Eppley expanding investment portfolio

Even with there being talk of a possible rise in interest rates, Eppley Limited remains unfazed by the pronouncement and is looking to satisfy the burgeoning demand for its loans, leases and insurance premium financing products.

This was revealed by managing director (MD) of Eppley Nicholas Scott at the company’s annual general meeting held on Tuesday last. Eppley recently refinanced JM$1.206 billion in debt through a JM$1.45 billion preference share offer in August which was oversubscribed. This will result in the company saving an extra JM$10 million in annual interest expenses and having an additional $200 million in capital for general purposes. Eppley’s preference shares are set to mature between August 2023 – August 2028.

Nicholas Scott, managing director, Eppley (File photo)

“The way to think about in our business or any lending business is to look at the duration of the liabilities and assets and whether those assets are floating or fixed. In the case of Eppley, our liabilities for preference shares are all fixed and have a long duration. If interest rates were to rise, our spread increases as our liabilities remains unchanged but we will reprice our products,” explained the managing director.

Eppley’s proprietary loan portfolio decreased from JM$1.63 billion at the end of March 2020 to JM$1.45 billion by the end of 2020 as lending across the country slowed during the initial stages of the pandemic. However, its lease portfolio expanded from JM$587.13 million to JM$1.60 billion at the end of June. Eppley owns a large fleet of cars, trucks and other forms of commercial equipment which it rents or leases to manufacturing, distribution and industrial businesses.

“Over the last 18 months, you’d have seen a strong growth in assets under management, which is part of a multi-year strategy. On the proprietary side, you’d have seen a fall in interest income as we were conservative during the period of uncertainty. What you saw in the last quarter and in subsequent results is that the business is firing on two cylinders from the asset management income and recovery in net interest income. We see a very strong resurgence in [loan] demand,” stated Scott.

Eppley’s interest income grew by five per cent to $177.54 million for the first six months of 2021, but its net interest income dropped by 18 per cent due to higher interest expenses. However, its asset management income has risen by 49 per cent to $123.83 million as its asset under management grow sharply. Eppley manages a number of funds with the Eppley Caribbean Property Fund and Caribbean Mezzanine Fund II being the largest funds due to recent acquisitions and capital raises. Eppley’s net profit marginally improved to JM$108.95 million up to the end of June.

Chairman of Eppley Paul B Scott

Eppley’s total assets has grown by 24 per cent to JM$5.14 billion since the end of 2020 while total liabilities rose by 33 per cent to JM$4.18 billion. Shareholder’s equity slightly declined to $953.82 million due to the large dividend payments of JM$166.91 million relative to JM$116.73 million in total comprehensive income.

When asked about the concerns surrounding its insurance premium financing business, Chairman Paul B Scott stated that there’s nothing significant to discuss at the moment as the Financial Services Commission (FSC) goes back to the drawing board. The FSC recently discussed barring insurance companies from offering premium financing but has since sought further dialogue from industry stakeholders on the matter. Eppley isn’t an insurance company, but its affiliate General Accident Insurance Company, is a general insurance business. Eppley’s insurance premium portfolio has declined by 26 per cent to $100.52 million since the start of the year.

— David Rose