• NPL ratios decline for Commercial Bank, HNB, and Sampath Bank
• Improved economic conditions and debt restructuring contribute to better performance

Sri Lanka’s top three private banks’ non-performing loan (NPL) ratios have improved between 3% and 5%, indicating an overall improvement in economic activity in the low-interest rate environment, according to their quarterly financial statements.

Accordingly, the Q3 financial statement of the banks showed an overall reduction in the stage 3 loan ratios and impairment charges in the quarter that ended on 30 September.

Commercial Bank’s impaired loans (Stage 3) ratio stood at 4.08% at the end of September compared to 4.87% at the end of June, 5.85% at the end of 2023 and 6.11% at the end of September 2023 while the impairment (Stage 3) to stage 3 loans ratio improved to 53.54% from 49.18% as at end of June and 43.22% at end 2023.

Hatton National Bank’s (HNB) net stage 3 ratio improved to 3.32% while the stage 3 provision coverage ratio improved to 60.50%, during the quarter, compared to 4.09% and 56.08% recorded in 1H 2024. The total impairment charge for the nine months amounted to Rs 3.2 billion, compared to Rs 32.4 billion for the same period in 2023.

“The support extended to customers to revive their businesses, concerted efforts on collection and the overall improvement in economic activity enabled the bank to record superior asset quality compared to the industry,” the financial statement of HNB said.

Also, the impairment charge for the previous period included an amount of Rs. 25 billion on account of the bank’s investments in international sovereign bonds (ISBs). With the agreement on the external debt restructuring, in line with the industry practice, the bank maintained its provision cover of 52% on the investments in ISBs.

Moreover, Sampath Bank’s stage 3 loans stood at 5.27% at the end of September compared to 5.87% at the end of June and 5.87% in the end of 2023 while the impairment to stage 3 loan ratio stood at 57.92% at end of the period from 58.77% at end of June.

Sampath Bank said that it recorded a net impairment charge of Rs. 1.2 billion against other financial instruments during the period, primarily due to an additional charge recognised for Sri Lanka ISB in 1Q 2024.

“We are confident that no further charges are necessary, as the bank has adequately provided for all anticipated losses and contingencies,” Sampath Bank said.