· Gross loan portfolio surpasses Rs. 423 billion

· Total assets reach Rs. 559 billion

· Profit after tax reaches Rs. 27 billion

· Underlying profitability grows close to 30%

LOLC Finance PLC, the flagship finance company of the LOLC Group and Sri Lanka’s largest non-bank financial institution, delivered a strong financial performance for the year ended 31 March 2026, supported by robust lending growth, stronger recurring income, improved asset quality and a capital position that remained comfortably above regulatory requirements.

The Company reported profit after tax of Rs. 27.4 billion for the year, compared with Rs. 25 billion in the previous year. At headline level, this represents growth of around 9%. However, the headline comparison does not fully capture the improvement in the Company’s underlying performance.

The previous year’s profit included significant non-recurring gains linked to Sri Lanka sovereign bond-related impairment reversals, partially offset by a derecognition loss. On a net basis, these one-off items added approximately Rs. 4 billion to the prior year result. Adjusting for this, the prior year’s underlying profit base was closer to Rs. 21 billion. Against that adjusted base, the current year profit of approximately Rs. 27 billion reflects underlying profitability growth of close to 30%.

This is the more important message behind the numbers. LOLC Finance did not merely preserve profitability in a recovering economic environment; it expanded its recurring earnings base materially, while simultaneously growing its balance sheet and improving key credit quality indicators.

The improvement was driven primarily by core income. Interest income increased to approximately Rs. 79 billion, supported by strong expansion in the lending portfolio. Interest expense rose at a slower pace to approximately Rs. 29 billion, allowing net interest income to grow to approximately Rs. 50 billion. This demonstrates the Company’s ability to expand its loan book while maintaining control over funding costs.

Net fee and commission income also improved, rising to approximately Rs. 3 billion, reflecting higher business volumes and broader customer activity. Total operating income increased to approximately Rs. 56 billion, despite the absence of the large sovereign bond-related gains that benefited the previous year. This shift from one-off gains to recurring operating income is a clear positive from an earnings-quality perspective.

The balance sheet story was equally significant. Total assets grew by approximately Rs. 129 billion during the year, reaching around Rs. 559 billion as at 31 March 2026. The main driver of this expansion was the lending portfolio, with gross loans and advances increasing from approximately Rs. 305 billion to approximately Rs. 423 billion, representing growth of nearly 39%.

This level of loan book expansion is notable not only because of its scale, but also because it was spread across multiple product categories. Growth was recorded across key lending lines including finance leases, gold loans, speed drafts, alternate finance, personal loans and term loans. This points to a broad-based recovery in customer demand rather than growth concentrated in a single product line.

Finance leases, historically one of LOLC Finance’s core products, continued to remain an important contributor to the loan portfolio. Gold loans also recorded strong momentum, supported by demand for short-term secured credit. Growth in alternate finance, personal loans and term lending further reflects the breadth of the Company’s customer franchise and its ability to serve multiple segments of the market.

LOLC Finance’s scale is also reflected in its leadership across key lending verticals within the NBFI industry. The Company is currently the largest financier in SME finance, micro and personal finance, agri finance, Islamic finance and factoring, underscoring the breadth and depth of its customer franchise. With close to 20% market share of both the industry’s asset and loan base as well as its deposit base, LOLC Finance occupies a systemically important position in the sector, supported by a diversified product platform and a funding franchise of significant scale.

Funding growth was aligned with the expansion of the balance sheet. Customer deposits increased to approximately Rs. 272 billion, compared with approximately Rs. 226 billion in the previous year. The continued growth in deposits reflects the strength of the Company’s retail franchise and its ability to mobilise funding at scale.

Borrowings also increased significantly, reaching approximately Rs. 98 billion. This reflects a more active use of institutional and wholesale funding to support accelerated lending growth. While the increase in borrowings naturally raises leverage, it should be viewed in the context of the Company’s substantially enlarged equity base, strong capital ratios and the productive deployment of funds into earning assets.

Total equity stood at approximately Rs. 155 billion as at 31 March 2026. This remains a major differentiator for LOLC Finance within the non-bank financial institution sector. The Company also completed a sizeable share repurchase during the year, returning capital to shareholders while still preserving a strong capital base. Even after this capital return, net asset value per share increased, reflecting the strength of retained earnings and disciplined capital management.

Asset quality also improved during the year. The net non-performing loan ratio declined to around 3.24%, compared with around 4.81% in the previous year. This improvement is particularly significant because it was achieved during a period in which the gross loan portfolio expanded by nearly 39%. In other words, growth was not delivered at the expense of asset quality.

This improvement was also reflected directly in the impairment line of the income statement. Despite the significant expansion of the lending portfolio during the year, LOLC Finance recorded a reversal of impairment on loans and advances in the current year, compared with an impairment charge in the previous year. This outcome reflects the impact of stringent credit underwriting standards, disciplined portfolio monitoring and effective recovery efforts. More importantly, it demonstrates that the Company’s growth was not achieved by compromising credit quality. Instead, LOFC was able to expand its portfolio while actively managing non-performing loans, improving recoveries and releasing provisions where the underlying credit risk had reduced.

Capital adequacy remained one of the strongest aspects of the Company’s financial profile. LOLC Finance reported Tier 1 and Total Capital Adequacy Ratios of around 23%, both well above the applicable regulatory minimum requirements. The Capital Funds to Deposit Liabilities Ratio stood at around 42%, also significantly above the minimum requirement of 10%.

These capital buffers are not merely technical regulatory indicators. For a financial institution with more than Rs. 270 billion in customer deposits and more than Rs. 420 billion in gross lending exposure, capital strength is central to depositor confidence, risk absorption and long-term growth capacity. LOLC Finance’s capital position gives it the ability to support future lending growth while maintaining resilience against unexpected credit or macroeconomic shocks.

The Company’s financial profile was further supported by its scale and diversified operating platform. LOLC Finance continues to offer one of the broadest product portfolios in the sector, covering leasing, loans, gold loans, factoring, credit cards, margin trading, personal finance, operating leases, alternate financial services and a wide range of deposit products. This diversified offering reduces reliance on any single product category and strengthens the Company’s ability to respond to changing market conditions.

The Company has also continued to invest in digital financial services, including its iPay platform. With increasing customer adoption of digital channels, this remains an important part of LOLC Finance’s long-term strategy. The combination of a large physical branch network and a growing digital footprint positions the Company to serve both traditional and emerging customer segments.

During the year, LOLC Finance’s credit rating was upgraded to A+ with a Stable Outlook by Lanka Rating Agency. The upgrade provides external validation of the Company’s market position, financial strength, capital base and improving risk profile.

The financial year ended 31 March 2026 therefore presents a stronger story than the headline profit number alone suggests. Reported profit after tax increased from approximately Rs. 25 billion to Rs. 27 billion. However, after adjusting for the prior year’s one-off sovereign bond-related gains, underlying profitability improved by close to 30%. At the same time, total assets grew to approximately Rs. 559 billion, gross loans surpassed Rs. 423 billion, deposits increased to around Rs. 272 billion, asset quality improved, and capital adequacy remained comfortably above regulatory requirements.

The significance of the year’s performance is not simply that LOLC Finance grew. It is that the Company grew while preserving profitability, strengthening the quality of earnings, improving asset quality and maintaining one of the strongest capital positions in the sector. That combination reinforces LOLC Finance’s position as Sri Lanka’s leading non-bank financial institution and a key financial services platform within the LOLC Group.