📈 Sri Lanka Banking Sector Profits Ease Despite Credit Surge & Stronger Asset Quality

Sri Lanka’s banking sector saw a massive lending surge and improved asset quality in the year ending March 2026, though overall profitability moderated due to higher impairment charges and operating costs. • Overall Performance & Profits • Profit After Tax (PAT): Declined 4.6% YoY to Rs. 86.4 Bn (down from Rs. 90.6 Bn). • Profit Before Tax (PBT): Fell 4.1% YoY to Rs. 136.4 Bn. • Key Ratios: Return on Equity (ROE) eased to 15% (from 18.7%), while Net Interest Margin moderated slightly to 4.4%. • Credit & Asset Growth • Total Assets: Expanded by 11.3% YoY to reach Rs. 25.8 Tn. • Net Loans & Receivables: Surged 26.3% YoY (up Rs. 2.81 Tn) to Rs. 13.5 Tn, driven by recovering credit demand. • Deposits: Grew at a slower pace of 9.5% YoY to Rs. 20.5 Tn, pushing the Credit-to-Deposit ratio up to 71.2%. • Asset Quality & Financial Buffers • Loan Quality: Gross Stage 3 loan ratio improved significantly to 9.4% (down from 12.7% last year), indicating stronger recovery. • Impairments & Expenses: Impairment charges jumped 35.5% to Rs. 31.3 Bn, while operating expenses rose 16.4% to Rs. 131.3 Bn. • Stability: Capital and liquidity buffers moderated but remain well above regulatory minimums. Capital Adequacy Ratio (CAR) stood at 18.3%, and the All-Currency Liquidity Coverage Ratio (LCR) settled at 234.7%.