Sri Lanka Banking Sector - Final

Sri Lankan Banking Sector
Update
Rukshana Thalgodapitiya,
Vice President
26 February 2015
Outlooks for 2015

Stable Rating and Sector Outlook for Sri Lanka
Outlook on Sri Lankan banking sector revised to Stable in 2015
More supportive operating conditions expected
Deterioration in key credit metrics have largely bottomed out
Banks to continue to face challenges
Ratings Outlook remains Stable

All Sri Lankan banks have a Stable ratings outlook
Growth potential supportive of bank performance
Operating environment rated risks factored into Viability Ratings
www.fitchratings.com
Sensitivities
Positive
Structural changes that can enhance the resilience of balance sheets
Sustained improvement in the operating environment
Negative
Capital Impairment risks
Sovereign rating
Public Ratings of Sri Lankan banks assigned by Fitch

LT IDR /
Outlook
Viability
Rating
Support
Rating
Support
Floor
National Rating
/ Outlook
National Savings Bank
BB- / Stable
na
BB-
AAA(lka) / Stable
Bank of Ceylon
BB- / Stable
b+
BB-
AA+(lka) / Stable
DFCC Bank
B+ / Stable
b+
AA-(lka) / Stable
National Development Bank
B+ / Stable
b+
AA-(lka) / Stable
People's Bank (Sri Lanka)
AA+(lka) / Stable
Commercial Bank of Ceylon
AA(lka) / Stable
Hatton National Bank
AA-(lka) / Stable
Sampath Bank
AA-(lka) / Stable
Seylan Bank
A-(lka) / Stable
Nations Trust Bank
A(lka) / Stable
Pradeshiya Sanwardhana Bank
BBB+(lka) / Stable
Pan asia Banking Corporation
BBB(lka) / Stable
Union Bank of Colombo
BB+(lka) / Stable
Sanasa Development Bank
BB+(lka) / Stable
Source: Fitch
Competitive landscape
Larger and mature banks have a clear competitive advantage being best placed to leverage
opportunities due to their established franchises
Mid sized banks need to find a niche or clear competitive advantage
Small banks face challenges in sustaining and developing their franchises
0
SAMP
5
PB
5
NSB
10
NDB
10
HNB
15
DFCC
15
COMB
20
BOC
20
FY10
FY11
FY12
FY13
1HFY14
SAMP
(%)
25
PB
1HFY14
NSB
FY13
NDB
FY12
HNB
FY11
DFCC
FY10
COMB
(%)
25
Market Share by Deposits
BOC
Market Share by Loans
Source: Fitch, Banks
Possible pick up in lending

Loan growth slowed in 2014 partly on account of the drop in credit for gold- backed lending
Some pick- up in lending possible in 2015
Loan growth
(%)
35
30
25
20
15
10
5
0
-5
2009
2010
2011
2012
2013
2014E
2015F
Source: Central Bank of Sri Lanka (CBSL), Fitch
Source: Major Sri Lankan Banks
Other Customers
Other Services
Infrastructure
0
Financial & Business Svcs.
5
FY13
New Economy
10
Traders
15
(%)
50
40
30
20
10
0
-10
-20
Construction
20
Transport
25
Tourism
1H14
Manufacturing
Sector Wise Composition
Agriculture & Fishing
Other Customers
Other Services
Infrastructure
Financial & Business Svcs.
FY13
New Economy
Traders
(%)
30
Construction
Transport
Tourism
Manufacturing
Agriculture & Fishing
Underlying sector trends

Sector Wise Growth
1H14
Source: Major Sri Lankan Banks
Pressure on asset quality from gold- backed lending

expected to diminish
Sector NPL ratio rose sharply mainly due to delinquencies from pawning (gold- backed lending)
Incremental risk to asset quality from pawning related NPLs likely to abate
(LKRm)
Total NPL
Pawning related NPL
250,000
200,000
150,000
100,000
50,000
0
FY12
FY13
1HFY14
Source: Major Sri Lankan banks
Downside risks remain

Provision coverage has reduced even during periods of strong credit growth
Potential risks to asset quality remain but impact expected to be manageable
(%)
8
7
6
5
4
3
2
1
0
Reported NPL ratio (LHS)

Adjusted NPL ratio (LHS)
Total Provision Coverage / NPLs (RHS)
Loan Growth (LHS)

60
50
40
30
20
10
0
2011
2012
2013
2Q14

Adjustment pertains to estimated performing rescheduled loans
(%)
35
30
25
20
15
10
5
0
-5
2008
Total Loan Loss Reserve / Loans (RHS)

5
4
3
2
1
2009
2010
2011
2012
2013
0
3Q14
Source: Central Bank of Sri Lanka (CBSL)
Profitability less healthy on an adjusted basis

Thinner NIMs have been a key challenge to pre - provision operating profitability. Bottom line
profitability has been impacted by higher impairment charges.
Modest improvement in profitability expected.
Reported credit costs fairly low. Stressed credit costs would dampen sector profitability
considerably.
ROA
Adjusted ROA
(%)
3
2.5
2
1.5
1
0.5
0
2011
2012
2013
3Q14
Stressed credit costs for major Sri Lankan banks

Credit Costs Tolerance 2013
Current Credit Cost
(% of loans)
6
Stressed Credit Cost
5
4
3
2
1
0
BOC
COMB
DFCC
HNB
NDB
NSB
PB
SAMP
Source: Banks, Fitch
10
Risk weighted assets for major Sri Lankan banks

Risk weighted assets total assets lowest among the major state banks
Risk weighted assets/Total assets

