ISP Finance has carved out a niche in Jamaica's lending market by offering a range of unsecured personal and business loans tailored to individuals with limited access to traditional banking services. Its loan portfolio primarily consists of short- to medium-term loans, with interest rates reflective of the risk associated with unsecured lending.
ISP doubles loan portfolio with $1.2-b acquisition
After years of laying the groundwork for expansion, ISP Finance Services Limited has advanced its growth plan with the acquisition of an unsecured loan portfolio valued at approximately $1.2 billion.
The acquisition, which was announced via the Jamaica Stock Exchange on Wednesday, significantly strengthens the company’s lending book, which as at September 2024 stood at $1.006 billion net of provisions. It is also expected to double its total assets to over $2.4 billion.
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The purchase of the loan portfolio has been years in the making. As far back as 2021, ISP Finance disclosed that it had entered into an agreement to acquire portions of a loan portfolio from an undisclosed entity. At the time, the size of the portfolio was not disclosed, and efforts to obtain more details on the transaction were unsuccessful. The latest announcement provides a clearer picture of the scale and financial impact of the long-anticipated deal.
ISP Finance has carved out a niche in Jamaica’s lending market by offering a range of unsecured personal and business loans tailored to individuals with limited access to traditional banking services. Its loan portfolio primarily consists of short- to medium-term loans, with interest rates reflective of the risk associated with unsecured lending. Over the years, the company has built a client base that includes salaried employees, small business owners, and self-employed individuals, relying on structured repayment models to maintain financial stability.
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The latest acquisition brings in a large number of personal loans, further diversifying ISP’s lending portfolio. While unsecured loans typically carry higher default risks, ISP has refined its risk assessment methodologies to improve collection efficiency and reduce loan losses.
The company has also announced plans to expand its loan offerings to better serve its primary customer base, which consists largely of public-sector workers. These loans will be tailored to address essential household expenses, education, and healthcare needs.
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“Looking ahead, we plan to introduce new products that we believe will enhance shareholder value,” CEO Dennis Smith said in the company’s July quarterly financial statement.
However, ISP Finance has been facing profitability challenges in recent times.
For the third quarter of 2024, net interest income declined by 16 per cent, falling from $122.2 million to $102.5 million. Additionally, net income after interest expenses and commissions before operating expenses totalled $98.4 million, a 15 per cent decrease from $115.7 million in the prior year. Operating expenses for the quarter amounted to $84.3 million, reflecting a 5 per cent reduction or $4.4 million compared to the same period in 2023. Net profit also saw a sharp decline of 45.9 per cent, dropping by $12.3 million to $12.2 million for the quarter.
The acquisition of this loan portfolio is part of a broader strategy that began with ISP Finance’s decision to raise $470 million in the bond market in 2022. At the time, $200 million was specifically earmarked for portfolio acquisitions, signalling the company’s long-term intent to grow its loan book.
In September 2024, ISP Finance engaged the services of an investment banker to explore strategic opportunities for expansion, including identifying and evaluating potential loan acquisitions. Additionally, the company retained a financial consultant to refine its approach to loan portfolio management, ensuring that growth efforts were aligned with its operational capacity and risk appetite.
