LB Finance tops K Seeds Investments’ 1Q Finance Sector Ranking

K Seeds Investments has identified LB Finance PLC as the best performing Finance Company under the 1st category among the 29 listed finance companies in Sri Lanka through a ranking carried out based on financial performance for the first quarter of 2026/27.

The report segregates the finance companies based on the size of their asset base and ranks them in their respective categories among their peers based on ten financial metrics, which are calculated from the quarterly financial statements. LB Finance PLC topped the overall spectrum by belonging to “Category 1” (asset base > Rs. 100 billion).

The categories 2, 3 and 4 represent the companies having an asset base between 

Rs. 50 to 100 billion, 20 to 50 billion and less than 20 billion respectively.

During the first quarter of the 2026/27 financial year (1 April 2026 – 30 June 2026), the performance of finance companies in Sri Lanka was shaped by the deepening and prolongation of the external shock that had first emerged towards the close of the preceding quarter. 

GDP growth had accelerated to 5.1% in the January–March 2026 quarter, up from 4.8% previously, and the economy carried this momentum into April. However, the 2026 Iran war, which had broken out on 28 February 2026, did not de-escalate as initially hoped. 

A ceasefire proved to be, in the words of market commentary, “relief, not resolution”: shipping through the Strait of Hormuz remained a fraction of pre-conflict levels, renewed US airstrikes on Iranian targets followed in early May, and a mediated memorandum of understanding aimed at a formal resolution was only announced in mid-June, with the conflict still not formally settled by quarter-end.

The continuation of the conflict kept global oil prices elevated and pushed Sri Lanka, which imports virtually all its fuel, into its most acute energy strain since the 2022 crisis. Domestic fuel prices were revised sharply upward through the quarter – by roughly 47% cumulatively by end-June – while a Government-mandated four-day working week for State institutions, introduced in mid-March to conserve fuel, remained in force through April and May. The sole domestic refinery at Sapugaskanda faced intermittent closure risk in June as crude stocks ran low. The Sri Lankan rupee came under sustained depreciation pressure, tumbling roughly 8.7% from its pre-conflict level and trading near Rs. 334 to the US dollar by late May, compounding the cost of imported fuel.

Faced with accelerating inflation and a weakening currency, the Central Bank of Sri Lanka (CBSL) reversed its earlier accommodative stance, raising the Overnight Policy Rate by a larger-than-expected 100 basis points to 8.75% on 26 May 2026 – its first monetary tightening in three years and the sharpest single hike since the depths of the 2022/23 crisis. Colombo headline inflation (CCPI, year-on-year), which had stood at just 2.2% in March, accelerated markedly through the quarter to reach 6.8% in June – a three-year high and close to the upper bound of the Central Bank’s target band – driven by the pass-through of higher energy costs into both food and non-food prices. Economic growth momentum weakened correspondingly: industrial production activity slowed sharply in April and May, services output contracted in April before partially recovering in May and June, and private-sector forecasters revised down full-year 2026 growth expectations, with some analysts cutting projections toward 3.0% from an earlier 4.2%.

For finance companies, this combination of a sharply higher policy rate, accelerating inflation, a weaker rupee and persistently elevated fuel and living costs represented a materially more demanding operating environment than in the preceding quarter. Higher borrowing costs raised the cost of funding and tested the repayment capacity of leasing, vehicle-financing and personal-loan customers, while margins came under renewed pressure from intensifying competition in the lending market. Nonetheless, having entered the quarter on the back of a strong domestic recovery and improved asset quality built up over the prior year, finance companies as a whole continued to demonstrate resilience through the April–June 2026 period, even as the operating backdrop deteriorated markedly in the closing weeks.

It was against this considerably more challenging backdrop that LB Finance PLC once again stood out. 

Despite the prolongation of the Iran war, a 100-basis-point policy rate hike, a three-year-high inflation print and continued rupee depreciation over the quarter, the company delivered the strongest overall performance in Category 1, securing the top rank across the ten equally weighted KPIs. Its ability to outperform its peers under these intensified conditions underscores the resilience of its balance sheet and the strength of its lending franchise, and it is this result that places LB Finance PLC at the top of the latest of the series of ranking reports released by K Seeds Investments on the finance sector of Sri Lanka.

The report ranks the finance companies according to their financial results released through interim reports on the Colombo Stock Exchange across ten key performance indicators (KPIs) – cost to income ratio, net profit margin, impairment to loan book, return on equity, return on assets, net interest margin, credit to deposits, operating leverage, net profit growth and loan growth.

These ten KPIs are weighted equally and an overall ranking is arrived at, based on the aggregate score for each category.