ICRA Lanka Limited has reinstated the issuer rating of [SL]B (Pronounced SL B) with a stable outlook for LCB Finance PLC (LCF or “the Company”).
The rating considers LCF’s limited track record, small scale, and modest competitive position in the non-banking finance sector.
As in March 2020, the gross portfolio of the Company stood at about Rs. 2.3 billion. LCF was formed after the acquisition of defunct CITY Finance Limited by LCB Limited (LCB) in April 2018, under the guidance of Central Bank of Sri Lanka (CBSL).
Post-acquisition, LCB transferred its assets and liabilities to LCF and became its holding company. The rating also takes into consideration LCF’s subdued asset quality indicators and moderate capital profile. LCF’s core capital as of March 2020 stood at about Rs. 1.2 billion, below the regulatory requirement of Rs 2 billion by December 2020, for Licenced Finance Companies (LFCs); however, the Company’s gearing was low at 1.0 time due to its modest asset size.
ICRA Lanka takes note of the initiatives taken by the Company to secure capital in the near-term.
The rating also factors in the sharp deterioration of asset quality indicators, where the gross NPA ratio (including legacy portfolio from City Finance Ltd.) increased to about 23.1% in March 2020, from about 23.0% in March 2019 and 20.8% in November 2018.
0 comments: