January 19, 2025 – Colombo: Vallibel Finance PLC has reported a robust surge in net profitability despite challenges in revenue generation during the quarter ended December 31, 2024. The company’s net profit climbed 51.1% year-on-year to LKR 718.6 million, underpinned by reduced impairment charges and cost discipline. However, gross income fell by 2.6% to LKR 4.82 billion, reflecting the impact of weaker interest income amidst tightening economic conditions.
Key Financial Highlights
- Net Interest Income: Rose 13.0% to LKR 2.13 billion, driven by a significant 20.8% reduction in interest expenses, offsetting lower lending rates and subdued demand for credit.
- Other Operating Income: More than doubled to LKR 389.2 million, buoyed by gains from non-core financial activities.
- Operating Expenses: Increased 19.0% to LKR 643.3 million, as higher personnel costs and inflationary pressures weighed on margins.
- Customer Deposits and Lending: Deposits grew by 9.8% to LKR 64.4 billion, enabling a 20.9% expansion in loans and receivables to LKR 70 billion.
Despite declining interest income by 6.8% year-on-year to LKR 4.24 billion, Vallibel Finance maintained profitability through effective cost management and improved net interest margins, which rose to 8.45% from 7.91% in the prior year.
Challenges and Strategic Moves
While operational profit margins improved to 29.9%, Vallibel Finance faces liquidity concerns. Cash and cash equivalents dropped sharply to LKR -215.5 million, reflecting increased lending activity and regulatory deposit requirements. The company’s capital adequacy remained strong, with a Tier 1 capital ratio of 14.67% and total capital adequacy at 20.47%, both exceeding regulatory thresholds.
The gross non-performing loan (NPL) ratio improved to 5.6%, down from 6.5% a year ago, signaling improved asset quality amidst macroeconomic pressures. However, a dependency on non-interest income and rising operational costs pose risks to sustained growth.
Outlook
The company’s forward strategy emphasizes expanding its lending portfolio and leveraging its robust capital structure. Vallibel Finance’s return on equity reached 17.6%, while earnings per share surged by 51.1% to LKR 3.05 for the quarter.
As the company positions itself for long-term growth, addressing liquidity constraints and operational costs will remain pivotal. Vallibel Finance’s share price of LKR 51.60 as of January 5, 2025, reflects investor confidence, with a year-on-year increase from LKR 32.00.
For stakeholders and investors, Vallibel Finance’s performance underscores resilience amidst economic uncertainty while highlighting areas requiring strategic focus for sustained success.
Read Full Report
