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Sri Lanka Equity Forum » Stock Market Talk » Sri Lanka banking outlook negative, NPLs rise

Sri Lanka banking outlook negative, NPLs rise

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1 Sri Lanka banking outlook negative, NPLs rise on Wed Sep 05, 2018 9:14 pm

ruwan326

ruwan326
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Sri Lanka banking outlook negative, NPLs rise, but capital stable: Moody's- Sep 05 2018 

  

ECONOMYNEXT - Non-performing loans in Sri Lanka's banks rose to 3.0 percent of assets in March 2018 from 2.7 percent a year earlier, though the economy is expected to grow 4.1 percent in 2018 from 3.7 percent last year, Moody's Investors Service, a rating agency said.

"Credit growth was very high over the last two years, with the credit multiplier (credit growth/GDP growth) peaking at more than 2.5 times," Tengfu Li, a Moody's Analyst said in a statement.
"As loans disbursed over this period begin to mature, asset quality will deteriorate, and higher borrowing costs due to tighter monetary policy implemented earlier will add to the debt burden of corporates."
Sri Lanka's central bank printed money and released liquidity of over 500 billion rupees over 2015 and 2016 to drive credit to unsustainable levels and boost credit, and the economy slowed after the currency fell and rates were raised.

The rupee has continued to depreciate steadily including in 2017 when most other Asian currencies appreciated, killing real wages and domestic demand.
Moody's said higher interest rates may reduce the repayment ability of companies. 
But with loan growth slowing internal capital generation would be enough to cover credit growth. Capital had also been raised to comply with Basel III standard.
The impact of higher loan loss provisions from a new accounting standard would be limited and banks capital ratios would be stable, the rating agency said.



Moody's assesses the operating environment as stable; asset risk as deteriorating; capital as stable; profitability and efficiency as stable; funding and liquidity as stable; and government support as deteriorating. 
 
Moody's notes that capital has strengthened as the banks successfully raised capital and reduced cash dividends to comply with their Basel III requirements. 
A high debt burden and contingent liabilities relating to state-owned enterprises will continue to limit the government's capacity to support the banks.

​​​​​​​https://economynext.com/Sri_Lanka_banking_outlook_negative,_NPLs_rise,_but_capital_stable__Moody_s-3-11793-17.html

DS Wijesinghe


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
Non Performing loan ratios will further increase with following


People’s bank being looted with Yahapalana political patronage


https://www.newsfirst.lk/2018/08/16/peoples-bank-being-looted-with-political-patronage/



Colombo (News 1st) – There have been multiple reports exposing Jehan Amaratunge’s involvement in obtaining a Rs. 10Bn loan from People’s Bank for  MTD Walkers PLC while serving as both a member of the board of directors of Peoples Bank and the Executive Deputy Chairman of MTD Walkers PLC.
A recent post on social media made some startling revelations about both the People’s bank and Jehan Amaratunge.
Dharshana Handungoda of SL VLOG claims that Minister of Social Welfare and Primary Industries Daya Gamage has obtained a total of Rs. 3.54bn from People’s Bank in loans for 5 of his private companies. Of this, the companies are yet to pay Rs 420mn due to the people bank, in loan installments.
Handungoda states that despite owing People’s bank over Rs 420mn in arrears payments, the Peoples bank continues to grants loans for the said companies. He claims that the General Manager of People’s bank Lasantha Kumara is being threatened by these companies that they will not make the required payments if additional loans are not granted.
The Vlogger also spoke about Jehan Amaratunga who serves on the board of directors of a number of private companies in addition to being on the People’s bank. Handungoda quoting experts in the banking sector states that anyone appointed to the board of directors in a bank should clearly declare as to why they are issuing loans to another company, on which the said persons serves as a board director.
The social media post also reveals that during his tenure as a member of the People’s bank board of directors, Jehan Amaratunge has approved loans amounting to Rs. 10.4bn.
Handungoda also revealed that Jehan Amaratunge is a close confidant of Gamini Senarath who served as the Chief of Staff of President Mahinda Rajapaksa. He further stated that Amaratunge is allowed to carry on with his activities at the Peoples bank because he is now a close confidant of Min. Malik Samarawickrama.

soileconomy

soileconomy
Vice President - Equity Analytics
Vice President - Equity Analytics
Few Giant banks have survived and shown positive results and growth in results so far.
HNB , CBC , NDB , SAMP shown growth almost ever other sectors are going steep down
If these banks are hurt with NPA whole economy system will collapse further.

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