Fitch assigns A-(lka) rating with stable outlook for LB Finance

Fitch Ratings has assigned LB Finance PLC a National Long-Term Rating at ‘A-(lka)’ with a Stable Outlook. According to Fitch the rating reflects its established franchise among licensed finance companies, and sustained sound profitability.  

“The rating upholds significant efforts and processes put into improve the GRC-(Governance, Risk & Compliance) aspects across the organisation. Company has made significant strides in the recent past to improve its risk management capabilities and strengthen independent oversight role of risk management across credit, market, liquidity and operational risk areas says LB Finance Executive Director Niroshan Udage.

The rating reflects Fitch’s expectation that LB’s profitability remains sufficient to allow for growth, while maintaining capital ratios at the current level.  Company’s cost to income ratio remained the lowest among the peers at 36% at end 1HFY16 on the back of greater scales. The regulatory Tier 1 ratio stood at 16% at end FY15. The Rating Agency observes that the company’s business focus remains on vehicle financing (75% of the loan book at end 1HFY16) with motor cars and three wheelers accounting for 26% and 24% of the total at end 1HFY16. About 60% of its motor car and three wheeler loans comprise unregistered vehicles, which is a positive as they are newly imported and are of a better credit quality. 

An upgrade of the company’s rating, Fitch asserts, is contingent upon achieving stronger capitalisation levels along with a moderation of its risk appetite. A more comfortable liquidity position would also support the rating. 

LB Finance PLC is an undisputed leader among the licensed financial services industry in Sri Lanka. The company was established in 1971 and through the years has built a strong reputation as one of Sri Lanka’s most trusted financial organisations. With a total deposit base of over Rs. 45 billion, LB Finance is proud of the trust placed by the general public making the Company the largest non-banking deposit mobiliser in the country. 

The Company also offers a variety of other services including Leasing, Factoring, Hire Purchasing, Micro Finance, Mortgage Loans and Gold Loans. LB Finance is licensed by the Monetary Board of the Central Bank of Sri Lanka under the Finance Business Act No. 42 of 2011.