SET-listed Group Lease Plc (GL), a digital finance company, expects to see a turnaround in business operations from improved loan quality following a considerable second-quarter net loss.

GL reported a net loss of 3.85 million baht in the second quarter, mainly from an accounting principle adjustment for calculation of bad debt allowance, said the company in a statement. The net loss would be 1.8 million baht if the bad debt allowance is excluded.

“This is quite a difficult time, but we are confident we have bottomed out and our business will grow through higher loan quality,” said chief executive Tatsuya Konoshita.

Mr Konoshita said the company had been intentionally reducing its loan portfolio during the past two years to tighten new loan approvals and improve loan quality.

Its total outstanding loan portfolio declined by around 4 billion baht over the past two years to 6.8 billion at the end of June.

At the end of June, the company reported non-performing loans (NPLs) at 7% for GL’s domestic business.

NPLs are expected to drop by more than one percentage point as special mention loans, defined as loans overdue from 1-3 months, have declined because of tighter loan approvals, said Mr Konoshita.

A reduction in the loan portfolio caused total revenue to fall by 12.2% year-on-year for the second quarter, from 729 million baht to 640 million.

Lower hire-loan purchases of business operations in Thailand and Vietnam and a decline in the asset-backed loan business also contributed to ebbing revenue.

Considerable legal fees have also put a crimp on earnings.

The Central Bankruptcy Court yesterday dismissed a rehabilitation petition filed by J Trust Asia Pte Ltd (JTA) as there was no clear amount of liabilities as claimed by JTA, and GL is currently not insolvent because the company’s assets exceed its liabilities.

GL still has debt obligations with two customers in Cyprus and Singapore. The Cyprus debt is worth US$16 million, which is covered by $25 million worth of collateral assets, while the Singapore debt is valued at $39 million, covered by $42 million of collateral.

The company was embroiled in a regulatory scandal last year, with the Securities and Exchange Commission uncovering evidence of alleged fraud, misappropriation of company assets and falsification of accounting records by executing concealed transactions through several associated companies abroad to exaggerate the company’s operating results.

GL shares closed yesterday on the SET at 5.40 baht, down 15 satang, in trade worth 49.7 million baht.

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