The affirmation by Fitch Ratings Lanka of the Central Finance Company’s A+(lka) rating on the eve of its 51st anniversary has made Central Finance (CF) the best rated among the country’s registered finance companies, a CF news release said last week.

A company spokesman noted that CF had continued to enjoy A+(lka) rating from Fitch for the past three years establishing its strong financial position, good asset quality, solvency and strong capital position relative to peers in the financial sector.

The CF release noted that the company had over the past half century expanded to become one of Sri Lanka’s most respected financial services companies.

CF which started with a modest issued capital of Rs.170,000 held Rs.6.6 billion shareholder funds at the end of September 2008.

The company’s profit after tax had topped the billion rupee mark over the past three years recording Rs.1,048 million in 2007/08, up from Rs.1,024 million the previous year.

CF attributed its success to prudent financial policies as well as complying with Central Bank specified norms and guidelines. This had supplemented the company’s inherent strength.

"A consistent policy of re-investing earnings continued to strengthen the CF capital base, which is the highest in the sector," the news release said.

"The establishment of strict credit controls, coupled with an effective network of branches ensures timely and efficient collection of receivables which has resulted in positive trends in lowering non-performing loans."

"Skilful management of financial resources and the priority given to the development of human resources at all levels has helped the company to build stability and strength over the years."

Fitch endorses these claims saying "well-defined credit policies and stringent recovery procedures have translated into asset quality that is amongst the best in the Registered Finance Company (RFC) sector in Sri Lanka."

It further said "CF’s NPL (defined by Fitch as loans in arrears for over three months/gross loan figure was 9.8% at H109 FYE08.3%), while the corresponding ratio at the six-month NPL level was 3.2% at H109 (FYE08: 3.3%). CF also had an additional provision for NPLs in arrears between three to six months - which was more prudent than the required regulation."

The rating made the point that although the majority of CF’s assets are financed by customer deposits, growth has been increasingly funded by bank borrowings. Interest rates swaps of Rs.2.6 billion at the end of the last financial year coving 40% of the borrowings of that year had minimized market risks.

Fitch also said that internal capital generation was strong, with high margins, low cost structures and a strong retention policy.

"Overall capitalization remains strong at 22% of assets in the first half of fiscal 2009," Fitch said.

CF has also diversified into new ventures with CF Insurance Brokers continuing to be the country’s market leader in this business.