LB Finance reports best year in history
LB Finance Ltd has transformed itself from an efficiently-run, profitable medium-sized finance company into a leading player in Sri Lanka's secondary-finance market during the 2006/07 financial year, says Chairman Bertram Amarasekera in the company’s 2006-07 annual report.
According to the report, the company recorded a gross income of Rs.1.3 billion and a net profit of Rs.77 million which it said is the highest ever posted in its history.
Amarasekera stated that the year ended 31st March 2007 has recorded a remarkable growth and the net profit has increased to Rs.179 million. He said the company's fortunes will largely depend on a favourable business climate and a sound macro economy and future government policies. He described the ensuing year as 'a year of cloudy prospects and shining results.'
Gross income has risen by 43%, interest income has risen by 44% and the company's other operating income has risen by 118%. Amarasekera pointed out that another positive factor is that the provision for fall in value of investments, bad and doubtful loans and write offs have dropped from Rs.50 million to Rs.28 million. He added that the monetary policy review for August 2007 has been released and despite the rising fuel and oil prices, the decline in the rupee against world currencies and the inflation rising to nearly 17% to 18%, the Central Bank authorities have reported that they are closely monitoring the macro economy to be as friendly as possible for business activities.
The report says the government has resorted to commercial borrowing which has not found favour with the opposition and such commercial borrowing is at market rates ranging from 7% and according to a formula agreed between the government and the banks. The expectations of the government's Growth Domestic Product (GDP) growth of 6% have now scaled down to 5%.
Managing Director Sumith Adhihetty said it was a year in which economic confidence was seen to decline among consumers and businesses alike. Rising inflation and interest rates backed by depreciation of the currency were among the factor contributing to this, though security issues and policy questions were also pertinent. Tourism was particularly affected by security worries, prompting companies and businesses in the industry to defer investment for better times. He added that investors and consumers displayed more caution than formerly, reducing the demand for financing from both sectors towards the last quarter of the financial year. The high interest rates the company was compelled to charge also tended to deter borrowers.
Despite the difficult conditions the company had to operate under, Adhihetty said it is doubly creditable that LB Finance was able to increase its lending portfolio by no less than 51% in the year under review, expanding its market share by a considerable percentage and driving category growth into the bargain. Their deposit portfolio also grew by 36%, attesting to the confidence their customers placed in them.