LB Finance posts Rs. 360m net profit

LB Finance recently posted financial figures for 2008/09 disclosing a remarkable increase in both revenue and profits even amidst difficulties in the macroeconomic environment.

The company recorded a creditable net profit of Rs.360 million - the highest profit made during its 38 year history, a 75 percent increase from last year's Rs. 206 million and a revenue growth of 29.1 percent to Rs. 3,580 million.

Rising prices and fuel costs put pressure on collections and the collapse of unauthorised financial institutions in the recent past resulted in finance companies being shaken but LB Finance remained successful in drawing in investor deposits recording a 31 per cent deposit growth, increasing from Rs. 7,309 million to Rs.9,558 million during the financial year ended March 2009. In its annual report, Managing Director Sumith Adhihetty attributed the solid performance to the strong strategic foundation laid during the past few years, innovative approach to the business and most importantly, getting the basics right.

"We continued to strengthen our asset quality and placed great emphasis on credit and asset management given the economic conditions during the year, he said.

Asset growth

"The Company recorded an asset growth of 30 per cent. The mix of lending among our principal activities was designed to suit market conditions and we believe we have taken this step in time and as a result, delivered splendid results.

"The total lending assets as at the end of the year increased to Rs. 11,841 million from Rs. 9,062 million. Lending chiefly comprised lease and hire purchases, of which Rs.9 billion was secured through vehicle leasing. Meanwhile, the Company's gross NPL ratio further improved to 1.70 percent, well below the industry ratio.

"A significant place in lending activities of the Company was given to micro-finance, especially agro-finance during the year".

"The sector has much untapped potential," said Adhihetty, adding that having resources and skills to cater to that market, the Company intended to expand the program activities in the coming years.

A year of growth all around, the Company also expanded its branch and pawning network; new branches were opened at Kuliyapitiya, Balangoda, Kegalle, Avissawella, Polonnaruwa and Nuwara Eliya while new pawning centres were opened in Embilipitiya, Thihariya, Welimada, Wennappuwa, Kandy, Matale, Mahiyangana, Badulla, Moneragala, Grandpass and Kiribathgoda.

Issuing unsecured, subordinated, listed debentures during the year, the Company successfully raised Rs.450 million, and even during a difficult environment the issue was oversubscribed.

Shareholders' equity

The Company's shareholders equity was at Rs.1.35 billion as at end March 2009 while Risk Weighted Capital adequacy ratio was at 17.26 per cent, when the minimum requirement is at 10 percent Headed by Managing Director Sumith Adhihetty, a veteran in the industry, and backed by a dynamic team of young but experienced professionals, LB Finance has been successful in weathering every bad economic climate to hit the country.

A Company spokesperson said that it had succeeded in expanding its portfolio amidst the recent weakening economic climate by utilising high-growth areas such as its loan base, especially lease financing for 3-wheelers.

LB Finance pawning services have spread further across the island, now available through 36 pawning centres, 21 branches and the head office.

LB Finance has been in the forefront of the country's finance sphere for over 38 years, each year reestablishing its place among the top three financial entities in Sri Lanka and enticing more and more astute investors to share in its success.

Veteran businessman Dhammika Perera remains its largest shareholder, owning a 71.33 percent stake as at end March 2009. The Board, comprising connoisseurs in finance, marketing and banking is chaired by B.M. Amarasekara.

The 38-year old LB Finance continues to consolidate and expand its operations. Leasing, hire purchase and pawning have remained the Company's key revenue drivers and the management has leveraged on its expertise in the automotive business by the trading of vehicles.

RAM Ratings has reaffirmed LB Finance PLC's long and short-term financial institution ratings at BBB- and P3, respectively with a stable outlook for the long-term rating.

L B Finance PLC is engaged in the acceptance of deposits, mortgage loans and other credit facilities, real estate development and related services.

The Company offers leasing solutions for a range of vehicles/equipment, including, private vehicles, commercial vehicles, machinery, three wheelers and motor bikes, agricultural equipment, trucks and trailers and construction.