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FC Research forecasts steady phase for banking sector

Daily News | 4 -1-2018

By First Capital Research

FC Research forecasts steady phase for banking sector


First Capital Research (FC Research) expects the banking sector to have a steady phase during 2018E-20E with stable credit growth, improving GDP growth supporting lower Non Performing loans and lower interest rate volatility leading to stable NIMs, it said in a statement issued yesterday.

First Capital Research expects the banking sector universe to provide 25% average return over a one-year period exceeding the expected market return.

Credit growth to stabilize at 16%-18%: FC Research expects private sector credit growth to slow down to remain stable at 16% during 2018E gradually increasing to 18% through 2019E-2020E on improving GDP growth backed by progressing external sector performance levels and lower impairment due to better credit quality resultant to more business-related credit compared to consumer credit.

Interest rate stability to be mirrored in spreads: First Capital Research expects the banking sector interest spreads to stabilize in 2017E and thereon backed by the implementation of Inflation Targeting Framework, improved government revenue streams, increased foreign inflows into government securities market, introduction of Liability Management Bill to stabilize the interest rate and rate of inflation while the flexible exchange rate policy further supports it.

BASEL III Capital requirements satisfied:

Core and total capital adequacy ratios were maintained at 12.2% and 15% where the regulatory minimums were 5% and 10% respectively. Larger banks in the sector have already taken necessary steps to raise capital thus meeting the BASEL III capital requirement. This move ensures more stability and paves way for the industry to be more resilient and better poised for future growth.


The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management, retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

First Capital is an investment bank offering services as Stock Brokers in Sri Lanka. The Company acts as a conduit between retail and institutional clients and the secondary market of the Colombo Stock Exchange. First Capital’s best-in-class research team provide a series of actionable trade recommendations, daily and periodic market commentaries and publications for Stock Brokers in Sri Lanka.