Sampath Bank expects to accelerate lending by year end
„MD Fernando says bank has mechanism and ability to expand „“We certainly feel going above 10% credit growth at end of the year”- Fernando „Says bank was focusing on credit quality over quantity in first half
Sri Lanka’s third largest private lender in terms of assets, Sampath Bank PLC, expects its credit growth to accelerate over 10 percent by the end of this year, beating industry projections.
“We certainly feel going above 10 percent credit growth at the end of the year,” Sampath Bank, Managing Director Nanda Fernando told reporters in Colombo last week.
He said that the bank was focusing more on enhancing credit quality than quantity at the early part of this year.
“During the first quarter, in the view of conditions, we wanted deliberately focus more on credit quality over credit quantum expansion. We have the mechanism and ability to expand. When the conditions are conducive, we would certainly grow,” he said.
Fernando highlighted that Sampath Bank’s annualised credit growth stood at 3.2 percent in the first quarter of this year while the private sector credit growth contracted by 1.5 percent.
However, he noted that the surge in nonperforming loans (NPL) is the biggest challenge for the banking sector including Sampath Bank. The banking sector NPL ratio nearly doubled to 4.2 percent by end of the first quarter of 2019 from 2.5 percent recorded at the end of 2017.
Similarly, Samapth Bank’s NPL ratio also shot up to 4.8 percent at the end of the quarter.
Fernando pointed out that the shift to forecast-oriented International Financial Reporting Standards (IFRS) was a key contributing factor for the rise in NPLS.
“With the IFRS requirement, we moved from incurred loss to future expected loss method from second quarter of last year.”
He expects that banking sector NPL ratios to subside by mid next year when the Presidential and Parliamentary elections are concluded.
“However, there could be a rise until the end of the year.” While noting that construction and infrastructure related activities took a dip during the last one and half years, he said tourism sector recovery, construction and infrastructure related activities would be crucial for NPLS to subside.
Speaking on the demand for working capital loans by the tourism sector after the Easter Sunday attacks, Fernando said Sampath Bank is a yet to experience a considerable demand for such facilities. “The appetite to borrow for tourism is little lesser. There’s no great demand for new loans into tourism right now. What most of our customers are asking is a moratorium,” he said.
He noted the NPL ratios on tourism sector loans at Sampath Bank currently is not high at the moment. However, he noted the real impact can be seen once the moratorium period ends in the middle of next year. Sampath Bank has 7 percent exposure to tourism sector.(nf)