LOFC maintains strong credit quality with NPLs below industry averages at both gross (~7.3%) and a net level (~4.97%) in FY25, though marginally higher than its peer group. The rating recognizes LOFC’s solid capital base, with a Capital Adequacy Ratio (CAR) of ~25.9% in FY25, up from ~23.0% in FY24, well above the regulatory minimum mandated by the Central Bank of Sri Lanka (CBSL). The Company recently completed share buy back. The CAR of the Company post this transaction stands at 20.1%. LOFC has taken a cautious approach towards deposit mobilization with clear focus on deposit costs to sustain its spread. The rating upgrade reflects improvement in key performance metrics and sustained growth trajectory.
Going forward, LOFC intends to focus on sustaining its leading position while maintaining cost efficiency by leveraging technology. In this regard, the Company has undertaken several digital initiatives to expand outreach and improve customer experience.
LOFC is poised to issue a listed, rated, unsecured, senior, redeemable debenture for refinancing of existing borrowings and enhance lending portfolio.
The assigned rating is dependent on maintaining growth momentum, upholding governance standards and sustaining key operational and financial indicators. Any material slowdown in growth, an increase in Non-Performing Loans (NPLs), or pressure on capital adequacy would be viewed negatively and could adversely impact the rating.