Lower interest rates help LOLC to stronger growth, profits
View(s):LOLC Group’s 2014 first quarter results saw its pre-tax profit (PBT) for the three month period reach Rs. 1.35 billion, up 45 per cent over the last year’s Rs. 934 million.
“This is a reflection of the strong profitability recorded from its operating activities which grew by 23 per cent compared with end June 2013,” the company said in a media announcement.
It said external effects on the company, mainly a significant reduction in interest rates contributed positively to the reduction in borrowing costs which saw an overall drop of 20 per cent compared with last year and this was despite the growth in savings and deposits increasing the overall borrowings of the group. “The increase in the borrowings base reflects the growth strategy fuelling higher executions strengthening the financial sector lending portfolio. A reduction in lending interest rates were also seen during the current period however, the higher quantum of lending resulted in the interest income from the group’s lending business moving up 7 per cent compared with last year June quarter end,” the statement said.
LOLC’s flagship finance company, Lanka ORIX Finance PLC (LOFC) posted strong profits for the quarter, with Rs. 325 million PBT. The company reduced its borrowing costs as a result of the reduction in interest rates on its deposits base which grew by Rs. 2 billion to Rs.45 billion over the last year.
Commercial Leasing and Finance PLC (CLC) too showed strong performance and maintained profits at the same level as in the last year, despite pressures on collections. The PBT for the June quarter was Rs. 381 million.
LOLC Micro Credit Ltd profit was reported at Rs.407 million PBT against Rs.268 million in the last year. “The company shows strong profits as a result of the reduced interest rates coupled with superior collections, which was a challenge throughout the year of 2013/14 due to poor weather affecting its agriculture centric customer base. However, strong recovery is seen in the current year, resulting in higher collections,” the statement said.
The two associate companies of LOLC operating in the financial services sector, Seylan Bank and PRASAC Micro Finance Company in Cambodia continues to give strong positive growth in profits, an impressive increase of 74 per cent over last year.
“In the coming months, LOLC will align group strategies towards strengthening its financial position further with increasing interest income with higher executions coupled with stronger collections in the financial services sector. The other sectors too will further strengthen its business operations, to derive medium to long term profitability. The group is well positioned and all sectors are being developed with strong investment backing to strengthen its business proposition for long term profitability growth,” the statement said.