Loan Forecast

Apr 08, 2011 (LBO) – Loans by Sri Lanka’s listed commercial banks will grow 25 percent in 2011, up from 22.5 percent in the with bad loans and also interest rates remaining low despite rising inflation, an equities research report has said. The report said PABC Bank reported highest loan growth of 80 percent and Sampath Bank 30 percent. Without margin trading and gold backed loans, PABC loans grew 49 percent and Sampath 26 percent.

Seylan Bank, which is recovering from a run and massive bad loans and is under state-supported restructure had recorded the lowest loan growth of 9.1 percent while DFCC Bank’s loans had grown 10.5 percent.

Asset quality of listed commercial banks had improved with bad loans falling to 6.7 percent in 2010 from 10.58 percent.

Gross non performing loans were just 1.90 at NDB and 3.95 percent at Sampath. Provision cover at NDB was 95.7 percent and at Samapth 79.5 percent. Seylan with 21.3 percent and DFCC with 7.5 percent had the highest bad loans ratio.

“Despite rising inflation and other external factors, we feel the government is unlikely to raise policy rates significantly which could hamper the growth of the economy,” the report said.

With rising inflation and low interest rates, deposit