12 Stocks of Christmas: International Personal Finance
International Personal Finance (LON:IPF) - A risky international lender but the valuation is hard to ignore
Market cap at the time of writing: £270m, at a share price of 124p
I’ve covered IPF and written positively about it for a long time, and now I want it on my annual watchlist.
IPF is an international consumer lender serving people who for a variety of reasons do not access credit from the mainstream banking system. Many of IPF’s customers would be considered high-risk by other lenders.
The flagship product is home credit but IPF also provides credit cards and online loans.
I interviewed the management team in July, publishing my notes here on Stockopedia.
The main challenge faced by the company in recent times has been the introduction of a cap on the cost of credit in Poland, which resulted in a major restructuring, redundancies, and the transition to greater emphasis on a credit card product.
CEO Gerard Ryan told me that while the exceptional costs associated with Poland are not finished yet, he thinks there is less planned activity now in terms of new regulations across IPF’s markets. The Czech Republic is the only European country where IPF does not currently face a rate cap.
Looking further afield, IPF is keen to expand in Mexico where there is currently no rate cap. The impairment rate there is a staggering 30% but it’s seen as a growth opportunity and so IPF is looking to increase its overall impairment rate from 9.2% to a target range of 14-16%.
IPF’s shares trade on a forecast PER of only 5.5x and have a perfect StockRank of 99:
The company does use substantial debt to fund its activities but seems comfortable with its position, even launching a £15m share buyback in July of this year. Total borrowings were last seen at over £550m and the company has a junk (or “non-investment grade”) rating of BB from Fitch.
It has a clearly laid out financial framework which targets an (attractive in my view) return on required equity of 15-20%, a dividend payout ratio of at least 40%, and equity of at least 40% of its outstanding receivables.
But by June this year, strong trading had strengthened its equity to receivables ratio to 56%, far above its 40% target. In other words, it was too well-capitalised. Much like its impairment rate, IPF’s actual performance has been stubbornly better than its preconceived plans.
Turning to management, CEO Gerard Ryan has been in his position since 2012 and I believe that he now owns nearly 2 million shares in the business after options vested for him earlier this year. He previously held 1.5 million shares.
The company’s last Remuneration Report stated the following:
Executive directors are expected to acquire a beneficial shareholding over time, with 50% of all share awards vesting to be retained until the requirement is met. Of the 1.5 million shares held by Gerard Ryan, 0.9 million were purchased outright by him using his own funds.
With a well-aligned CEO who is hopefully not thinking about retirement any time soon, I’m happy to make IPF a new entrant to my share watchlist for 2025.
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14 comments
Thanks to everyone for the insightful comments so far. I have added IPF to my personal portfolio as of today. Graham
Graham, I have confidence- held it for 18 months and like the way the company is delivering.
I think it is fair to say that historically this has been a troubled sector. Cattles (Welcome) , Morses, Wonga have all had a go at short term lending .
There are a number of headwinds with such lending. The biggest being the limited options for a lender if someone defaults. By the nature of the client they will be probably be renting and have few assets to pursue. If they are also in debt to an unregulated lender who has other varied methods of collection - the unregulated lender will probably get paid first.
If someone defaulted a traditional regulated doorstep lender the key factor used to be the relationship with the agent and the ability of the agent to secure repayments through personal contact. This approach however has some limits if the client simply does not have the money to repay.
Other risk factors include a change in legislation and the scrutiny of the FCA which is quite active in the sector.
My experience is not direct but via contacts no longer in the industry - it is possible that IPF have a new angle on the business and can succeed. For me however, this one is a little risky when there are a number of other value opportunities in the current UK market. Cannot comment on offshore lending , Mexico etc....
It's not a bad company, in my view, and have to own up to having a small holding which is underwater. It is certainly cheap and Aberforth as a large holder are testiment to that! I think they will inevitably follow the path of Provident Financial (of which they were once part) at some point but it may take another decade or so for the Regulators to catch-up with them and drive them out of business. Not sure there is a great future in being a high cost lender to individuals anymore. Think that boat has sailed.
Aberforth have sold down over the recent months. More interesting shareholders on the register. I am not sure that Regulators "will catch up with them". I assume you mean UK regulators, but the business is International. Listen to a presentation by the company and I think it is pretty clear how they operate . The Mexico one was interesting- 18 months ago I think.
