the move in the group’s non-performing loan (NPL) ratio from 9.9 per cent at the end of 2024 to 11.5 per cent at the end of March. The NPL ratio was 6.5 per cent at the end of 2022.

Non-performing loans are loans where there has been no principal nor interest payment in more than 90 days while past due loans are loans which have not been paid between 30 to 90 days.

Although the size and quantum of the bad debt was not broken out in the company’s quarterly report, its provision for expected credit losses (ECL) moved from $3.96 million to $50.05 million. The ECL ratio also moved from 2.8 per cent to 3.1 per cent. The ECL is an estimate of potential losses on a financial asset due to credit related issuers by a borrower or external party. The recovery or repayment of a loan results in the loan provision being added back to the income statement.

“Our NPL as a group has slid above 11 and that is largely attributable to Ultra and our portfolio. We are in the process of liquidating a number of properties and as we know, in Jamaica, it does take quite a while to liquidate property. So, we’re not worried. We’re closely monitoring it [NPL] as we go forward and we do see that within the next three to six months, that we will have our NPL back below five per cent as we always intend for it to be,” stated David Henriques, chief executive officer of Ultra Financier Limited, in the company’s earnings call on Learn Grow Invest Limited on May 20.

The rise in Dolla’s consolidated NPL ratio during Q1 was largely related to two or three significant accounts at Ultra. Ultra began operations in November 2022 as a financier to high-net-worth individuals who could borrow against a wider range of asset classes. Ultra has since realigned its focus to private credit with most of its loan book remaining secured. Ultra Financier grew its interest income by 73 per cent during 2024 to $547.90 million and represented 36 per cent of Dolla’s consolidated income. This subsidiary also grew its net profit by 42 per cent to $165.02 million.

During the first quarter, Ultra grew its loan book by 10 per cent to $1.66 billion which was backed by collateral worth more than $3.6 billion. Ultra had 65 active loans at the end of Q1 with the average loan size being $17.5 million.

Due to this tough Q1 experience, Ultra has since increased the focus on the mixture of collateral backing loans to ensure that there is a greater ease in recovery of funds. The subsidiary is looking to bring its NPL ratio which stood at nine per cent at the end of 2024 to under five per cent by mid-2025. It is also aiming to grow its loan book to $2 billion while focusing on improving its efficiency, which saw the Ultra team shrink from eight to six team members during Q1.

As for the overall Dolla group, CEO Kenroy Kerr highlighted that changes in the economy along with a general slowdown has resulted in some clients struggling to repay large balances. This has resulted in Dolla becoming more conservative in its loan loss provisioning along with refinement to its credit models. This is on top of a push to further improve turnaround times and automate different parts of the business going forward. Dolla’s loan book is currently 86 per cent secured with most of its loan book being towards businesses.

“One of the things that we’re looking at is diversifying the collateral. Even David [Henriques] spoke about this earlier about having a mix of motor vehicles and properties and just looking at the properties that we accept to ensure that these are properties that we can still be able to easily liquidate. We’re also looking at just reducing the average ticket size and I believe that these factors together should assist us in the medium to long term in terms of maintaining a quality loan portfolio,” Kerr said in his remarks.

Dolla’s consolidated interest income grew 38 per cent to a record $502.10 million or a third of its entire interest income earned in 2024. This growth was due to a larger loan book coupled with higher rates on some of its product offerings. Even with a 64 per cent uptick in interest expense, net interest income was up 32 per cent to $403.36 million.

Dolla’s operating expenses jumped 57 per cent from $147.58 million to $232.14 million as the company spend more on marketing during the quarter and an irrecoverable bad debt. These higher expenses pushed Dolla’s efficiency ratio to 56 per cent with Chief Financial Officer Trevene McKenzie noting that this should be sub-50 in the subsequent quarters. Dolla expects to complete the wind up of Dolla Guyana Inc by the third quarter.

Dolla’s consolidated asset base stood at $4.63 billion with its loan book at $4.26 billion with cash and cash equivalents at $141.57 million. Total liabilities and shareholder’s equity was $3.42 billion and $1.21 billion, respectively.

During the earnings call, several participants asked about Ultra listing on the Junior Market of the JSE considering that the share capital limit has been adjusted to $750 million. McKenzie stated, “We are not looking to do this in the next few quarters. That’s the most we can say for right now. There’s a lot to take into consideration including the dilution of shares, what’s going on right now in the stock market and the economy. All of these things we have to take into account, and we are guided by the experts, our financial advisors, board of directors and all our other advisors keeping us on the page of making the best decision for the business at this point in time.”

Dolla’s stock price declined six per cent on Monday to $2.24 with the stock hitting a new 52 week low of $2.11 during the trading session. That left the stock down 26 per cent in 2025 with a market capitalisation of $5.60 billion. Shareholders like Mayberry Jamaican Equities Limited (MJE) have pledged Dolla shares as collateral for debt. The stock traded at a peak of $2.44 on Tuesday with an average closing price of $2.39.

Dolla’s board of directors were set to have considered an interim dividend payment at a meeting on May 20. Dolla declared a $0.012 dividend totalling $30 million during the first quarter which was paid on April 11. Dolla will have its third hybrid annual general meeting at 11:00 am on May 30 by the Jamaica Pegasus hotel.