Monday Jun 08, 2026
Monday Jun 08, 2026
Monday, 8 June 2026 05:41 - - {{hitsCtrl.values.hits}}
An AI illustration of a transaction taking place in a bank
Sri Lanka’s banking sector recorded strong lending growth and improving asset quality in the year to end-March 2026, although profitability moderated amid higher impairment charges and operating expenses, according to recent data from the Central Bank of Sri Lanka (CBSL).
Total assets increased by 11.3% to Rs. 25.8 trillion at end-March 2026 from Rs. 23.2 trillion a year earlier. Net loans and receivables rose by Rs. 2.81 trillion, or 26.3%, to Rs. 13.5 trillion, significantly outpacing the 9.5% increase in deposits to Rs. 20.5 trillion. Borrowings grew 30.2% to Rs. 1.88 trillion, while equity capital and reserves expanded 14.7% to Rs. 2.41 trillion.
Net interest income increased 9.7% to Rs. 270.3 billion. However, impairment charges for loans and other losses rose 35.5% to Rs. 31.3 billion and operating expenses increased 16.4% to Rs. 131.3 billion. Non-interest income declined marginally by 1.4% to Rs. 68.9 billion.
As a result, Profit Before Tax (PBT) fell 4.1% to Rs. 136.4 billion from Rs. 142.3 billion a year earlier, while Profit After Tax (PAT) declined 4.6% to Rs. 86.4 billion from Rs. 90.6 billion. Return on equity (ROE) eased to 15% from 18.7%, while return on assets (ROA) declined to 2.2% from 2.6%. The net interest margin moderated to 4.4% from 4.6%.
Asset quality indicators improved during the period. The Stage 3 loans-to-total loans ratio, including undrawn amounts and net of Stage 3 impairment, declined to 9.4% from 12.7%, while the ratio excluding undrawn amounts fell to 9.4% from 12.5%. Stage 3 impairment coverage increased to 59.5% from 54.1%, although total impairment coverage declined to 7.2% from 8.5%.
Capital and liquidity indicators moderated from year-earlier levels but remained well above minimum regulatory requirements. The Capital Adequacy Ratio (CAR) stood at 18.3%, compared with 19.4% a year earlier, while the Tier 1 Capital Ratio declined to 14.8% from 16%. The All-Currency Liquidity Coverage Ratio (LCR) eased to 234.7% from 310.6%, while the Rupee LCR declined to 267.9% from 342.4%. The Net Stable Funding Ratio (NSFR) stood at 150.6%. The sector’s Credit-To-Deposit ratio increased to 71.2% from 62.6%, reflecting stronger lending activity as private sector credit demand continued to recover.
Despite lower profitability and somewhat lower capital and liquidity ratios, the banking sector remained well capitalised and liquid, while asset quality indicators improved markedly over the year.
