Fitch affirms Vallibel Finance at ‘B+(lka)’

Fitch Ratings Lanka has affirmed Vallibel Finance Ltd’s (VFL) National Long-term rating at ‘B+(lka)’. The outlook remains stable.

VFL’s rating factors in its small asset base, relatively weak asset quality and modest financial profile. VFL has rapidly grown its loan book over the last 18 months, branching into lease and loan products from a portfolio previously dominated by hire purchase facilities (HP) for three-wheelers.

Total advances increased to LKR1,054.8m at H109 ending September 08 (FYE07: LKR34m) comprising HP (74%), leases (22%) and fixed deposit loans (4%).

The company has also shifted its focus away from three-wheelers and, as at H109, 52.2% of vehicles financed comprised of cars and dual purpose vehicles, with the remainder mainly vehicles used for commercial passenger and goods transport.

However, the seasoning of its portfolio has also resulted in an increase in the company’s NPLs - the three-month gross NPL ratio increased to 19.7% at FYE08.

Although this reduced to 17.4% at H109, NPLs at the regulatory six-month level increased to 2.4% of gross loans (FYE08: 0.6%), indicating a worsening in arrearage of existing NPLs.

These figures are nevertheless inline with the registered finance company (RFC) sector figures of 13.7% (three-month) and 4.8% (six-month) at H109.