The growth in profits was a direct result of the increase in interest income which grew by 51% to reach Rs. 4.4 billion from previous year’s income of Rs. 2.9 billion. The Company was able to achieve this level of performance through its strategy of steady portfolio growth backed by effective collections leading to lower non-performing loans ratio, the company said in a statement.
"The portfolio recorded steady growth over the year increasing the book from Rs. 15 billion to Rs. 21 billion. This was a growth of 38%. The Company’s collection efficiency provided a strong backing to achieve this growth with the non-performing loans being contained at a ratio of 1.1%, which is one of the best NPL ratios in the industry. The provisions made on account of bad and doubtful debts were strengthened with additional provisions of Rs. 96 million over and above the Central Bank of Sri Lanka (CBSL) requirements. The factoring business of CLC, Commercial Factors too, contributed to the increase in interest income with 73% growth over the last year to end at Rs. 795 million.
"Company’s profit after tax of Rs. 2.9 billion was after providing for Rs. 263 million as taxes, of which Rs. 205 million was for income taxes and the balance being deferred taxation. These profits were achieved by strategic expansion of its core business of lending and effective management of the borrowing costs and operating expenses. The operating expenses of the Company increased fuelling the growth in the business and expansion of the footprint throughout the island. However, these increases in expenses did not negatively affect the performance of the Company, clearly demonstrating the low cost model of CLC with a superior cost to income ratio of 20%.
"CLC was able to record this level of growth through its carefully planned growth strategy which was fuelled by the expansion in the distribution network of branches and service centers. The Company added its 50th branch during the year and 8 of these branches are located in the North and East where CLC has had a strong presence and acceptance among the public for several years. CLC now has a strong presence in the regions where access to funding is offered to the Company’s target market of the lower SME and the Micro sectors.
"LOLC, CLC’s parent company has a unique ability of attracting long term foreign funding from a wide range of multilateral and bilateral funding agencies as a result of its long standing relationship with these institutions. During the year, the Company secured US$ 17Mn foreign borrowing from foreign funding partners. These funding comes at attractive long term rates which helps the Company to maintain a healthy level of cost of borrowings.
"LOLC Group policy is to have zero foreign exchange risk with 100% hedging on all foreign borrowings. CLC too therefore follow this policy which safeguarded the Company against the foreign exchange fluctuations prevailed during the year. This policy is aligned to the mandate given by the CBSL of zero exposure to exchange risks on foreign borrowings," the statement said.