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By Abhijith Ganapavaram
March 1 (Reuters) - Consumer credit lender International Personal Finance Plc's full-year pretax profit fell 20.2 percent, weighed down by intense competition from digital and payday lenders in some key markets such as Poland and regulatory changes that capped non-interest costs.
Shares of the company, which provides small personal loans in eastern Europe and Mexico, fell as much as 12.3 percent, making it the top percentage loser on the FTSE midcap index .
"There has been a shrinkage in some of markets in Europe in the home credit business," Chief Executive Gerard Ryan told Reuters.
Home credit business accounted for more than 90 percent of the company's total revenue in 2016.
Ryan said digital lenders were luring away IPF's higher creditworthy customers, forcing the company to spend more to retain them.
Some European countries, such as Slovakia, have imposed a cap on the fee and costs that lenders can charge from customers, hurting profitability and making it difficult for IPF to serve high-risk customers. The company shut down its operations in Slovakia in 2016.
Lenders charge more money to higher risk customers than those with better credit rating.
Poland, which together with Lithuania makes up IPF's biggest market, has also proposed to lower the limit on non-interest costs to 75 percent of the amount of the loan from 100 percent.
The company said it decided to cease lending to high risk customers in Poland in the fourth quarter.
"We expect the competitive and regulatory environment to remain challenging," Ryan said.
IPF's profit before tax dropped to 92.6 million pounds ($114.49 million) in 2016 from 116.1 million pounds a year earlier, partly hit by investments in its digital platform.
Revenue rose 1.2 percent to 755.9 million pounds, but number of customers fell 1.6 percent to 2.5 million, the first such drop in seven years.
The company's shares were trading down 11.2 percent at 160.61 pence by 1015 GMT.
$1 = 0.8088 pounds Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Amrutha Gayathri