Lanka Rating Agency upgrades Vallibel Finance to A- on strong growth and asset quality

• Upgrade reflects its superior asset quality, improved profitability and ambitious expansion plans across Sri Lanka’s finance sector

Vallibel Finance PLC (VFIN), a licensed finance company in Sri Lanka, has been upgraded by Lanka Rating Agency from BBB- to A-, underscoring its robust market outreach, superior asset quality and improved profitability.

Mid-sized player with national footprint

Vallibel Finance has crossed a historic milestone of Rs.100 billion in assets in FY24/25, underscoring its position as one of Sri Lanka’s most trusted and high-performing financial services brands. This milestone reflects the strength of a brand built on integrity, innovation and impact. 

Vallibel Finance’s brand promise is to be a financial partner that understands the aspirations of Sri Lankans: from small businesses looking to expand, to families seeking financial stability, to young entrepreneurs chasing their dreams.

Accounting for about 5.3 percent of total licensed finance company sector assets, VFIN is primarily engaged in vehicle loans, auto drafts, gold loans and leases. Together these segments make up more than 94 percent of its lending portfolio. The rating upgrade recognises the company’s ability to maintain its non-performing (NPL) loan ratio at industry benchmarks despite rapid portfolio growth, while sustaining strong coverage for impaired loans.

Stronger financial performance

Net interest income rose by 15.9 percent to Rs.8,118 million in FY25 (3MFY26: Rs.2,308 million), while net income grew by 22.8 percent to Rs.2,629 million (3MFY26: Rs.785 million), fuelled by higher lease income. Core spreads improved to 7.8 percent, from 6.0 percent in FY24, thanks to lower interest rates and liability repricing.

Revenue is predominantly core at 78 percent, with the remaining 22 percent derived from fair value gains, provision write-backs and early-termination income. The loan and lease portfolio expanded from Rs.92,147 million in FY25 to Rs.104,280 million in 3MFY26.

Capital strength and risk management

VFIN’s gearing stood at 6.0x in FY25 (6.9x in 3MFY26). Its Tier I capital adequacy ratio (CAR) was 16.54 percent and total CAR 21.51 percent in FY25, comfortably above the regulatory thresholds but slightly below industry averages. Short-term asset-liability gaps have narrowed, although a wider gap remains in the one to three-year tenure due to debenture maturities.

Aggressive expansion strategy

VFIN plans to open 13 new branches in underserved markets to widen access and gain market share. The growth strategy also includes diversifying into margin trading, digital and online services, Islamic banking and scaling its property loan franchise. Management expects gold loans to comprise one-third of the loan book by FY26/27.

Governance and board strength

The company’s board comprises seven members — four Independent Non-Executive Directors, one Non-Executive Director (Chairman) and two Executive Directors. K.D.A. Perera was appointed Chairman in 2023, while J. Kumarasinghe serves as Senior Independent Director.

Future ratings hinged on sustained performance

Lanka Rating Agency emphasises that the company’s future ratings will depend on continued growth, robust governance and steady financial and operational metrics. Any significant increase in NPLs or a decline in capital adequacy ratios could exert downward pressure on the rating.