Banking Bent

Mar 26, 2010 (LBO) – Sri Lankan banks will shift focus towards small and medium enterprises as well as the former north-east war zone while consolidation is needed to control costs and expand assets, a report said. “Banks to watch out for are those where management is forward thinking and empowered to mix traditional banking with strong inroads into fee-based products and project-based lending.

BMS also said consolidation is required among Sri Lankan banks with a need to boost their asset base to take advantage of emerging development opportunities.

“Sri Lanka needs the necessary regulatory environment to make this possible as the current ceiling on single investor holdings will inhibit this opportunity.”

Ensuring adequate capitalization is a priority to be able to support projected faster economic growth.

“Sector balance sheets do not support this capital requirement and we will necessarily see an expansion of investment in the sector, possibly through consolidation,” the BMS report said.

Consolidation will help control costs by making use of existing banking infrastructure.

BMS said the average cost-to-income ratio of Sri Lankan banks is higher than competing
Asian banks mainly d