LRA Assigns Initial Entity Rating of A- with a Stable Outlook to WealthTrust Securities Limited

The Lanka Rating Agency has assigned WealthTrust Securities Limited with an Initial Entity Rating of (A-) with a stable outlook. WealthTrust Securities Limited (WTSL) commenced operation in the year 2011 as an authorized standalone Primary Dealer (PD) appointed by the Central Bank of Sri Lanka and has demonstrated remarkable financial resilience and growth over the years. As a PD, WTSL deals in Government securities, including treasury bills and bonds, in both primary and secondary markets, and adeptly navigates market risks associated with interest rate fluctuations.

With a proven track record in the PD sector, the company's recent rating underscores its robust capitalization, significant increase in profitability and profit retention along with a prudent risk management framework.  Additionally, WTSL operates as a licensed stock dealer (debt) and stockbroker (debt) under the Securities and Exchange Commission of Sri Lanka.

The company recorded an impressive Capital Adequacy Ratio (CAR) of 43.01% for FY24, significantly exceeding the statutory requirement of 10%. By investing 90% of its assets in Government securities, WTSL minimizes credit risk, though it remains exposed to interest rate fluctuations. The company's strategy includes rebalancing its portfolio between short-term and long-term Government securities to mitigate these risks effectively. In FY24, WTSL appointed Ernst & Young (E&Y) as its external auditors.

WTSL's management team boasts of extensive experience and strong qualifications, ensuring sound governance and strategic direction. The board is adequately sized, with a non-independent director serving as Chairman. Recent financial performance has been exceptional, driven by substantial gains from high yielding bonds following a sharp reduction in interest rates.

Looking ahead, WTSL is poised to sustain its performance, albeit with potentially lower profitability due to expected stable interest rates. The company's future success hinges on its active trading strategies on its portfolio by capitalizing on interest rate movements, maintaining and strengthening its market position as a non-bank PD, while preserving its capital cushion and implementing effective portfolio rebalancing and governance practices.