Resort Savings and Loans plc, a major real estate player, has recorded a deep fall in interest income as the mortgage giant continues to struggle with huge operating cost that bleeds its profits.
The Nigerian estate firm continues with its unimpressive performance as it posted a loss after tax of N183.34 million in the nine months through September 2014, from a profit position of N69.90 million the same period of the corresponding year (Q3) 2013.
BusinessDay investigation shows the firm top-line suffered a one-two blow due to a 49.09 percent decrease in interest income to N429.23 million from N841.79 million the preceding year.
A 111.55 percent increase in net interest expense had bearing on profitability as net interest income dipped by 82.46 percent to N122.18 million from N696.64 million the preceding year.
This aforementioned performance means the firm is not generating enough revenues from interest on mortgage loans.
Top-line however received a boost as net earnings increased by 47.14 percent to N1.68 billion in Q3 2014, compared with N1.14 billion last year, thanks to a 215.14 percent in other income and 303.50 percent surge in recoveries.
Resort Savings’ inability to cut costs also added to its loss position as total operating expenses of N1.71 billion swallowed operating profits of N1.56 billion. Administrative expense alone grew by 150.97 billion to N1.10 billion.
The cost pressures resulted in a high cost to income ratio of 109.61 percent, though lower than the 239.37 percent recorded last year.
The surge in operating expenses combined with falling or reduced interest from mortgage loan has hampered the firm from taping into the Nigeria growing real estate and mortgage sector.
The real estate sector contributed up to 15 percent of the recently rebased GDP of N80.22 trillion driven by private residential investments and consumption spending on housing services.
Analysts say Resort Savings will revert to path of growth if it is able to take advantage of Nigeria rapid urbanisation as more people exodus from rural areas to the urban areas.
According to the United Nations, around 58 million people will move to cities in sub-Saharan Africa this decade and Nigeria is at the heart of Africa’s urbanisation. BGL Research recently revealed that Nigeria needs around 16 million housing units to accommodate its population, with over 50 percent of the Nigerian population lacking adequate housing.
The recently formed Nigerian Mortgage Refinance Company (NMRC) in collaboration with a broad coalition of stakeholders are facilitating the housing development in Nigeria. This means the future of real estate and mortgage business is unflinching and firms that operate in the sector will be repositioned for growth.
Resort Savings’ total loans and advances were reduced by 35.65 percent to N2.40 billion in 2014, as against N3.73 billion as of Q3 2013.
Total deposits increased by 55.82 percent to N3.88 billion as against N2.49 billion the preceding year. Total assets increased by 16.21 percent to N8.58 billion from N10.24 billion as of Q3 2013.
Resort Savings share price closed at N0.50 on the floor of the exchange while market capitalisation was N5.66 billion.
BALA AUGIE
