Vallibel Finance Limited (VFL) has successfully increased its scale of operations while maintaining profitability although asset quality has continued to weaken between March 2007 and September 2009, according to Fitch Ratings Lanka.
According to a press release this week from the ratings agency, Fitch affirmed VFLs National Long-term rating at 'B+(lka)' but noted that as the companys non-performing loans (NPLs) rises and arrearage increases, VFLs small equity base could come under stress. Fitch also stated that the Outlook is Stable.
Fitch stated that profitability as measured by return on assets (ROA) increased to 2.7% in FY09 (financial year ended 31 March 2009) compared to 2.2% in FY08, due to rapid loan growth early in the year driving up net interest margins in H109.
However, higher provisions and lower margins resulted in a lower ROA of 2.5% in H110 (though still comparing well with the sector figure of 2.1% in H110). Provisions/pre-provision income increased to 22% in H110 (FY08:7.7%) and could increase further as NPLs increase.