Even Keel

Sri Lanka's Prime Minister Ranil Wickremesinghe arrives with flowers to receive blessings at the Gangaramaya Buddhist Temple, Colombo, Sri Lanka on Wednesday 4 April 2018. On wednesday (4), Wickremesinghe survived a no-confidence motion in the Sri Lankan parliament with a 46 vote majority after a 12-hour debate with 122 MPs voted in his support while 76 MPs voting to remove the prime minister. (Photo by Tharaka Basnayaka/NurPhoto via Getty Images)

January 27, 2010 (LBO) – Sri Lankan finance company Vallibel Finance had its long term rating of ‘B+(lka) and stable outlook confirmed by Fitch Ratings Lanka. The rating considers Vallibel’s relatively small asset base, weak asset quality and modest financial profile, Fitch said in a statement.

Although the company has successfully expanded its operations while maintaining profitability, its asset quality had weakened between March and September last year.

“Fitch notes that as non-performing loans rise and arrearage increases, VFL’s small equity base could come under stress.”

Profitability as measured by return on assets increased to 2.7 percent in the 2009 financial year, compared to 2.2 percent a year before, due to rapid loan growth.

Higher provisions and lower margins resulted in a lower return on assets of 2.5 percent in the first half of 2010.

Despite falling deposit rates from March 2009, net interest margins in the first half of 2010 improved only marginally to 9.8 percent due to falling interest rates and the effect of higher six month non-performing loans on interest yields.

“Fitch notes that interest yields could come under fu