NBFI sector to record weakest performance in current decade with substantial loss: FCR

Oct 17, 2020 (LBO) – Sri Lanka’s Non-Bank Financial Institution (NBFI) sector may record a substantial loss in FY21E, the weakest performance in the current decade, First Capital Research (FCR) said.

Accordingly, the NBFI Sector PAT growth to dip to 322 percent in FY21E, and with it, sector ROE is also expected to decline to -15 percent for FY21E.

“Sector-wise NIMs and spread may further narrow to 6.3 percent in FY21E, lowest in the recent past while post moratorium, NPLs may reach an astronomical high of 20 percent at its peak,” First Capital said in a research note.

NBFIs credit growth portion may remain subdued despite the expected recovery in private sector credit growth resulting in total private credit being captured by LCBs ultimately impacting NBFI market share to reduce.

“We expect, NBFI market share to reduce to 6 percent by 2022E.”

NPLs too skyrocket destabilizing the sector with smaller NBFIs facing the biggest hit. Consequently, the market share of NBFIs staggers at 9 percent for the last 3 years but dipped over a 6-Yr period.
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