Their GBP12% coupon bond which has 3 years to maturity (12/12/2027) currently yields shy of 11%
Chelsea -Trading at sell/buy £109-111, redemption £100 12/12/2027 which a sign of market confidence. So buy today capital loss for just under 3 years of 9/11 points. So total return around 22.7% allowing for the Capital loss. Not sure what the tax situation is re a capital loss on the bond v. interest, but short dated gilts are tax effective for higher rate tax payers.
2. Capital Gain/Loss:
3. Total Return:
Therefore, the total return on this bond is 22.73% over the 35-month period.
I have held IPF for a while and will continue to use this. Researching with AI Deep research came up with these brokers price targets.
Analyst Ratings and Price Targets
Analyst sentiment towards IPF is positive. Based on data from three analysts offering 12-month price targets, the median target is GBX 185.00, with a high estimate of GBX 210.00 and a low estimate of GBX 165.00 . This median target suggests a potential upside of 46.83% from the last price of GBX 126.00
Hi Charles,
Happy New Year!
Is there any chance you could share the AI research you have done on International Personal Finance (LON:IPF) please? I haven’t got round to trying the Google AI research model yet and I’m also not sure how successful I’d be.
Thanks in anticipation.
Gramwell.
International Personal Finance (International Personal Finance (LON:IPF)) Stock Analysis
International Personal Finance (International Personal Finance (LON:IPF)) is a leading international home credit business, providing small, unsecured cash loans to customers in eleven countries across Europe and Mexico [36]. This report provides an analysis of International Personal Finance's recent performance, financial health, competitive landscape, and future prospects.
Company Overview
International Personal Finance offers small, unsecured cash loans to customers who may not have access to traditional banking services. The company operates through a network of agents and digital channels, providing responsible lending solutions tailored to the needs of its customers. International Personal Finance is committed to financial inclusion and responsible lending practices, ensuring that its products and services are accessible and affordable for its target market.
Recent Performance and Financial Health
International Personal Finance has demonstrated resilience in navigating challenging market conditions. In its Q3 2024 trading update, the company reported a 10% increase in credit issued compared to the same period in 2023 [37]. This growth was driven by strong performance in its European home credit business and the ongoing expansion of its digital lending operations.
Key financial highlights for the first half of 2024 include:
The company has a dividend yield of 3.8% and a payout ratio of 42% [39]. The ex-dividend date is December 12, 2024, with a dividend pay date of January 17, 2025 [39].
Analyst Ratings and Price Targets
Analysts have a positive outlook on International Personal Finance, with a consensus recommendation of "Buy" [40]. The median 12-month price target is 185.00p, representing a potential upside of 41.22% from the last closing price of 131.00p [40].
Competitive Landscape
International Personal Finance operates in a competitive market with various players, including Provident Financial. However, specific competitor performance data was not available in the provided sources.
Market Outlook: Personal Credit in Mexico and Poland
Mexico:
The consumer credit market in Mexico is experiencing growth, with consumer credit increasing to 1,999,893 MXN million in the third quarter of 2024 [41]. This growth is driven by factors such as greater financial inclusion and the adoption of automation technologies [42]. Despite high-interest rates, consumer credit in Mexico surged by 14.5% year-on-year in May 2024 [43].
Poland:
The alternative lending market in Poland is expected to experience substantial growth through 2028, with a projected compound annual growth rate of 10.7% [44]. The value of card transactions in Poland reached $165.3 billion in 2023, with a projected CAGR of over 13% between 2023 and 2027 [45].
Historical Stock Price Data
International Personal Finance's stock price has shown positive momentum in recent months. As of December 30, 2024, the stock price was 131.00 GBX, reflecting a 32.06% increase from its 52-week low of 99.20 GBX [46]. Over the past year, the share price has increased by 9.05% [47].
SWOT Analysis
Strengths:
Weaknesses:
Opportunities:
Threats:
Conclusion
International Personal Finance is a well-established home credit business with a strong track record of performance. The company has demonstrated resilience in navigating challenging market conditions and is well-positioned to capitalize on the growing demand for personal credit in its markets of operation. While the competitive landscape remains intense, International Personal Finance's focus on responsible lending and customer relationships provides it with a competitive advantage. The company's expansion into digital lending and potential for further market expansion offer promising growth opportunities. However, investors should carefully consider the potential risks associated with regulatory changes and economic downturns before making any investment decisions.
