"The agency expects the consequent decline in funding costs and the resultant benefit to net interest margin, to offset the high credit costs," Fitch said in a statement on central bank registered finance and leasing companies in Sri Lanka.
"However Fitch notes that the recovery of the industry’s current weak asset quality could lag the positive macroeconomic trends seen at present, underlining the severity of the recent economic downturn and the higherrisk nature of the industry’s client base."
Liquidity Easing
Liquidity problems at finance companies and leasing firms have "eased somewhat" since a Fitch comment in September 2008 which then intensified after the collapse of several unregulated financial firms.
During the period finance companies had to give higher risk premiums compared to commercial banks.
