Page 28 - Invest in Sri Lanka

Sri Lanka: The Heart of the Eastern Hemisphere Your Destination for Timeless, Sustainable Investments

Sri Lanka’s banking sector is a cornerstone of the country’s financial
system, comprising both state-owned and private banks. The sector is
relatively well-capitalized and has demonstrated resilience and strong
fundamentals despite macroeconomic shocks over the years. Figure 19
below outlines key ratios from Sri Lanka’s banking sector as at Q2 2024.

Figure 19: Sri Lanka’s Key Banking Sector Performance Ratios

Capital Adequacy Ratio (CAR) The banking sector maintains a CAR of around 15-16%, above the
regulatory minimum of 10%. This indicates a strong capital bu er,
essential for absorbing potential losses.

Non-Performing Loan (NPL) The NPL ratio has seen an uptick due to economic challenges,
Ratio standing at approximately 8-9%. This reflects a cautious environment
but is within manageable levels.

Return on Assets (ROA) and The sector has a ROA of around 0.8-1% and a ROE of approximately
Return on Equity (ROE) 8-10%. These ratios, while modest, indicate the sector’s ongoing
profitability.

Loan-to-Deposit Ratio (LDR) The LDR hovers around 85-90%, reflecting a balanced approach to
credit expansion and deposit mobilization.

Liquidity Coverage Ratio (LCR) The LCR remains robust at over 150%, ensuring that banks have
su cient liquidity to meet short-term obligations.

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