LB Finance ends FY20 with exceptional Rs. 5.2 b PAT amidst challenging environment

Proving its resilience as a prudent and stable financial institution, LB Finance has recorded a strong performance for the financial year ended 31 March with an exceptional Rs. 5.2 billion profit after tax.

The company maintained the operating cost within stable margins to post an operating profit before tax on financial services of Rs. 9.9 billion for the year.

Income for the year increased by 7% year-on-year (Y-O-Y) to Rs. 31.2 billion at the end of the financial year under review of which interest income to the company was Rs. 29.2 billion, illustrating a 7% Y-O-Y improvement. Net interest income for the year was Rs. 15.5 billion, indicating an 8% increase in comparison to the previous year. The company’s total operating income reflected a growth of 8% at Rs. 17.6 billion.

As a prudent measure, the company considered the Portfolio Delinquency State, Probability of Default (PD) and Loss Given Default (LGD) as at 31 March which partially includes the impact of COVID-19 for the impairment calculations. 

The company’s cost to income ratio stood at 33%, denoting its efficient cost management. Meanwhile, the company’s total assets as at 31 March stood at Rs. 144 billion in comparison to Rs. 136 billion as at 31 March 2019, with more than 90% of them being income generating assets which are backed by solid securities.

Despite the hardships that were faced by the sector, LB Finance managed to have a portfolio with 5% growth which was commendable given that it was achieved at a time when overall private credit expansion was highly subdued. 

“Our profitability has been increasing every year surpassing all our peer groups. This year too, in spite of challenging unexpected external shocks, LBF showed our resilience, prudent management skills and sustainable pursuit of growth. Changes in the economy and disruptions such as the Easter Sunday attack and COVID-19 pandemic are beyond our control. 

“Nevertheless, we consistently remain a step ahead of such external challenges by adopting prudent practices, anticipating customer needs and seeking opportunities to maintain sustainable competitive advantage. Looking ahead, we have already laid a strong foundation by executing robust business plan and well thought-out business strategies for future path,” commented LB Finance Managing Director Sumith Adhihetty.

LB Finance’s total capital adequacy ratio as at the end of the financial year stood at 20.75% as compared with a minimum regulatory requirement of 11%. LB Finance consistently maintains the industry’s lowest Non-Performing Loan (NPL) ratio which shows the superiority of its asset quality. This year too the company succeeded in maintaining an NPL ratio of 3.93% and a net NPL of -0.12% through prudent lending and efficient recovery methods. 

As it has now become habitual, LB Finance won the Gold Award for best annual report in its sector at the CA Sri Lanka Annual Report Awards conducted by the Institute of Chartered Accountants of Sri Lanka, showcasing its expertise in financial disclosure. Furthermore, affirming the strength and popularity of its brand, LB Finance was awarded the ‘Peoples Award for Financial Service Provider of the Year’ at the SLIM-Nielsen Peoples Awards 2020 once again. 

The company’s first overseas venture, LB Micro Finance Myanmar Ltd., is now making profits, less than three years since its inception. In addition to this, LB Finance further enhanced its technology offering, which has gained a reputation as the best among all finance companies, to enhance customer convenience.

LB Finance’s consistently excellent financial performances reflected in higher Return on Equity, an above industry average asset quality and sound capitalisation have been recognised by Fitch Ratings in assigning an A- credit rating with a Stable outlook. 

The company has been able to maintain an A- rating since 2015, demonstrating stability and excellence across all key metrics. The Stable outlook signifies expectations of low default risk and strong capacity for payment of financial commitments.