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Sri Lankan bank net interest margins seen stabilizing

Economy Next – 05.01.2018

By First Capital Research

Sri Lanka’s listed banks are expected to have a steady phase of growth during the 2018-20 period with net interest margins stabilising, stockbrokers First Capital said in a research report.

It attributed the forecast to stable credit growth, improving economic growth supporting lower non performing loans and lower interest rate volatility leading to stable NIMs.

“We expect the banking sector interest spreads to stabilize in 2017E and thereon,” it said.

The trend would be backed by the implementation of an inflation targeting framework by the central bank, improved government revenue streams and increased foreign inflows into government securities market, First Capital said.

The introduction of a Liability Management Bill is expected to reduce volatility and stabilize the interest rate and rate of inflation while the flexible exchange rate policy further supports it.

Improved government revenue and increased foreign inflows are expected to stabilize interest rates, the report on the banking sector said.

“The stable interest rate regime is expected to result in more stabilized interest margins in the banking sector.”

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.