LB Finance secures first place in K Seeds Investments ranking report

K Seeds Investments has identified LB Finance PLC as the best performing finance company under the 1st category among the 27 listed finance companies in Sri Lanka through a ranking carried out based on their financial performance for the second quarter of 2023/24.

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 10 financial metrics, which are calculated from the quarterly financial statements. LB Finance 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 to50 billion and less than 20 billion respectively.

During the quarter under review, from 1 July to 30 September 2023, Sri Lanka’s financial sector faced a multifaceted set of challenges, deeply influenced by the country’s broader economic difficulties. The sector was navigating through an ongoing economic crisis, marked by uncertainties and a slowdown in economic growth. In this challenging macroeconomic landscape, some financial institutions managed to demonstrate resilience.

The economic crisis led to a significant contraction in the economy, resulting in reduced activity in financial intermediation. This reflected a marked decrease in both the demand and supply of credit. A further complication was the deterioration in credit quality, which was a direct consequence of these tough economic conditions.

The Central Bank of Sri Lanka played a pivotal role in mitigating these challenges. Its policies, including the adjustment of interest rates, were instrumental in moderating the previously high rates. This regulatory intervention, coupled with the International Monetary Fund’s Extended Fund Facility, which was approved in March 2023, provided a much-needed boost of confidence to the financial sector.

In response to the downturn in their main business areas such as vehicle leasing and hire purchase, Licensed Finance Companies (LFCs) in Sri Lanka adapted by diversifying their services. They increasingly focused on areas like pawning and gold loan facilities, which offered more stable revenue streams under the prevailing economic circumstances.

Overall, during this period, Sri Lanka’s financial sector displayed a commendable level of adaptability and resilience, despite the various hurdles posed by the economic crisis and its cascading effects.

However, despite all these factors, LB Finance managed to maintain their top rank in 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 Colombo Stock Exchange across 10 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, loan growth. These 10 KPIs are weighted equally and an overall ranking is arrived at based on the aggregate score for each category.

K Seeds Investments is a boutique investment banking firm, specialising in mergers and acquisitions, balance sheet restructuring, equity/debt placements, treasury management, corporate restructuring and talent management.