Growth in banking sector
The Banking sector has shown a significant growth during the first
half of year with the expansion of branches reflecting continued
economic activity Central Bank sources said.
During that period their was an increase in assets, loans and
deposits by Rs. 203 billion (9.5%), Rs. 144 billion (11.2%) and Rs. 114
billion (7.6%), respectively, recording a real growth of financial
resource mobilisation and utilisation.
With the opening of 45 new banking outlets including branches,
extension offices and other service centres and 52 new automated teller
machines (ATMs) facilitating greater access to liquidity. Out of these
45 new banking outlets, 14 were opened in the Colombo district while the
rest were opened in locations outside the Colombo district.
Approvals had been granted for another 37 banking outlets and to
relocate 22 existing outlets.
A pre-tax profit of Rs. 26 billion indicating a 23 per cent growth
when compared to pre-tax profit of Rs. 21 billion was reported during
the first half of 2006. This profit growth has led to increase the
return on assets from 2.2 per cent to 2.3 per cent.
According to statistics nearly 40 per cent of the banking sector
income is consumed by banks by way of operational expenses, staff and
shareholders, while 50 per cent is given out to depositors and creditors
by way of interest payments and the balance 10 per cent to the
Government as taxes.
Maintenance of non-performing loans is at a ratio around 5.7 per cent
of total loans despite the high growth in loans, its sources said. In
the entire banking sector there is a remarkable expansion in credit card
advances by Rs. 3 billion, registering a real growth of 10 per cent
while maintaining the non-performing credit card loans around 6 per
cent.
Increase in capital funds by Rs. 21 billion or 13 per cent indicating
enhanced cushion for banking risks.
The capital funds as against the estimated risks on banking business
were maintained around 13 per cent when compared to the international
norm of 8 per cent-10 per cent. The growth of liquid assets (the assets
that can be sold for cash easily to meet the funding needs) by Rs. 63
billion or 11 per cent, its sources said.
The Central Bank has implemented a number of prudential measures to
promote the resilience of the banking sector by mitigating any potential
risks arising from various financial, economic and external factors.
The banks also addressed the issue of a new share ownership policy to
promote corporate governance and to address conflict of interest arising
from large share holding in banks.
It has also taken some action to enhance the level of capital by
increasing risk weights applicable to certain banking assets thereby
requiring the banks to maintain a higher level of capital, its sources
said.
Advising banks to curtail lending for consumption and other
non-productive purposes to mitigate potential credit risk and
periodically monitoring bank credit delivery at targeted levels in line
with the monetary policy framework.
It also widely discussed consultative policy documents on proposed
adoption of Basel II capital standards and international accounting
standards to promote risk management and financial reporting in line
with new international standards. |