RCE Capital’s FY19 loan growth benchmarked against banks’ 5%

This article first appeared in The Edge Financial Daily, on September 7, 2018.
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KUALA LUMPUR: General loan financing services provider RCE Capital Bhd, which provides consumer financing to civil servants, said it is benchmarking its loan growth this year against the banking industry’s average.

“The banks’ average loan growth is at about 5%, so on our side, that’s something we will be benchmarking ourselves against,” RCE Capital chief executive officer (CEO) Loh Kam Chuin said.

The group recorded a loan growth of 8% for its last financial year ended March 31, 2018 (FY18), with non-performing loans kept at 4%, following a “slight impact” from the Malaysian Financial Reporting Standard 9 introduced.

Loh said the average loan size the group sees per application is increasing each year. As at its first quarter ended June 30, 2018 (1QFY19), its average loan size stood at RM18,000 per application, he said.

For the group’s 1QFY19, net profit grew 11% to RM23.2 million from RM20.93 million a year earlier, on higher interest income arising from steady loan growth in its consumer financing segment; quarterly revenue also rose 11% to RM63.24 million from RM57.1 million.

Should the earnings growth momentum continue, Loh said he is positive the group would do well for the full year.

“Looking at the results of the first quarter, you can get a good indication. But by the second quarter, you will have a better view of how the company is performing. However, we do not want to target loan growth for the sake of growing. It’s more important to have quality loans,” he told reporters after the group’s annual general meeting yesterday.

RCE Capital, through its unit RCE Marketing Sdn Bhd, provides consumer financing to civil servants. The maximum loan tenure is about 10 years, with monthly repayments made through direct salary deductions. It currently covers about 80,000 civil servants out of the 1.6 million total in the civil service.

RCE Marketing is the main contributor to group revenue, accounting for 97.2% as at end of FY18.

Although the market it covers is small, Loh said the intention is to grow its customer base.

“There are many reasons why civil servants take loans. Chief among them would be for home renovation, medical, education and other personal use,” he noted.

RCE Capital’s share price closed one sen or 0.62% lower at RM1.61 yesterday, for a market value of RM552.34 million.