COL Financial [COL 3.00 3.2%; 27% avgVol] [link] reported a Q1 net income of P158 million, up 75% y/y from Q1/22’s P90 million, and up 353% q/q from Q4/22’s P35 million.
COL makes money in basically two ways: the first is through commission income that it earns on each trade placed by one of its users, and the second is by earning interest income on its users' deposits.
COL’s commission revenue was down 23% y/y to P128 million (down from P167 million), which COL blamed on a “challenging market environment”, but its interest income was up 237% y/y to P172 million (up from P50 million).
COL thanked its own “effective cash management” (and rising interest rates)for its ability to earn a significantly higher amount of interest income in the quarter. COL said that both customer growth and trading were weak for the quarter.
MB BOTTOM-LINE
Not even banks can get away with monetizing customer deposits and giving nothing in return, but that’s exactly what COL is doing here.
It’s entirely possible for COL to provide interest payments in return for deposits, but so far, they haven’t really had to as the long-term growth of the PSE in terms of users and deployed capital kept pushing more and more users and money into COL’s system despite the old tech, questionable performance during critical moments, and lack of interest on deposits.
But COL’s not the only retail-facing discount broker in town anymore, and the competition from DragonFi and GCash is going to (probably?) squeeze at COL from all sides.
If I were a COL shareholder (disclosure: I’m not), I’d be furious with the complacency with which the COL management team and ownership group has dealt with any of these challenges.
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