LCB Finance PLC

ICRA Lanka has put the Issuer Rating of Lanka Credit and Business Finance PLC under Watch


On 10th November 2022, Lanka Credit  and Business Finance PLC (“LCF” or the Company) announced that it had signed a Non-binding Indicative Term Sheet with Co-operative Leasing Company Limited (CLCL, not rated) on 9th November 2022 setting forth the preliminary understanding between the parties with regard to a potential amalgamation, with LCF being the amalgamated company.

However, the proposed amalgamation is contingent on the parties fulfilling certain conditions, including the completion of satisfactory due diligence and the receipt of necessary approvals.

Rating action

In view of the above development, ICRA Lanka Limited has taken the rating action indicated in the below table.

Instrument Rated Amount (LKR Mn)Rating Action
Issuer RatingN/A[SL]B+; Rating placed on watch with Developing implications; Stable outlook removed


The rating action factors in the potential improvement in LCF’s credit profile following the expected amalgamation with CLCL. ICRA Lanka will closely monitor the amalgamation process and take further rating actions, if needed. The rating continues to factor in the Company’s modest scale (gross portfolio at LKR 3.4 Bn as at Mar-22), limited track record and modest competitive position. However, the rating also takes comfort from the Central Bank of Sri Lanka’s (CBSL) recognition of LCF as a Category A NBFI[1].

The previous detailed rationale was dated June 27, 2022.

Analytical approach: For arriving at the ratings, ICRA Lanka has applied its rating methodologies as indicated below.

Links to applicable criteria: ICRA Lanka Credit Rating Methodology for Non-Banking Finance Companies

About the Company:

LCB Finance PLC (LCF) is a licensed Finance Company providing an array of products including Leasing, Hire Purchase, Business loans, Gold loans, Micro Finance, and Factoring. The Company was incorporated in 1962 as Industrial Finance Limited. In 2008, the ownership of the Company was transferred to ASPIC group and subsequently to Millennium group in 2009. The Company went through a name change in 2012 as City Finance Limited. In April 2018, under the guidance of Central Bank of Sri Lanka, LCB Limited (LCB), took over the Company and renamed it as LCB Finance Limited. LCB transferred its assets and liabilities to LCF during May 2018 and became its holding company. As of Mar-22, LCB Limited held 72.08% of LCF. For  FY2022, LCF reported a net profit of LKR 98 Mn on a total asset base of LKR 4.4 Bn, compared to a net profit of LKR 25 Mn on a total asset base of LKR 3.7 Bn in the previous fiscal year. In the 6M ended September 2022, LCF earned a net profit of LKR 85 Mn on a total asset base of LKR 5.4 Bn.

Key financial indicators
LKR MnFY2021 (Audited)FY2022 (Audited)6M FY2023 (Unaudited)
Net Interest Income 348408294
Profit after Tax 259885
Net worth 2,1072,6812,719
Loans and Advances (Net) 2,3063,0273,797
Total Assets 3,6734,3575,377
Return on Equity1.39%4.08%6.30%
Return on Assets0.74%2.43%3.49%
Gross NPA9.30%7.83%17.42%
Net NPA-1.78%1.33%7.31%
Capital Adequacy Ratio56.43%51.34%42.06%
Gearing (times) 0.640.580.97
Rating history:

[1] These entities are considered compliant in terms of capital rules of the CBSL and able to withstand losses during a crisis/macro shock.


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