Nov 14, 2012 (LBO) – Sri Lanka’s Fitch Ratings has confirmed an ‘A+(lka)’ rating of Central Finance Company Plc, the country’s largest finance company at the end of 2011, with a stable outlook. At end-2011, CF was the largest licensed finance company (LFC) holding 13% of LFC assets in Sri Lanka.
An upgrade of CF’s rating is contingent upon greater product and funding diversity together with better funding flexibility commensurate with higher category peers. Conversely, a sustained weakening in capitalization due to a deterioration in asset quality or profitability could result in a downgrade.
CF has been successful in sustaining its strong capitalization ratios in the face of high growth. Its equity/asset ratio of 23.0% at end-September 2012 was higher than that of peers and was supported by robust profitability and high capital retention. Its statutory Tier 1 capital adequacy ratio of 22.4% also compared well with local peers.
Profitability remained strong with ROA increasing to 5.2% in FY12 (FY11: 4.4%) despite a narrowing of net interest margins (NIMs) during the year. This was mainly due to lower taxes (because of a reduction in the corporate and financial value added tax rates