Asset Mix

June 12, 2013 (LBO) – Sri Lanka’s licensed finance companies (LFC), which play in the sub-prime market has cut exposure to property and stocks, though they are facing an uptick in non-performing loans amidst a downturn, a rating report said. Investments in land and property had fallen to 1.86 percent of assets in the 9 months to December 2012, after peaking at 8.6 percent in 2009, RAM Rating Lanka said in a report on Sri Lanka licensed financed companies.

In 2010 investments in land and property was 8.4 percent, but in 2011 it had fallen to 6.11 percent and by 2012 March investments in land had fallen to 2.8 percent.

“We also note that many LFCs reduced their stakes in equity investments in favour of interest-yielding assets, given the downturn in the equity market,” RAM Ratings said.

RAM said the fall was a combination of selling down land and property and channeling cash mostly into interest bearing credit.

There was also an increase in total assets in 2013 in the sector with several licensed finance companies, including People’s Leasing, Sri Lanka’s largest non-bank lender migrating into in to a finance company.

In the year to March 2013 credit growth had slowed as interest rates rose and the state jacked up tax