Commercial Leasing and Finance PLC (CLC) concluded FY2019/20 on an impressive note, consistently performing well year on year despite the extremely challenging events that marked the financial year. As a further testimonial to its robust financial performance, CLC was reaffirmed as SL (A) stable by ICRA Lanka Limited, which guarantees trust, security and stability for its customers. During the year, CLC also became the 1st Finance Company in Sri Lanka to be granted a licence by the Central Bank of Sri Lanka for accepting micro savings through digital platforms.
CLC recorded Profit After Tax of Rs. 1,547 Mn, reflecting an increase of 29% from Rs. 1198 Mn in the previous year even as revenue declined marginally. Cost of funds reduced by 8% and overheads by 12%. Non-Performing Loans (NPLs) for the year stood at 7.05%, whereas industry NPLs exceeded 11%. One of the key reasons for the faster recovery of CLC after the Easter Sunday attacks in April 2019 was its portfolio, which consists of over 95% asset-backed products that served to absorb any possible shocks.
Explaining further, Krishan Thilakaratne, Executive Director/CEO of CLC said, “The year 2019/20 was probably the most challenging in our lifetime, as first we were assailed by the Easter Sunday attacks in April 2019; and just as the economy was recovering by end of the year, there was an even bigger crisis in store – the COVID-19 outbreak. It was like a candle being burnt from both ends. Despite the tough operating conditions in the industry, CLC succeeded in sustaining its financial performance on par with the previous year whilst enhancing Profit after Tax figures. This was no mean feat considering the rise in NPLs across the industry.”
Adding further, Thilakaratne said, “Despite the volatility in the sector during 2018 and 2019, CLC has remained steadfastly loyal to its customer base, ensuring our financial services remained accessible at all times. Our strategy of prudent management of the credit portfolio while keeping overheads within reasonable limits helped the Company to post impressive financial results. CLC’s strong performance has instilled confidence amongst depositors, with its depositor base growing to Rs. 25 Bn and accounting for 52% of the total funding. The Company’s other funding sources include DFI borrowings, bank funding, capital market products and a full range of liability products. CLC’s equity stands at Rs. 17 Bn in Tier 1 capital which is well over the Central Bank of Sri Lanka’s capital adequacy requirements, making CLC one of the highest capitalised financial institutions in the country.”
The fastest-growing financial services Company has its ears to the ground and forecasts significant growth potential from Gold Loans, Islamic Finance and Microfinance. CLC commenced its Gold Loan operation in the previous financial year and has now expanded the service to 55 of its 65 branches.
Mr. Thilakarathe elaborates further, “If I were to sum up CLC’s performance in the most challenging year in my career – I would call it ‘exceptional’. Further endorsing CLC’s notable performance in 2019/20, the Company managed to retain its rating of ‘A’ stable with ICRA Lanka, strongly supported by the holding company, LOLC, and its sale of its Cambodian subsidiary company, Prasac Microfinance Ltd, for a sum of USD400 Mn. The sale of Prasac is one of the largest and most significant offshore transactions by a Sri Lankan Company and one of national importance, especially at a time like the present.”
Thilakaratne is equally proud about some of the news and numbers that did not reach the public domain, such as the 59,000 moratoriums granted to its customers whose livelihoods were affected due to COVID-19. In turn, the Company also experienced a rise in customer deposits which truly reflects the public perception of the company as a reliable and trustworthy financial services partner.
Looking ahead, Mr. Thilakarathne said, “It will be a survival of the fittest – how companies manage internal and external stakeholder relationships, systems and processes, and leverage communication and branding, will determine how they come through this challenging period. Companies will not only have to build strong balance sheets, but might also have to challenge and question their business models, cost and overhead structures, and conventional revenue streams and capital adequacy to face this unprecedented disruption. CLC scores high across all these parameters and I am confident it will sustain and improve its credit rating further, while upholding its pioneering status in the industry.”
Enhancing CLC’s brand equity further and adding yet another feather to its cap, the Company was rated within the Top 50 brands by LMD for 2019/20, reflecting strong acceptance amongst the public as a leading financial institution in Sri Lanka.
The Chairman of CLC, Mr. Priyantha Fernando offers his perspective on CLC’s performance: “Finance companies’ fortunes are inextricably linked with the economy and any external disturbances can prove challenging. Since 2016, many external shocks such as adverse climatic conditions, the Easter Sunday attacks in April 2019 and the global pandemic have caused unprecedented shocks to the economy. The financial services industry has most certainly felt the pain. However, what gives me pride is how CLC has sustained the previous year’s performance amidst a challenging 2019/20 by curtailing NPLs within reasonable levels and acquiring an ‘A’ Stable rating reaffirmed by ICRA Lanka. To have the credit rating reaffirmed at a time when many financial institutions and banks ratings are being downgraded is an impressive achievement by far.”
Considering the year of uncertainty that prevailed, the Board of Directors of CLC stayed closely engaged with the Company’s activities while monitoring evolving ground realities. One of the pillars of the company’s success, besides the backing of parent group LOLC, has been its eminent and highly disciplined Board of Directors, instilling further confidence in the stability of the entity. The combined experience of the Directors was evident in the triumphant manner in which CLC emerged through the year.
Mr. Fernando said, “Many sectors in which our clients are engaged were affected due to the violence that ensued after the Easter Sunday bombings in April 2019. In most cases, the disruption of supply chains made it difficult for our customers to recover their livelihoods. Nevertheless, our experience of handling tough situations came to the fore. Since the Company had the necessary digital and physical infrastructure and trained staff to handle the crisis, we continued to provide uninterrupted services to our clientele, while ensuring the safety and health of staff and customers when the lockdown was lifted and 66 CLC branches opened their doors. In the interim, we encouraged customers to transact digitally via our advanced digital platforms.”
CLC’s IT infrastructure and digital platforms were already primed and prepared for handling large volumes of digitalised transactions, which made it possible for the Company to deliver uninterrupted services free from inconvenience to its large customer base. Customer communication too was shifted more towards social media and mobile to remain connected with customers.
Mr. Fernando is optimistic that if CLC can achieve a strong balance sheet in such a difficult period, it can most certainly accelerate its performance once the hard times are over. He believes the vision to become a Rs. 100 Bn Company is what will drive CLC in the years ahead to be a Tier 1 level Company. CLC is already having a notable impact at the grassroots, touching the lives of 80,000 households, supporting them to one day uplift themselves from micro level enterprises to SME status.
Mr. Fernando believes this period has made CLC think differently and that the Company will seek new growth segments, for example, aquaculture, micro energy generation and other such project-based lending to encourage new business growth and to widen its already varied and granular customer base. The Company’s products such as term loans, flexicash, Islamic finance, leasing, factoring and gold and property loans made significant contributions to the company’s bottomline during 2019/20.
Commenting on the road ahead, Mr. Fernando said, “In the medium term, we are looking at moving one notch up in the ‘A’ grade rating as well as towards becoming a Rs. 100 Bn Company and to maintain our quality of credit at high standards with low NPLs, all the while contributing to the growth of the economy by elevating micro businesses to SME levels.” CLC is a member of the LOLC Group and is now one of the leading financial service providers in Sri Lanka, offering products ranging from leasing, fixed deposits, savings, loans, flexicash, micro-finance, Islamic finance, gold loans, to factoring. CLC has become a trusted brand synonymous with stability and dependability, playing an invaluable role as a key catalyst in financial empowerment through its network of customer touch points spread across the country.