Above expected performance attributed to stimulus and regulatory relief measuresSri Lankan banks’ performance in 2020 and 1Q21 exceeded Fitch Ratings’ initial expectations, thanks to stimulus and regulatory relief measures, Fitch Ratings noted yesterday (5). However, Fitch believes risks to the banks’ performance and operating environment remain, due to pressures stemming from Covid-19 and the sovereign credit profile. Sri Lankan banks’ loan growth in 2020 dipped below historical averages due to subdued private credit demand and reduced appetite for new lending. According to the rating agency, state banks’ capital buffers have come under pressure from rapid loan growth, while private banks remained broadly intact on the back of a faster pace of earnings retention and capital-raising by some banks. “Banks’ funding profiles remained largely unchanged, although the share of foreign currency funding in total funding continued to decline, to 21% by end-1Q21 (2019: 23%).

Source: The Nation July 05, 2021 21:56 UTC