Overview
LB Finance is a leading non-bank lender spanning deposits, leasing and SME credit, complemented by its CIM digital platform, with operations in Sri Lanka and a microfinance arm in Myanmar. The June quarter showed strong profit growth but a thinner net take‑home after finance costs and tax. Structurally, the amalgamation of Associated Motor Finance has completed, simplifying the group, and the company secured long‑term development funding to extend MSME and green lending.
Price performance
The share outperformed over the year, up 17.1% versus the ASPI’s 9.3%. Over six months it fell 5.2% against the index’s -11.3%. The latest month was softer, down 4.3% versus -3.1% for the market.
Valuation
P/E is 5.86. P/B is 1.4, around the 71st percentile for the sector. Dividend yield is 5.2% and sits near the 76th percentile. An ROE of 22.5% helps justify the above‑median P/B relative to sector peers.
News and sentiment
Recent coverage was about normal, with a balanced tone (8 positive versus 6 negative). The amalgamation of Associated Motor Finance completed at end‑July and AMF is being de‑listed. LFIN secured 35 million dollars in long‑term funding from Norfund and Swedfund. A final dividend of LKR 5.95 per share went ex on 1 July. CBSL’s FIU imposed a Rs 1 million AML penalty on LFIN in July. LB Finance was removed from the S&P SL20 in late June.
Financials
Net profit grew 40.7% year-on-year in the June quarter. Operating margin was 64.0% versus 65.7% a year ago. Net margin was 31.7% versus 32.2%. Below the line absorbed LKR 3.91 billion (finance costs, tax and other items). Gross margin is not reported for this business model. Within its own history, the latest quarter’s net margin was the worst of its last twelve quarters. For the year to March 2026, ROE was 22.5% with profit growth of 29.3% and revenue growth of 31.3%.
Risks
Regulatory and conduct risk is live after the FIU’s AML penalty, and CBSL has tightened scrutiny on vehicle valuations and LTVs in motor lending. Execution risk around the AMF amalgamation includes systems, portfolio quality and any residual pricing disputes raised by minorities. Earnings sensitivity to funding costs remains: the quarter’s below‑the‑line charge was heavy, so shifts in rates and taxes can move net profitability.
Outlook
As at 6 August 2026, the next results for the quarter to 30 September 2026 are expected between 28 October and 28 January. Two near‑term swing factors are integration progress post‑amalgamation and whether easing T‑bill/bond yields begin to reduce finance costs. A cleaner corporate structure and fresh long‑term lines should support growth; the question for the upcoming print is how much of that reaches the bottom line.