Emerging markets-focused credit company International Personal Finance (LSE: IPF.L - news) loses around a fifth of its stock market value in heavy volume on Fridayafter the company gets hit by a fine in Poland.
International Personal Finance shares are down by 18.9 percent at 439.20pence in early morning trading, making the stock the worst-performer onBritain's FTSE 250 mid-cap index. Trading volumes in the stock come inat 2.7 times above the average 90-day amount.
Late on Dec. 24, International Personal Finance said it had been finedaround 2.4 million pounds ($3.94 million) by Polish authorities over the way itcalculated some of its APR (annual percentage rate) lending terms. The companyadded it would appeal against the decision.
Analysts at Numis Securities and Shore Capital (Other OTC: SHOCF - news) both say the blow couldpresage a bigger hit to International Personal Finance's overall Polandbusiness, which is the company's largest profit centre.
"While the fine itself is not material, in our view, the proposed inclusionof the preparatory fee and home collection service charge in the APR calculationhas potentially much wider implications," says Shore Capital analyst GaryGreenwood.
"If the revised APR calculation is imposed in Poland it could be potentiallydevastating for the company's business model in Poland, we think, as it wouldseverely restrict the pricing structure. As Poland is IPF's largest profitcentre, accounting for just over half of the group total, this is clearly a bigissue," adds Greenwood, who has a "sell" rating on the stock.
Numis Securities' analysts also agree that changes to how InternationalPersonal Finance works out its APR terms in Poland could have a major impact onthe business going forward.
"Of greater concern is the discussion paper which is looking at changing theinterest rate cap to a cost of credit or APR cap. These two combined in a worstcase scenario with a low APR cap could fundamentally impact the Polish businesswhich accounts for 45 percent of IPF's profit," they write in a note.
In spite of Friday's stock market slump, International Personal Financeshares remain up by around 18 percent since the start of 2013.
($1 = 0.6088 British pounds)
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