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Sri Lanka Equity Forum » Stock Market Talk » Increase of NPL likely to affect quarterly results of banks and financial companies

Increase of NPL likely to affect quarterly results of banks and financial companies

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Manager - Equity Analytics
Manager - Equity Analytics
The increase in Non Performing Loans (NPL)  in banking and financial sector has affected the profitability of companies in the industry. As a result, the stock prices of these companies are likely to come down when their quarterly results are released during the course of the week or so, stock market analysts said.

Due to the drought and other natural disasters and coupled with economic slowdown has resulted in increasing the non performing loan ration which amounts to Rs 184 billion alone in the banking and financial sector. This amount could even be much lower, the analysts said.Loan growth is anticipate at a low or mid digit percentage in 2017, and is estimated that the reported non-performing loan (NPL) ratio will rise to about 3.0-3.2 percent over the next year from about 2.6 percent as of December 31, 2016," S&P Global ratings credit analyst said in a statement.NPL ratio in banks may climb this year after two years of strong loan growth, as capital buffers are also getting thinner, S&P Global Rating said.

"The NPL ratio has improved for the past three years due to the removal of non-performing gold-backed lending from the books. Now that the positive impact of the removal is fully played out, the NPL trend could reverse."

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