FY12
(%)
90
80
70
60
50
40
30
20
10
0
BOC
COMB
DFCC
FY13
HNB
1HFY14
NDB
NSB
PB
SAMP
11
Adjusted capital ratios weaker

Regulatory capital adequacy ratios have benefitted from 0% risk weights on certain exposures
Adjusted capital ratios of major state banks much weaker
Higher capital buffers at Sri Lankan banks justified
Capital ratios as at June 2014

(%)
25
Tier 1 Regulatory Capital Ratio
Equity/ Total Assets
Adjusted Tier 1 Capital Ratio
20
15
10
5
0
BOC
COMB
DFCC
HNB
NDB
NSB
PB
SAMP
12
Stable Funding Structure

Deposits are likely to remain the main source of funding for Sri Lankan banks
Pressure on loans /deposits have eased
Loans / Deposits (LHS)
(%)
100
90
80
70
60
50
40
30
20
10
0
CASA(RHS)
50
40
30
20
10
0
2008
2009
2010
2011
2012
2013
3Q14
Source: Central Bank of Sri Lanka (CBSL)
13
Increase in share of borrowings in funding structure

Share of funding from borrowings has been increasing as banks have been turning more frequently
to the capital markets for funding.
The share of foreign currency denominated borrowings been steadily increasing.
Borrowings
120
Foreign currency lending and funding
FCY borrowings/ Total borrowings(LHS)

LCY borrowings/Total borrowings(LHS)
Total Borrowings /Total Assets (RHS)
100
80
60
40
20
0
2009
2010
2011
2012
FCY loans/Loans
20
18
16
14
12
10
8
6
4
2
0
30
FCY Deposits and Borrowings/ Total Deposits

and Borrowings
25
20
15
10
5
0
2013 3Q14
2009
2010
2011
2012
2013
3Q14
14
Financial Sector Consolidation

Should improve the credit profile of financial institutions, strengthen franchises, and
reduce supervisory burden
Beneficial to the sector in the long term
Credit-neutral in the short to medium term
15
People in pursuit of answers
16
Disclaimer
Fitch Ratings credit ratings rely on factual information received from issuers and other sources.
Fitch Ratings cannot ensure that all such information will be accurate and complete. Further, ratings
are inherently forward-looking, embody assumptions and predictions that by their nature cannot be
verified as facts, and can be affected by future events or conditions that were not anticipated at the
time a rating was issued or affirmed.
The information in this presentation is provided as is without any representation or warranty.
A Fitch Ratings credit rating is an opinion as to the creditworthiness of a security and does not
address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned.
A Fitch Ratings report is not a substitute for information provided to investors by the issuer and its
agents in connection with a sale of securities.
Ratings may be changed or withdrawn at any time for any reason in the sole discretion of
Fitch Ratings. The agency does not provide investment advice of any sort. Ratings are not
a recommendation to buy, sell, or hold any security.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE
LIMITATIONS AND DISCLAIMERS AND THE TERMS OF USE OF SUCH RATINGS AT WWW.FITCHRATINGS.COM.
17
New York
33 Whitehall Street
NY, NY 10004
London
30 North Colonnade
Canary Wharf
London E14 5GN

Sri Lanka Banking Sector - Final

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Sri Lanka Banking Sector - Final

Încărcat de

Drepturi de autor:

Formate disponibile

Sri Lankan Banking Sector

Outlooks for 2015

Ratings Outlook remains Stable

Public Ratings of Sri Lankan banks assigned by Fitch

National Savings Bank

National Development Bank

People's Bank (Sri Lanka)

Commercial Bank of Ceylon

Hatton National Bank

Nations Trust Bank

Pradeshiya Sanwardhana Bank

Pan asia Banking Corporation

Union Bank of Colombo

Sanasa Development Bank

Market Share by Deposits

Market Share by Loans

Source: Fitch, Banks

Possible pick up in lending

Source: Central Bank of Sri Lanka (CBSL), Fitch

Source: Major Sri Lankan Banks

Sector Wise Composition

Agriculture & Fishing

Financial & Business Svcs.

Agriculture & Fishing

Underlying sector trends

Source: Major Sri Lankan Banks

Pressure on asset quality from gold- backed lending

Pawning related NPL

Source: Major Sri Lankan banks

Downside risks remain

Reported NPL ratio (LHS)

Loan Growth (LHS)

Source: Central Bank of Sri Lanka (CBSL), Fitch

Total Loan Loss Reserve / Loans (RHS)

Source: Central Bank of Sri Lanka (CBSL)

Profitability less healthy on an adjusted basis

Source: Central Bank of Sri Lanka (CBSL), Fitch

Stressed credit costs for major Sri Lankan banks

Stressed Credit Cost

Source: Banks, Fitch

Risk weighted assets for major Sri Lankan banks

Risk weighted assets/Total assets

Source: Banks, Fitch

Adjusted capital ratios weaker

Capital ratios as at June 2014

Tier 1 Regulatory Capital Ratio

Equity/ Total Assets

Adjusted Tier 1 Capital Ratio

Source: Banks, Fitch

Stable Funding Structure

Loans / Deposits (LHS)

Source: Central Bank of Sri Lanka (CBSL)

Increase in share of borrowings in funding structure

Foreign currency lending and funding

FCY borrowings/ Total borrowings(LHS)

Source: Central Bank of Sri Lanka (CBSL), Fitch

FCY Deposits and Borrowings/ Total Deposits

Source: Central Bank of Sri Lanka (CBSL), Fitch

Financial Sector Consolidation

People in pursuit of answers

S-ar putea să vă placă și