Holding

Apr 09, 2013 (LBO) – Sri Lanka’s banks have experienced a moderate weakening in asset quality and capital ratios as the country recovers from a credit bubble, central bank data up to the third quarter of 2012 has shown. Gross non-performing loans rose to 4.0 percent from 3.8 percent in 2011, but the ratio is much lower than the 8.5 percent seen after a balance of payments crisis in 2008. Net non-performing loans have risen to 2.4 percent from 2.1 percent.

There has been a faster weakening of capital ratios amid strong credit growth. Tier I capital ratio fell to 13.3 percent from 14.4 percent and total capital adequacy fell to 13.3 percent from 14.4 percent.

Net non-performing loans to capital funds rose to 14.1 percent by the end of the third quarter of 2012 from 11.5 percent in 2011.

Sri Lanka 2012 bank prudential ratios

Provision coverage as a percentage of gross non-performing loans fell to 40.2 percent from 46.0 percent.

In 2010, despite pressure being brought on banks to increase lending, Central Bank Governor Nivard Cabraal urged banks to publicly lend only to good borrowers.

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