Vallibel Finance sustains growth in March quarter, FY19/20

• Asset base crosses Rs.51bn
• Records better asset quality compared to industry 
• Higher provisions weigh on earnings 

Vallibel Finance PLC reported subdued profits for the three months ended March 31, 2020, as the company made a higher provision for possible loan defaults amid the expectations that the pandemic-driven economic shocks to have an extended bearing on its borrowers. 

The company provided Rs.216.7 million for the three months on account of possible loan defaults, compared to just Rs.9.6 million last year, as it expected sour loans and leases to increase with businesses and individuals getting impacted by the economic malaise created by the pandemic.  Vallibel Finance in May said it was offering relief measures to the affected parties, as required by the Central Bank by way of moratoria on loans and leases. 

However, the sector is facing competition from banks, which extend loans at 4 percent, under the Central Bank’s refinance scheme. 

The banks are also using their own funds to extend loans at single-digit rates to a broadening segment of borrowers, as they operate with low-cost funds and have the balance sheet strength, a comfort which most of the licensed finance companies do not enjoy.  The sector recently sought to become partners in the refinance scheme and called to relax the statutory requirements, which will enable them to offer loans at relatively low rates.  However, the sector non-performing loan ratio rose to 11.37 percent by March-end while the same for the banking sector was at 5.1 percent, both rising from 10.59 percent and 4.7 percent in December 
2019, respectively.

Vallibel had a much better asset quality, as the company said its non-performing loans were 5 percent of total loans. 

The licensed finance company with assets of Rs.51.5 billion reported earnings of Rs.22.42 a share on total profit of Rs.329.9 million for the January-March quarter, compared to Rs.26.26 a share or Rs.363.9 million in the comparable period in 2019. 

The company made a net interest income of Rs.1.1 billion for the three months, up 19 percent from a year ago. 

The fee incomes fell by 18 percent to Rs.79.6 million—a sign of slowdown in business volumes. 

Meanwhile, for the financial year ended March 31, 2020, the company reported earnings of Rs.20.52 percent a share or Rs.1.2 billion, compared to Rs.20.37 a share or Rs.1.13 billion in the previous financial year. 

The return on equity fell to 20.3 percent, from 25.7 percent last year. The net interest income rose by 22 percent to Rs.4.1 billion. 

The company said its loans grew by Rs.2.2 billion or 5.4 percent in the year to Rs.41.1 billion while the deposits increased by Rs.3.8 billion or 15 percent to Rs.29.2 billion. 

Vallibel Investments Private Limited, the investment vehicle of billionaire businessman Dhammika Perera, owns 51 percent of the issued shares of the firm, while Perera under his personal account has another 21 percent stake.