Vibrant stock market boosts Lanka Bangla’s half-yearly profits

LankaBangla Finance posted year-on-year degrowth in net interest income for the first half of this year mainly due to the competitive lending rate over the period.

However, its capital market subsidiaries engaged in market-leading brokerage and investment banking services, took the profitability baton over and helped the non-bank financial institution boost its net profits.

Lanka Bangla Finance's half-yearly consolidated net profit that includes the figures of all subsidiary and associate companies grew more than five times to Tk38.74 crore, while its consolidated earnings per share (EPS) rose to Tk0.71, from a meagre Tk0.14 a year ago.

On the other hand, its solo half-yearly EPS that reflects the profitability of the lending business slightly fell to Tk0.32, from Tk0.34 in the corresponding period of the previous year. 

"Downward pressure in interest rates since early 2020 reduced both their interest expense and income. But the net interest income was slightly down for this year's first six months compared to the same period of 2020," LankaBangla's Chief Financial Officer Shamim Al Mamun told The Business Standard.

"The net interest income did not grow mainly because we were focused on competitive borrowing-lending alongside maintaining a healthy cash flow."  

He said the capital market subsidiaries more than offset the net interest income factor for the period when LankaBangla secured a good growth in lending in SME and other sectors which was important during the pandemic from the economic recovery point of view.

Consolidated income from investments rose to over Tk37 crore in the January-June period this year, which was Tk8 crore a year ago as the stock market was in free fall and also remained closed for weeks during the nationwide shutdown put in place to curb the first wave of Covid-19.

As the stock market recovered significantly since mid-2020, income from investment rose sharply for institutions like LankaBangla.

Also, as the market participation is buoyant during rallies, capital market intermediaries like brokerage firms, investment banks, asset managers are enjoying an improved revenue and profitability after a decade-long depression.

DSEX, the broad-based index at the Dhaka Stock Exchange (DSE), grew to over 6,760 points on Thursday, from below 4,000 in June last year. Average daily trading turnover has increased by nearly 10 times over the period.

In the first half of 2020, capital market subsidiaries dragged the consolidated profits down due to the net losses amid the stress on their business, which is not a case anymore.

Top stockbroker LankaBangla Securities helped its parent company post five times in brokerage, commission and exchange income over the first six months of the year.

LankaBangla Investment, another capital market subsidiary of the NBFI, is a top-tier local merchant bank engaged in portfolio management, corporate advisory, issue management and capital market underwriting services, while LankaBangla Asset Management is managing mutual funds and also has its licence for managing alternative investment funds.   

However, consolidated other operating income for the first half too grew by more than 50% for Lanka Bangla Finance. Against over 50% growth in total operating income, LankaBangla managed to contain its operational expenses within a few percentage points of growth that resulted in three times net operating income.

LankaBangla, a joint venture financial institution between some local and Sri Lankan individuals and banks, began its journey in late 1990s and it has been listed on local bourses since 2006.

Besides its capital market services wings, Lanka Bangla is also a leading player in the country's credit card market, and other retail financial services like personal loans, car loans and mortgage loans.