LB Finance reaffirms top tier status; posts strong results for FY 23

• Company continues to be the highest taxpayer in the NBFI sector

LB Finance PLC said yesterday it remained steadfast in the face of extreme economic adversity to deliver strong financial results for FY 2022/23.

Despite the crisis that upended the Sri Lankan economy throughout the year 2022, LBF registered year on year growth in total operating income for the current financial year improving to Rs. 22.14 billion from Rs. 21.31 billion in the previous year.

With the incremental topline growth helping to soften the impact of inflation induced cost increases, the company recorded operating profit before tax on Financial Services of Rs. 14.41 billion for FY 2022/23, on par with the Rs. 14.04 billion tabled in the previous financial year. 

While consistently high profits over the past decade has seen LBF been recognised among the top three taxpayers in Sri Lanka’s NBFI sector, strong pre-tax profit for FY 2022/23 saw LBF surpassing peers to register Rs. 8.874 billion as cumulative direct taxes paid to the Government.

As per the new tax regime introduced by the Government with effect from 1 October 2022, LBF’s income tax liability for FY 2022/23 amounted to Rs. 3.28 billion.

The upward revision of the Value Added Tax (VAT) on Financial Services rate from 15% to 18% with effect from 1 January 2022 saw the company’s Financial Service VAT liability increasing to Rs. 2.499 billion in the current financial year.

Another notable development under the new tax structure was the 2.5% Social Security Contribution Levy (SSCL) on financial services, which saw LBF allocating an additional Rs. 171.71 million on account of SSCL in FY 2022/23. LBF also became liable for the one time surcharge tax introduced under the Surcharge Tax Act, No. 14 of 2022 which was passed in Parliament on 7 April 2022 approving a 25% tax liability imposed on companies whose taxable income exceeds Rs. 2,000 million for the 2020/21 Year of Assessment. Accordingly, surcharge tax of Rs. 2.320 billion was added to the tax liability for FY 2022/23.

LBF’s asset quality remained at healthy levels, with the NPL ratio as at 31st March 2023 standing at 4.45% well below the industry average of 10.65% (Provisional figure by CBSL) as at the same date.

Even under tough economic conditions LBF had continued in receiving funds from multiple funding sources due to the organisation’s stability and trust in managing its funds. In the financial year 2022/23 LBF remained largely funded by deposits. Deposit mobilisation activities gathered momentum on the back of rising interest rates in the current financial year. The company’s capital ratios further improved in the current financial year. The Tier I Core Capital Ratio and the Total Risk Weighted Capital Ratio standing at 30.50% and 31.13% respectively as at 31 March 2023, were also both significantly above the regulatory minimum of 10% and 14% respectively.

Acknowledging the exemplary resilience demonstrated by the company in tough operating conditions, LBF became one of the financial institutions to retain its National Long Term Rating of A- (lka) on Rating Watch Negative, assigned by Fitch Ratings Lanka Ltd., when most local NBFIs and Banks were subject to downgrade.