LBF’s well-established market outreach is augmented by its extensive nationwide footprint (~221 branches as of Sep'25), coupled with technological advancements and robust controls in place. Over the years, the Company has diversified its portfolio with relatively lower contribution from gold loans while maintaining its superior asset quality. As of Sep'25, LBF’s lending portfolio comprised gold loans (Sep'25: ~38%; FY25: ~42%), followed by leasing and vehicle loans (~42%), with the balance comprising power drafts (~13%), term loans (~5%), and mortgage loans (~2%). While the relatively high exposure to gold loans exposes the Company to gold price volatility, the risk is partially mitigated through strong controls, including daily price monitoring, conservative margin requirements, and periodic portfolio reviews.
The Company’s earnings profile remains resilient, with its Net Interest Income (NII) increasing by ~3.2% YoY to LKR~25.1bn in FY25 and further improving to LKR~14.2bn in 6MFY26 (6MFY25: LKR~12.3bn). Backed by improved NII, lower asset impairment, and growth in the loan portfolio, LBF's posted sound profitability of LKR~10.8bn in FY25 and LKR~5.8bn in 6MFY26, a ~23.7% YoY increase for the same period. LBF's core strength of prudent credit evaluation in its primary lending areas is evident by its low NPLs. The Company's gross and net NPL ratios clocked in at ~1.55% and -1.36%, respectively, as of Sep'25, significantly below the industry averages. LBF's Capital Adequacy Ratio (CAR) stands at ~23.66%, comfortably above the CBSL regulatory minimum of ~14% for large LFCs. The Company relies on a mix of deposits and borrowings to meet its funding needs, with an inclination towards deposits (~63% deposits and ~37% borrowings as of Sep'25). LBF strategizes on increasing its reliance on deposits to fuel further expansion, supported by its diversified deposit base and a high retention rate. On the other hand, the Company envisages diversifying its loan mix, focusing on expanding in the vehicle financing segment.
Lately (Nov'25), LBF has acquired a controlling stake in Associated Motor Finance PLC (AMF), with ownership of over ~73%. The merger process is expected to be completed by March 31, 2027. The acquisition demonstrates LBF's strong foothold in the industry and aligns with its strategic focus to expand in the vehicle financing segment. The merger is expected to strengthen the Company's business scale, operational efficiency, and regulatory alignment.
The rating is dependent on LBF’s ability to sustain its market position, credit quality, and performance indicators. Continued diversification of the loan portfolio and effective management of funding avenues remain imperative. Meanwhile, the Company's ongoing acquisition of AMF will be closely monitored to assess its unfolding impact on the Company's overall risk profile, strategic direction, and financial discipline.