Overview
UB Finance is a licensed lender focused on secured retail and SME financing, leasing and gold-backed loans, funded by deposits under Central Bank oversight. The stand-out change is a sharp re-rating versus sector while leverage remains high and supervision tightened on gold-backed lending.
Price performance
At LKR 2.20 as of 2026-08-07, the share has surged 109.1% over 1 year versus the ASPI’s 9.5%, but fell 20.7% over 3 months against the index’s -7.1%. It sits 47.7% below its 52-week high, indicating a large pullback after the run-up.
Valuation
UB Finance screens expensive in banks_finance: P/E 55.3 (96th percentile) and P/B 2.16 (86th percentile) against a modest ROE of 3.5%. The dividend yield is 0.0%, and the company has not paid recent dividends, so there is no payout support to the multiple.
News and sentiment
Coverage is about normal, with 6 material articles in 90 days (2 positive, 3 negative, 1 neutral). Fitch highlighted higher risk weights on gold-backed loans and named UB Finance among those most affected. Parent Union Bank reported gains from selling UB Finance shares, and the company disclosed an increase in public holding.
Financials
FY2026 (year to 2026-03-31) showed a clean step-up: revenue LKR 1.53 billion, operating profit LKR 423 million and net profit LKR 112 million. Margins improved to 27.7% at operating level and 7.3% net, with revenue up 39.9% and net profit up 179.5% year-on-year.
The latest reported quarter (to 2026-06-30, company basis) delivered operating and net margins of 20.0% and 6.0%, respectively. Gross margin is not disclosed, and year-ago comparisons for this quarter were not reported. Below the line remained a drag of LKR 62.6 million, consistent with finance costs and tax taking a material share of operating profit.
Balance sheet scale increased: total assets were LKR 19.32 billion at 2026-06-30, with equity of LKR 3.25 billion at 2026-03-31. Shares outstanding rose from 2.70 billion in FY2023 to 3.18 billion in FY2026, so the earnings recovery is better judged on absolute profits than EPS alone.
Risks
Regulatory capital is the lead risk. Fitch reported that higher risk weights on gold-backed loans could trim finance companies’ Tier‑1 ratios by about 1pp->5pp and specifically cited UB Finance as among the most affected. This comes on top of high leverage: gearing was 415.3% of owners’ equity at 2026-03-31. Historically low interest cover (0.16x in FY2025) underscores sensitivity to funding costs. Price risk is non-trivial given a high beta (1.41) and a long-run volatile tape.
Outlook
As at 2026-08-07, the next figures are the quarter to 2026-09-30, expected between 2026-10-28 and 2027-01-26. Two things to watch: any update on capital and portfolio mix after the gold-loan risk-weight change, and whether the below-the-line drag eases as market rates continue to drift lower in the sector backdrop.