Graham, a concise view. I could expand the country research IPF operate in
Thanks Charles,
That’s much appreciated. I hold these at a slightly higher price than current SP but am looking to top up as an average down.
Have a great New Year!
Graham.
And you. Gemini 1.5 pro Deep research has potential. Question of asking the right questions, which I am still experimenting with.
Graham, here is a report I created using a pretty simple question asking "research the personal credit market in Poland. How does IPF perform and what market share does IPF have." The question could be much more detailed.
Answer.
Personal Credit Market in Poland: An Analysis of International Personal Finance's Performance
Executive Summary
This report provides an in-depth analysis of the personal credit market in Poland, with a specific focus on the performance and market share of International Personal Finance (International Personal Finance (LON:IPF)). The Polish personal credit market is experiencing substantial growth, driven by factors such as increasing consumer spending and the rising popularity of alternative lending solutions, particularly mobile payments. Key players in this market include major banks like Bank Polski, Santander, and Bank Pekao, as well as non-bank financial institutions. While specific data on £IPF's market share is limited, the available information suggests that the company faces challenges due to recent regulatory changes, such as the Anti-Usury Act, and the competitive landscape. Despite these challenges, International Personal Finance (LON:IPF) remains committed to the Polish market and is adapting its strategies to maintain its presence by expanding its product offerings, such as credit cards, to cater to a broader customer base.
Economic Overview
Before diving into the specifics of the personal credit market, it's essential to understand the broader economic context in Poland. Key economic indicators provide insights into the overall financial health of the country and consumer behavior, which can influence borrowing patterns and credit demand.
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These figures show that Poland has a sizable population and economy, but it faces challenges with negative real GDP growth and a relatively high inflation rate. The low unemployment rate, however, suggests a stable labor market, which can positively impact consumer confidence and creditworthiness.
Market Size and Growth
The personal credit market in Poland is demonstrating significant growth, driven by various factors. One source estimates the alternative lending market in Poland, which includes non-traditional lending options, to be valued at $1.9 billion in 2024, with a projected growth to $2.9 billion by 2028. This represents a compound annual growth rate (CAGR) of 10.7%. This growth highlights the increasing popularity of alternative financing solutions in Poland.
In terms of overall consumer credit, data from Trading Economics reveals that outstanding consumer credit reached 798,808.10 PLN million in October 2024. This figure provides a snapshot of the total consumer credit market in Poland, encompassing a wide range of credit products.
The growth rate of the personal credit market is further emphasized by the projected CAGR of 12.39% for the payments market during 2022-2027. This growth is fueled by the increasing adoption of mobile payments and contactless transactions, indicating a shift towards digital financial solutions. The increasing popularity of mobile payments and contactless transactions is driving growth in the personal credit market, as consumers become more comfortable with digital financial solutions. Additionally, data on domestic credit growth shows a 4.5% year-on-year increase in October 2024, suggesting continued expansion in the overall credit market.
It's worth noting that the market concentration in the Polish payments industry is categorized as "Medium." This suggests a competitive landscape with a moderate number of players, each holding a significant market share.
Interest Rates
Interest rates play a crucial role in the personal credit market, as they directly impact the cost of borrowing for consumers and influence lending decisions. Understanding the current interest rate environment in Poland is essential for assessing market dynamics and potential growth.
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These figures provide a glimpse into the cost of borrowing for different segments in Poland. The relatively high household lending rate suggests that personal credit can be expensive for consumers, which could potentially impact credit demand.
Competitive Landscape
The personal credit market in Poland is characterized by intense competition, with numerous players vying for market share. This competition drives innovation, with companies constantly introducing new products and services to attract customers. Digitalization is another key trend, with many companies offering online and mobile banking solutions to enhance customer experience.
Export to Sheets
These institutions offer a wide range of personal credit products, including credit cards, personal loans, and mortgages, catering to diverse customer needs.
Beyond traditional banks, lending institutions play a crucial role in financial inclusion by offering services to higher-risk consumers and those who may not meet the requirements of traditional banks. They often provide smaller loans with shorter terms, filling a gap in the market and catering to a specific customer segment. Notably, non-banking loans are primarily targeted towards individuals with lower income and those seeking smaller loan amounts.
