Sri Lanka Banking Sector Profits Up in 2010

20th April 2011, www.dailynews.lk

The year 2010 was a high performance year for the local Banking industry in the last decade.

The banking industry achieved a considerably high level of profits in 2010. The profit after tax amounted to Rs 57.5 billion last year and this is a 111 percent growth in comparison to a profit of Rs 27.2 billion in 2009, the Central Bank said.

This was reflected in improved Return on Assets and Return on Equity ratios, which increased from 1 percent and 11.8 percent respectively, in end 2009 to 1.8 percent and 21.6 percent respectively in end 2010.

The significant growth in profitability was mainly attributed to a higher increase in fee-based income, a lower increase in none-interest expenses and the reversal of loan loss provisions due to reduced provisioning requirement.

According to the Central Bank the total assets of the banking sector recorded a 18 percent growth last year compared to 2009. The loan growth of 23 percent significantly contributed to this assets growth in the banking industry. The growth of loans was mainly in respect of agriculture, consumption, infrastructure , trade and construction sector. The negative growth of credit card advances continued and was at a negative 3 percent while against pawning indicated a significant growth of 40 percent.

Further overdrafts and term loans including housing loans recovered from the negative growth of 14 percent and 11 percent respectively, reported in 2009 to a significant growth of 35 percent and 24 percent respectively by the end of 2010.

The growth of funds raised through deposit products declined from 19 percent in 2009 to 16 percent in 2010. However deposits remained the main funding sources accounting for 73 percent of total liabilities.

Total borrowing recorded a significant growth of 28 percent in 2010 against the negative growth of 15 percent in 2009 and the share of borrowings in total funds increased marginally from 13 percent to 14 percent, the Central Bank said.