Banking

Sri Lanka’s NSB rating confirmed by ICRA Lanka

Monday July 27, 2020 8:35 am

ECONOMYNEXT- ICRA Lanka has reaffirmed the state-owned National Savings Bank at [SL]AAA with a stable outlook due to low risk investment portfolio and government support.

The Bank had reported a gross non-performing asset ratio of 1.57 percent in December 2019 up from 1.44 percent a year earlier. In March 2020 NPA was 1.60 percent. NSB’s gross NPA ratio was better as compared to the licensed specialised banks’ average of 6.58 percent and system average of 5.08 percent in Mar-20.

The Bank is mandated to invest a minimum of 60 percent of the total deposits in government securities.

As of March 20, 61 percent of the total deposits were invested in government securities, ICRA said.

The full ICRA Lanka statement follows:

Rationale

The ratings take note of the 100% Government of Sri Lanka (GoSL) ownership, which provides a strong likelihood of sovereign support and, the 100% explicit guarantee provided by the Government of Sri Lanka (GoSL) for the moneys deposited with the Bank and the interest thereof through the National Savings Bank Act (NSB Act).

The ratings factor in the low-risk investment portfolio, healthy quality lending portfolio and the adequate capital profile. The Bank’s investment portfolio is characterised by low risk, with NSB mandated to invest a minimum of 60% of the total deposits in government securities; as in March 2020, 61% of the deposits were in government securities.

The Bank’s overall GNPA ratio (1.60% as on Mar-20) continued to remain lower than the Licensed Specialised Banks (LSB) segment’s GNPA ratio of 6.58% as in Mar-20. The quality of the lending portfolio is driven by zero Gross NPAs reported on its exposure to GoSL, State-owned Entities (“SOE”) and Corporate segments which accounted for 36% of the lending portfolio in Mar-20 and 2.52% gross NPA in the retail portfolio (64% of the lending portfolio) as of Mar-20 compared to 2.47% in Mar-19. NSB’s BASEL III complied total capital adequacy ratio (CAR) stood at 13.59% (Tier-I capital ratio at 11.37%) as compared to regulatory requirement of 12.00% (Tier-I capital ratio at 8.00%) as of Mar-20.

Further, in Dec-19, CBSL reclassified NSB as a Non-Domestic-Systemically Important Bank (“Non -DSIB”) based on its new criteria for this assessment. As a result, NSB’s regulatory capital requirement in terms of Tier I capital reduced to 8.50%[1] from 10% % earlier. ICRA Lanka notes that a reduction in regulatory capital requirements would reduce the pressure of securing external capital in the medium term.

Going forward, continuous maintenance of adequate buffers (at least 1%) over and above the minimum capitalisation requirements (Tier-I plus CCB and total CAR) would be critical for the sustenance of the current rating.

Outlook: Stable

ICRA Lanka believes that NSB will continue to benefit from Government support considering its position as the largest licensed specialised bank in Sri Lanka, which also provides vital funding support to GoSL as per the NSB Act. The outlook may be revised to ‘Negative’ in case of a steady shortfall in NSB’s capital buffers over the regulatory requirements as compared to ICRA Lanka’s expectations or significant weakening in the profitability and asset quality indicators.

Key rating drivers

Credit strengths

100% government ownership and explicit guarantee on deposits: NSB is a 100% government-owned specialised bank incorporated under the NSB Act in 1972. The main objective of the Bank is to promote savings habit in the country.

GoSL provides explicit 100% guarantee through the NSB Act for the depositors’ deposit money and the interest thereon. Since the Bank’s inception, NSB has been able to self-fund its capital requirements and has not required any capital support from GoSL.

ICRA Lanka expects GoSL’s support, if needed, given the Bank’s position of being the largest licensed specialised bank in the country and also being one of the important sources for its financing needs. The Government appointed Board comprises of a mix of qualified and experienced professionals, including a representative from the treasury and the Post Master General.

The senior management of the Bank consists of qualified and experienced banking professionals.

Low-risk nature of its investment portfolio:

The Bank is mandated to invest a minimum of 60% of the total deposits in government securities. As of Mar-20, 61% of the total deposits were invested in government securities, as compared to 61% as of Dec-19 (61 % as of Dec-18). As of Mar-20, 94% of the investment portfolio consisted of Treasury Bills and Bonds followed by 2% in placement with banks, 2% in Debentures and Trust Certificates, 1% in listed equity and the balance as investments in subsidiaries, unquoted equities and others.

As of Mar-20, close to 99% of the government security portfolio was classified as Held to Maturity (“Financial Assets Measured at Amortised Cost”) and balance as Held for Trading (Fair value through Profit and Loss and Fair Value through Other Comprehensive Income”).