The annual value of card transactions in Poland reached $165.3 billion in 2023, with a projected CAGR of over 13% between 2023 and 2027. This highlights the significant role of card-based payments in the market. Key payment instruments in Poland include cards, cash, credit transfers, mobile wallets, direct debits, and checks.
International Personal Finance (International Personal Finance (LON:IPF)) in Poland
International Personal Finance (International Personal Finance (LON:IPF)) is a leading international home credit business, offering small, unsecured cash loans to customers who may not have access to traditional banking services. The company operates in several countries, including Poland, where it provides financial solutions to individuals who are often underserved by mainstream financial institutions.
Market Share
While precise data on £IPF's market share in Poland among the major players is limited, it's important to acknowledge the challenges the company faces in this evolving market. £IPF's traditional focus on home credit has been impacted by the rise of digital lending solutions and changing consumer preferences. To adapt to these changes, International Personal Finance (LON:IPF) is expanding its product offerings, including the introduction of credit cards, to cater to a broader customer base and maintain its competitive edge.
Financial Performance
£IPF's financial performance in Poland has been affected by recent regulatory changes, particularly the introduction of a lower rate cap on loans. This has led to a reduction in customer lending and receivables in Poland. However, the company has taken steps to stabilize its receivables and is showing signs of growth in the Polish market.
Despite the challenges in Poland, International Personal Finance (LON:IPF) has maintained a strong overall financial performance. The company reported a pre-tax profit of £83.9m for the year ending December 31, 2023, exceeding market expectations. This strong performance is attributed to robust demand for its financial products in other markets and good cost control.
However, it's important to note that despite an 18.95% increase in revenues, International Personal Finance (LON:IPF) experienced a 15.49% fall in net income in 2023. This decline can be partly attributed to increased operating costs. Additionally, the company's pre-exceptional RoRE was 14.8% in 2023.
Regulatory Changes and Economic Factors
The personal credit market in Poland is subject to various regulatory changes and economic factors that can impact its performance. One significant change is the Anti-Usury Act, effective from January 1, 2024. This act introduced stricter regulations on consumer credit providers, including tighter restrictions on fees charged to borrowers and more stringent criteria for assessing consumer creditworthiness. These changes have implications for all lending institutions, including £IPF. The Anti-Usury Act's stricter regulations on fees and creditworthiness assessment are likely to impact the profitability of lending institutions and may lead to more cautious lending practices.
Another important development is the increased supervision of consumer credit providers by the Polish Financial Supervision Authority (PFSA). Lending institutions are now required to report data on the scale, structure, and nature of their loan portfolio to the PFSA, increasing scrutiny and potentially impacting lending practices and risk management.
Furthermore, historical context shows that the credit policy of banks in Poland has undergone shifts, including the liberalization of interest rates on loans for private and institutional clients, mainly since 2012. This liberalization aimed to lower interest rates on loans, potentially impacting credit availability and consumer borrowing.
Conclusion
The personal credit market in Poland presents a dynamic landscape with significant growth potential. However, intense competition and evolving regulations create challenges for lenders. International Personal Finance (International Personal Finance (LON:IPF)), while facing headwinds in Poland due to regulatory changes and the need to adapt to the digitalization of the market, remains committed to serving its Polish customers. The company's strong overall financial performance and its efforts to expand its product offerings suggest a potential for continued growth.
£IPF's competitive advantages in Poland include its established presence in the home credit market and its focus on financial inclusion, serving customers who may not have access to traditional banking services. However, the company faces disadvantages such as the impact of the Anti-Usury Act on its profitability and the need to compete with established banks and digital lending platforms.
The outlook for International Personal Finance (LON:IPF) in Poland depends on its ability to navigate the evolving regulatory landscape, adapt to changing consumer preferences, and effectively compete in the dynamic market. Continued focus on customer needs, innovation in product offerings, and efficient cost management will be crucial for £IPF's success in Poland.
Based on the analysis, investors and stakeholders should closely monitor £IPF's progress in adapting to the Polish market's challenges and its ability to maintain profitability amidst regulatory changes. The company's success in Poland will rely on its strategic response to the competitive landscape and its ability to leverage its strengths while mitigating its weaknesses.
I bought this one in October after one of your SCVR reviews and constant enthusiasm for it.. 5% under-water but I buy over a 9 month period so do not mind getting them slightly cheaper over that time. It was the 8-9% dividend which finally made me pull the trigger. Happy to continue to hold.