July 2021

Alpen Capital (ME) Limited has announced publication of its report on Sri Lanka banking and non-banking financial institutions (NBFI) sector report for the year 2021. The report highlights resilience and competitiveness of both the sectors despite challenges exacerbated by the pandemic, with new and emerging opportunities to capitalize on.

Reporting on Sri Lanka’s banking sector, Alpen Capital listed a number of opportunities including growth in deposits as customers moved away from risky institutions towards quality-assured products. Strategic acquisition of finance companies and smaller banks, and accelerated digitalization also paves the way for further growth. These provide opportunity for Sri Lankan banks to reduce operating costs, grow low-cost fund base and drive strategic investments going forward, the report found.

However, there is risk of rising non-performing loans at expiration of debt moratoriums, whilst the downgrade in Sri Lanka’s sovereign credit rating could also bring challenges to banks with high exposure to foreign currency denominated debt. Alpen Capital noted credit growth to the private sector was moderate in 2020 at 6.5%, despite the deposit base of banks showing strong growth.

Profitability of banks was adversely impacted by lower interest margins and high impairment costs. The Central Bank of Sri Lanka responded with several measures to ease pressure on banks and the economy including monetary policy easing, debt moratoriums and easing of capital and liquidity measures.

To download the report, please click here.