The assigned rating reflects AFCPLC's improved financial performance during FY26, supported by a gradual recovery in credit demand and continued focus on sustainable financing. Net Interest Income (‘NII’) of the Company increased by ~16.3% year-on-year (YoY) to around LKR~9.0bn (FY25: LKR~7.8bn), primarily driven by higher interest income from loans and advances as lending activity and portfolio grew, albeit below industry average. Profit After Tax (PAT) rose to LKR~2.0bn (FY25: LKR~1.7bn) in FY26 due to trickledown effect of higher Net Interest Income (NII) and an increase in non-markup income. Going forward, the Company intends to consolidate its position by focusing on sustainability initiatives and selective portfolio growth. This is expected to result in an elevated cost structure, impacting margins, initially but would translate into better profitability in the longer run.
In FY26, asset quality indicates a gross non-performing loan (NPL) ratio of ~5.9% (FY25: ~4.7%), higher than the industry average of ~4.4%. The Company’s capital position remained adequate, with a total capital adequacy ratio (CAR) of ~17.4% as of March 2026, above the regulatory minimum of 12.5% prescribed by the Central Bank of Sri Lanka (CBSL). The Company is projected to achieve LKR 100bln asset base in 1HFY27, resulting in higher total regulatory CAR requirement of 14%. Sustained internal capital generation is important in this regard to meet regulatory requirements.
The assigned rating to social bonds reflect their unsecured but senior nature where the bondholders will rank pari passu with other senior unsecured creditors of the Company, ahead of subordinated debt and equity holders in the event of liquidation.
The rating remains sensitive to changes in the entity rating of the Company coupled with the Company's financial profile, particularly its profitability, capitalization, and asset quality. Deterioration in these metrics may exert downward pressure on the rating, while sustained improvement, if accompanied by a stronger financial profile, could support positive rating momentum. Improving capitalization and CAR, in line with higher regulatory requirements for LKR~100bln LFCs is critical for maintaining the rating.