LOLC releasing its first quarter results for 2020/21, recorded the highest ever PAT of Rs. 37.2Bn compared with Rs. 5.6Bn recorded in June 2019. The sale of its Cambodian investment in PRASAC to South Koreaís largest Commercial Bank - Kookmin Bank, was concluded in April for a value of US$603Mn. The Group received the first tranche of US$ 422Mn, with the balance of US$181 being due in 2022. The Group recorded a gain of Rs.43Bn arising from the sale. LOLC made its maiden investment outside Sri Lanka, acquiring an 18% stake in PRASAC in 2007 and gradually increased its stake to 70% in 2017. With the concluded transaction, LOLC will continue to hold a 21% stake in PRASAC.
The top line of the Group grew to Rs. 32Bn, a 12% growth over last year. The interest income from its financial services businesses recorded an increase of 16% to reach 22Bn. However, the economic and business challenges arising from the Covid-19 pandemic, increased pressure on the financial services sector, with increasing NPLs. The Group made conservative provisioning for bad and doubtful debts, a Rs.10Bn being set aside for this purpose. These provisions are well above the regulatory requirements in each country. Based on regulatory recommendations, each company offered moratoriums and deferred payment plans to its clients considering the negative impact on such clients caused by the pandemic.
Despite the higher provisions made for NPLs, the financial services companies continue to be in close contact with the clients to extend support to recover from the loss of business and negative impacts resulting from the pandemic. The long-standing strong relationships maintained by the Group with local and foreign banks as well as multiple foreign funding partners, enables the financial sector companies to continue to support its clients even in these trying times with financial facilities, promoting new business generation.
The trading sector revenue increased marginally. Both insurance businesses recorded strong growth in the three months compared with the same period last year. The higher level of provisioning along with fixed costs and marginal increases in operating expenses which continued throughout the period of lockdown, caused the operating businesses to record a negative result of Rs. 4.7Bn compared with a positive Rs. 1Bn, last year.
The Groupís lending portfolio of the financial businesses outside Sri Lanka showed strong growth over the last year while the local companies recorded marginal growth, following a period of subdued economic activity, political instability and the impact from moratoriums granted to distressed clients due to the pandemic.
The Group will continue to follow a conservative provisioning policy despite seeing a positive trend in client engagement for collections, with businesses gradually resuming their operations after a period of lockdown.
Despite the negative shocks arising from the lockdown and pandemic situation, we are hopeful that businesses will return to normalcy in the coming months with heightened economic activity arising from the strong recovery strategies adopted by the government.