Small Finance

Nov 28, 2007 (LBO) – Fitch Ratings Lanka has assigned a ‘B+(lka)’ National Long-term rating to Sri Lanka’s Vallibel Finance Ltd. (VFL) with a stable outlook. VFL, a small registered finance company with a single office in Colombo, has managed to improve growth and shift to more profitable businesses since it was acquired by Dhammika Perera and related parties.

But its return on assets (ROA) has dipped owing to higher bad loans provisioning and higher cost of funds and operating expenses, Fitch said.

Net interest margins fell to 9.1 percent in the first half of this year from 11.1 percent last year.

“This, coupled with increased operating expenditure and greater provisioning for bad and doubtful debts resulted in a significant dip in ROA to 1.2 percent at the (first half of the year), from 3.9 percent (last year),” Fitch Ratings said in a statement.

The sector average was 3.6 percent.

“Fitch is of the view that VFL’s profitability would continue to remain below the sector, as a result of increased expenditure due to the proposed expansion, and greater provisioning as the portfolio seasons.”

Major loan growth enabled VFL to incre