Finance Debt

Sept 25, 2012 (LBO) – RAM Ratings has confirmed a ‘BBB-‘ long term and ‘P3’ short term rating of Sri Lanka’s Softlogic Finance PLC, with a stable outlook.

Where SLF’s funding mix was previously dominated by borrowings, deposits now form
the bulk, following a 195.42% y-o-y surge in deposits in FY Mar 2012. Its loan-todeposit
ratio (LD) had eased as at end-June 2012, clocking in at 150.79% (end-March
2011: 238.80%), albeit remaining higher than peers’. Going forward SLF intends to
obtain from the Netherlands Development Finance Company (FMO), a loan amounting to LKR 1.3 billion, a portion of which would be convertible subordinated loans; however,
deposits are expected to remain the Company’s main funding source.

SLF’s liquidity is in line with that of peers; its statutory liquid asset ratio clocked in at
22.47% as at end-March 2012 (end-March 2011: 17.13%), upheld by deposit growth
and capital infusions during the year. Nevertheless, liquidity levels fell to 14.98% by
end-June 2012, as a portion of liquid assets were utilised to pare down borrowings.
Meanwhile, the negative gap between interest-earning assets and interest-b