L B Finance December quarter shows growing lending book ahead of re-opening vehicle imports

Just days before the banks are set to open their books for the December 2024 quarter, L B Finance PLC reported their financials for the quarter, providing a glimpse into how the non-bank lenders fared in the final quarter of last year when the economy was projected to have shown a faster turnaround with the help from the declining interest rates and lower prices.

L B Finance, one of the largest finance companies in the country was seen setting aside only Rs. 21.2 million for possible bad loans for the quarter, just a fraction of the Rs.282.25 million set aside in the same period in 2023.    

Impairment provisions are one of the few key performance matrices the investors want to use in financial sector companies, particularly in the banks when they start reporting their December quarter results as they want to see how much of provision reversals they have brought back into profits from the recently concluded sovereign bond restructuring exercise.

The exposure of finance companies to sovereign bond investments was limited to just a couple of entities such as LOLC Finance PLC.

L B Finance meanwhile reported earnings of Rs.4.51 a share or Rs.2.49 billion for the three months through December 2024, its fiscal third quarter compared to Rs.4.45 a share or Rs 2.47 billion in the same period in 2023, which translated to only 1.0 percent growth between the two periods.

The net interest income slipped 2.0 percent in the December quarter to Rs. 6.52 billion as interest expenses declined twice the rate of the decline in the corresponding interest income in an environment of declining rates.

For the nine months ended in December 2024, the company reported earnings of Rs.13.01 a share or Rs.7.19 billion, up 5.0 percent from Rs.6.88 billion in the corresponding period a year ago.

The annualised return on equity was at 20.67 percent by the end of December quarter compared to 22.79 percent a year ago.

The company which is typically big on pawning gave total loans worth of Rs.24.42 billion, registering a 15.1 percent growth in the loan book which has a size of Rs.185.71 billion.

Deposits grew by Rs.9.48 billion or 7.7 percent to Rs.132.29 billion.

The company’s gross non-performing loans ratio fell to 2.53 percent from 4.53 percent a year ago, one of lowest in the sector.

L B Finance, along with the others in the sector is bracing for the re-opening of vehicle imports after five years of closure which should add a further tailwind for the growth in their leasing book amid lower interest rates.

Dhammika Perera owned Vallibel One PLC and Royal Ceramics Lanka PLC together held 77.83 percent stake in L B Finance as of December 31, 2024.