The first client bureau and ID Collect reported for 2023

The largest participants in the foreclosure market reported for 2023. Against the backdrop of portfolio growth, both the income of collection companies and business profitability are growing at a faster pace. However, to maintain growth rates, companies must increase the costs of doing business and complying with new regulatory requirements. This slows down the emergence of new players in the market.

Some of the largest players in the collection market – First Client Bureau (PCB) and ID Collect – reported for 2023. Thus, PCB’s revenue according to IFRS at the end of 2023 increased by 50%, to 12.6 billion rubles. Net profit increased 1.8 times, to 6.5 billion rubles. The company estimates the profitability of its own business (ROE) at 46%. The portfolio at the end of the reporting period reached 69.6 billion rubles, the company provides data. Almost 15.5 billion rubles worth of debt portfolios were purchased last year, according to PKB’s reporting.

Revenue of ID Collect according to RAS for the same period also doubled, to 7.5 billion rubles. The portfolio at the end of 2023 reached 147 billion rubles; in 2023, cession portfolios were acquired for 62 billion rubles. (68% increase). The company estimates profitability at 44%. According to Ivolga Capital Management Company, the profitability of PCB assets can be estimated at 25.9%, ID Collect – 17.8%.

At the same time, the costs of collection companies are also growing, although at a slower pace than revenue. Thus, at PKB, operating expenses increased by 36% and reached 1.7 billion rubles. The most noticeable increase was in IT and communications costs, as well as in document management and commissions, according to the company’s reporting. ID Collect almost doubled its expenses, to 2.3 billion rubles. This is mainly due to the expansion of the regional network (from 19 to 36 branches in 2023) and, as a result, a large recruitment of personnel, the company explained.

Costs will continue to grow in 2024, companies are confident. In 2024, payments on borrowed funds are expected to increase against the backdrop of plans to place a record issue of exchange-traded bonds, says PKB CFO Alexey Goethe. In addition, the company is an active participant in the debt market – according to Rusbonds, there are two bond issues worth RUB 3 billion in circulation. In 2023, the ratio of net debt to EBITDA cash was at 0.7, which indicates an extremely low debt load and financing of purchases mainly from own funds. And the company plans to return to a more classic level of debt/EBITDA below 2. “In 2024, ID Collect plans to expand the regional network, as well as increase the volume of purchased debt and increase its share in the corporate debt segment,” notes the general director of the service for the recovery of overdue debt company Alexander Vasiliev. At the same time, Mark Savichenko, chief analyst at Ivolga Capital Investment Company, is confident that cybersecurity costs will grow the fastest.

Collection organizations have a significant share of variable costs in their cost structure, experts point out. “For example, labor costs are directly proportional to the size of the portfolio under management. In addition, financial results may be pressured by one-time large purchases of new portfolios of distressed debts or a significant overall volume of such transactions for the period. The suspended animation of assignments of claims in 2022 gave way to revival in 2023: there was a surge in activity to clear balance sheets of retail creditors,” explains Ivan Uklein, senior director for banking ratings at Expert RA. For example, from PKB’s reporting it is clear that the portfolio of sold bank debts increased 1.5 times, to 15.4 billion rubles.

The professional collection market has been extremely interesting to investors of various levels in recent years, NAPCA notes. However, the barrier to entry into business is constantly growing. “Businesses must invest in technology and security to compete. Requirements at the legislative level are growing, which also require expenses,” the association lists (see “Kommersant” dated September 22, 2023).

Polina Trifonova