LB Finance tops K Seeds Investments’ finance sector ranking for Q4 FY25/26

From left: LB Finance Head of Channel Development Dinesh Pillai, Senior Deputy General Manager – Credit and Branch Operations Ainsley Motha, Executive Director Ravindra Tissera, K Seeds Investments Senior Financial Analyst Pavithra Herath, Financial Analyst Kasun Sajitha, and Trainee Financial Analyst Kalana Palihakkara

K Seeds Investments 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 their financial performance for the fourth quarter of 2025/26.

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 fourth quarter of the 2025/26 financial year (1 January 2026 – 31 March 2026), the performance of finance companies in Sri Lanka was shaped by a combination of a continued domestic recovery in the early part of the quarter and a sharp external shock that emerged towards its close. The recovery of the Sri Lankan economy carried into the new year, with GOP growth accelerating to 5.1% from 4.7% in the preceding quarter, led by a strong industrial sector and resilient services. For much of the quarter, an accommodative monetary policy stance and prevailing low interest rates supported credit demand across sectors, encouraging individuals and small and medium-sized enterprises to seek leasing,

vehicle financing, and personal loans, which contributed to an expansion of loan portfolios for finance companies. Reconstruction and recovery activity following Cyclone Ditwah, which had struck in late November 2025, added further to credit demand in the early part of the year, while the ongoing IMF supported reform program continued to underpin investor confidence. From a micro perspective, finance companies benefited from increased lending activity, a gradual improvement in loan repayment capacity, and a reduction in non-performing loans compared to previous crisis years.

The external environment shifted materially towards the end of the quarter. On 28 February 2026, the outbreak of the 2026 Iran war and the subsequent disruption to shipping through the Strait of Hormuz a conduit for roughly a fifth of global oil flows, drove global crude oil prices sharply higher. As an economy that imports virtually all of its fuel, Sri Lanka felt the pass-through quickly, domestic fuel prices rose steeply. These pressures fed into consumer prices late in the quarter, with Colombo headline inflation (CCPI, year-on-year) accelerating to 2.2% in March 2026 from 1.6% in February, having stood at 2.3% in January, and the March increase was driven primarily by the transport and broader non-food categories.

While inflation remained low by historical standards, the renewed energy-cost pressure marked a clear reversal of the disinflationary trend seen earlier in the quarter.

For finance companies, this late-quarter energy and price shock introduced a fresh set of risks. Higher fuel and living costs weigh on the repayment capacity of leasing and personal-loan borrowers and add to operating costs, while heightened global uncertainty clouds the near-term outlook. Layered on top of intense competition in the lending market and declining interest margins, these factors made for a more demanding operating environment than in recent quarters. Despite these mounting pressures, finance companies as a whole demonstrated strong resilience and continued to perform during the January-March

2026 period, with the early-quarter domestic recovery and a supportive low-rate environment helping to cushion the impact of the closing-weeks shock.

It was against this more challenging backdrop that LB Finance PLC stood out. Despite the external shock from the outbreak of the Iran war, the sharp rise in fuel costs and the acceleration in inflation during the closing weeks of the quarter, the company delivered the strongest overall performance in Category 1, securing the top rank across the ten equally weighted KPls. Its ability to outperform its peers under these 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 (KPls) – 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 KPls are weighted equally and an overall ranking is arrived at, based on the aggregate score for each category.