iFast aims to crack 20% ROE through digital banking in 5 years
Singapore
MAINBOARD-LISTED iFast Corporation is targeting an ambitious 20 per cent return on equity (ROE) from its digital banking outfit in the next five years, with the firm "confident" of receiving a wholesale licence come mid-2020, said its top executive.
iFast chief executive Lim Chung Chun's comments come as the fintech group posted on Thursday a 14.4 per cent rise in net profit to S$3 million for the three months ended Dec 31, 2019, on stronger sales. Earnings per share came in at 1.12 Singapore cents for the quarter, versus 0.98 Singapore cent previously.
It has also proposed a final dividend of 0.9 Singapore cent per share, to be paid out on May 19.
iFast - which operates a wealth management platform for over 400 companies across five Asian markets - is leading a consortium comprising China's Yillion Group and Hande Group for a digital wholesale bank licence in Singapore. If awarded the licence, iFast will own a 65 per cent stake in the virtual entity.
Against a competitive backdrop of fintechs and digitally-savvy incumbents, iFast's five-year target ROE of 20 per cent from its digital offering is admittedly ambitious, Mr Lim told reporters and analysts at a results briefing. Singapore banks averaged an annualised ROE of 12.4 per cent as at end-2019. DBS's latest fourth-quarter ROE, at 13.2 per cent, was a new high for Singapore's largest lender.
That said, Mr Lim is confident that the iFast-led digital bank's focus on securing deposits will give it a leg up over its peers.
iFast plans to integrate its existing wealth management platform into the digital bank and target the mass affluent market to acquire deposits.
Specifically, the digital bank will tap iFast's growing regional network to attract foreign currency deposits such as the US dollar and the Chinese yuan.
"Singapore has established itself as a wealth management hub for the region, and increasingly the world. But that segment of the business is largely in the private banking space; we think that the mass affluent are not well-served," explained Mr Lim.
He said that iFast has S$410.7 million held under trust as at end-2019, of which around S$300 million are in cash accounts.
"We are essentially handling cash the way some banks are doing and earning service fee income. Some of these concepts will be applied to the new digital bank to boost service fee income to ensure a better capital liquidity ratio, and eventually achieve a good ROE," said Mr Lim.
Over the last three years, the group's assets under administration jumped 64 per cent to S$10 billion as at end-2019.
Deposits acquired will be loaned out to small and medium-sized enterprises (SMEs) at competitive rates, Mr Lim noted. "As a wealth management platform, SME lending is certainly a segment that we've not quite developed. If we have a digital bank, we can do so much better in this area."
Revenue in Q4 was up 20.8 per cent at S$33.8 million from the year-ago period, amid higher contributions from two of the group's main business units. The business-to-customer segment saw a 21.5 per cent year-on-year hike in revenue to S$5.5 million, while the business-to-business segment grew 20.7 per cent to S$28.4 million.
For the full year, iFast's net profit slipped 12.8 per cent to S$9.5 million, from S$10.9 million in 2018.
iFast shares closed at S$1.02 on Thursday, down one cent.
Additional reporting by Rachel Mui
