LankaBangla Finance profit gush amid pandemic

After IDLC Finance and IPDC Finance, another non-bank financial institution posted substantial profit in 2020: LankaBangla Finance.

The 23-year-old NBFI logged in Tk 97.9 crore as profit for its financial year that ended on December 31, 2020, up a whopping 92.5 per cent from a year earlier, in what can be viewed as an incredible feat in a year that saw the global economy, including Bangladesh’s, turned upside down by a rogue virus.

Besides, loans were turning sour at NBFIs at an alarming rate last year.

Earlier on March 24 last year, as the coronavirus was putting down its roots in Bangladesh, the central bank had asked the NBFIs to keep classification unchanged until June to help the borrowers tide over the economic shock. The loan moratorium facility was extended twice to the end of 2020.

And yet, the loans kept going bad at the 33 NBFIs.

At the end of the third quarter of 2020, the 33 NBFIs’ bad loans accounted for about 15.5 per cent of their total outstanding loans of Tk 66,215.4 crore, according to data from the central bank. Three months earlier, default loans accounted for 13.3 per cent of the outstanding loans.

To put things into perspective, default loans soared 49.8 per cent from a year earlier at the NBFIs.

So, IDLC, IPDC and now LankaBangla’ssolid showing in 2020 in such a landscape seem particularly more impressive.

LankaBangla, which provides corporate, retail and SME financial services as well as liability management, stockbroking, corporate advisory and wealth management service, credits three factors for the winning result: cost optimisation, a reversal of provision of investments in the capital market and increased investment income from the capital market.

During the course of the year, the NBFI exponentially strengthened its cash flow, which is the net amount of cash and cash-equivalents being transferred into and out of a business.

At the most fundamental level, a company’s ability to create value for shareholders is determined by its ability to generate positive cash flows.

Positive cash flows indicate that a company is adding to its cash reserves, allowing it to reinvest in the company, pay out money to shareholders or settle future debt payments.

At the end of 2020, LankaBangla’s net operating cash flow per share -- which is all cash generated by its main business activities -- stood at Tk 15.79, in contrast to Tk 2.53 in the negative a year earlier.

Subsequently, the company announced a 12 per cent cash dividend for the year, which is well within the 15 per cent cash dividend ceiling set by the Bangladesh Bank for the NBFIs for this year.

A year earlier, LankaBangla had announced a 7 per cent cash and a 5 per cent stock dividend.

Shares of LankaBangla, which were listed in 2006, gained 75.4 per cent in 2020. Yesterday, they closed at Tk 36.1, up 2.6 per cent from the previous session.