They had a 10.9Bn pawning portfolio last year end and apparently they have done a provision for fall in value of this about 10% which in my opinion is fairly ok. Fortunately they have corrected a fundamental error in accounting which work for their good.
As we see the balance sheet they have reduce drastically the cash component so that those will be utilized for making interest. Also they have reduce the bank borrowings which is fairly high in terms of cost. in the interest rate falling scenario this will work handy.
their NIM has reduced to 7.22 from 9 last year
Cost to income worse from 44% to 56% but if you remove the impact of gold auction loss it will be again 44% so they have maintained consistency in the cost structure against income. The NPL has increase from 3.5 to 4.5 which is a common feature in the industry for 2013/14 financial year as the economy it self had lot of problems so time to come it may recover.
provision for impairment by now has surpass the last year figure of 400Mn redoubtably as the NPL also have gone up. all income/return related ratios will be worse due to 1Bn loss from gold.
So the point to note is the exposure of 10Bn for gold is bit of risky as we never know where the gold price is heading. but end of the day even though the gold price in the world market (paper gold) drops it will not have a impact in same gravity to the local gold prices as they is a high demand for gold in mainly Asian countries like india/SL. All i see is that LB has been perfoming the usual way but an external factor (which we have never thought of) impacted the bottom line.
This is only a limited analysis i have done witin a short period of time we will if time permits for a better one.
[i]These are my personal opinion and i must say i do not hold a single share ion this company at present[/i]