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 shareholders of the Company recently completed its share buyback transaction worth of LKR~21.1bn, and ~3.5bn shares. The CAR of the Company post this transaction stands at ~20.1% as of 1HCY25. LOFC has taken a cautious approach towards deposit mobilization with a clear focus on managing deposit costs to sustain its spread. The rating upgrade reflects a notable improvement in the key performance metrics alongside a sustained growth trajectory. Going forward, LOFC intends to focus on sustaining its leading position and improve efficiency through key digital initiatives to expand outreach and enhance 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 the envisaged growth, or an instability in the performance indicators, such as an increase in Non-Performing Loans (NPLs), or pressure on the capital adequacy, would be viewed negatively and could adversely impact the rating.