Central Finance (CFCL) Returns to Profit in Q4 with Improved Margins but Rising NPL Risk

Central Finance Limited (CFCL) has released its audited Q4 results for FY 2024/25, showing a strong rebound in profitability after prior-year losses, driven by improved cost efficiency and stronger net income. However, asset quality challenges persist with rising non-performing loans (NPLs).

The company recorded total revenue of Rs. 696.92 million, down 12.44% year-over-year compared to Rs. 882.75 million in Q4 2023/24. Revenues fluctuated throughout the year, with a significant drop of -36.76% in Q3, though Q4 saw stabilization.

Gross profit stood at Rs. 198.87 million, up from Rs. 130.15 million in Q3, with a margin of 28.54%, showing improved efficiency compared to last year’s 26.21%. Net income recovered sharply to Rs. 89.15 million, a turnaround from last year’s loss of Rs. 63.88 million, resulting in a net margin of 12.79%.

For shareholders, EPS (annualized) rose to Rs. 9.40, compared to negative earnings last year (-Rs. 6.73). The PE ratio normalized to 58.54, down from extreme highs in prior quarters, reflecting more stable valuation. Book Value per Share improved to Rs. 113.92, while the market value per share closed at Rs. 549.96, slightly higher than last year’s Rs. 532.00. Dividend distribution remains absent.

Financial Sector Indicators

CFCL’s financial indicators show both recovery and risks:

• Capital Fund to RWA fell to 12.14%, from 16.98% last year, narrowing its capital buffer though still above the regulatory minimum.

• NPL Ratio rose sharply to 14.18%, compared to 6.77% last year, indicating significant stress in loan recovery.

• Loan Loss Provision coverage weakened to 73.17%, down from 82.68%, showing inadequate provisioning relative to rising NPLs.

• Cost of Funds decreased to 5.84%, down from 7.95% last year, easing pressure on expenses.

• Credit-to-Deposit Ratio stood at 66.84%, maintaining balanced liquidity.

• Base Rate dropped to 8.25%, compared to 10.38% last year, while Net Interest Spread remained stable at 4.46%, sustaining profitability in lending operations.

• Net Liquid Asset remained strong at 43.77%, in line with last year’s liquidity position.