The Bank’s FVOCI equity portfolio reported a significant mark to market (MTM) loss of LKR 1,159 Mn in Q1CY2020 as compared to the MTM loss of LKR 595 Mn reported in Q1CY2019 due to the weak equity market performance.

Since the equity portfolio represents less than 1% of the total investment portfolio, the overall impact on the investment portfolio is expected to be minimal.

Healthy overall asset quality supported by zero NPAs on corporate and GoSL& SOE portfolios;

NSB reported LKR 465 Bn lending portfolio as of Mar-20 as compared to LKR 454 Bn as of Dec-19 (LKR 423Bn as of Dec-18). The portfolio reported a Y-o-Y growth of 4.85% in Mar-20 as compared to 7.43% growth in Dec-19 (12.56%% in Dec-18). The portfolio growth in CY2019 and Q1CY2020 was driven by retail lending which grew from LKR 249 Bn in Dec-18 to LKR 287 Bn in Dec-19 and LKR 296 Bn in Mar-20.

As of Mar-20, NSB’s portfolio included retail exposure which contributed to 64%, followed by, Government and SOE at 30% and corporate at 6%. Under the retail segment, personal loans, housing loans, pawning and loans against FDs represented 32%, 15%, 8% and 7% respectively of the total portfolio as of Mar-20. Based on NSB’s Act, all the SOE loans are secured by government guarantees and are routed through the Treasury, which further strengthens the credit profile of the lending portfolio.

The Bank reported a gross NPA ratio of 1.57% as of Dec-19 as compared to 1.44% as of Dec-18, it remained at 1.60% as of Mar-20. NSB’s gross NPA ratio was better as compared to the licensed specialised banks’ average of 6.58% and system average[2] of 5.08% in Mar-20. ICRA Lanka noted that corporate and government &SoE portfolios of the Bank which accounted for 36% of the total lending portfolio as in Mar-20 had zero NPAs.

The retail portfolio of the Bank reported a GNPA ratio of 2.52% as of Mar-20 as compared to 2.51% as of Dec-19 and 2.46% in Dec-18. At the product level, Auto Loans reported a GNPA ratio of 8.98% followed by Personal loans at 3.59%,

Housing loans at 2.25% and Pawning at 1.09% as of Mar-20. ICRA Lanka expects the Bank to maintain its GNPA ratio below the systemic averages going forward. The Bank’s regulatory provision coverage ratio improved to 54% as of Mar-20 from 51% as of Dec-19 and 43% in Dec-18. The Bank’s provision coverage ratio was significantly better than the LSB sector’s average of 35% in Mar-20.

Granular deposit base;

NSB reported a deposit base of LKR 1,060 Bn as of Mar-20 as compared to LKR 1,017 Bn reported as of Dec-19 (LKR 953 Bn as of Dec-18). The NSB Act provides explicit government guarantee for the deposits and interest payable thereon. The Bank has a granular deposit base with 42% of the Rupee denominated deposits [3]having a ticket size of less than LKR 1.0 Mn.

The savings deposits to total deposits ratio was 21% in Mar-20 as compared to 21% in Dec-19 and 24% in Dec-18. The savings deposits to total deposits ratio moderated over the period due to higher growth witnessed in term deposits in 2019. The Bank’s short term (less than 1 year) negative cumulative ALM mismatch was 70% as of Mar-20 (71% as of Mar-19) as a result of its shorter tenured deposits as against longer-tenured loan portfolio.

The Bank’s Liquidity Coverage Ratio stood at 277% as of Mar-20 as compared to the regulatory requirement of 100%. The Bank’s significant investment in government securities (95% of the investments as in Mar-20) provides comfort on the liquidity.

Adequate capital profile

NSB reported a Tier-I Capital Ratio of 11.37% and Total Capital Ratio of 13.59% as of Mar-20 as compared to the regulatory requirement of minimum Tier-I Capital Ratio of 8.00% and Total Capital Ratio of 12.00%. The Bank’s core capital stood at LKR 44 Bn as in Mar-20 as compared to the LKR 7.5 Bn regulatory core capital threshold to be achieved by December 31, 2022. Based on ICRA Lanka’s computation, the Bank will not require Tier-I capital infusion for the next 3 years to maintain a 10-15% growth factoring a 2% capital buffer and 9% internal capital generation.

The Bank was reclassified as a non-systemically important bank which reduced the regulatory capital requirement by 150 basis points. ICRA Lanka believes that as the largest licensed specialised bank, the Government of Sri Lanka will provide the required funding support to the Bank when needed.

Continuous maintenance of adequate buffers (at least 1%) over and above the minimum capitalisation requirements (Tier-I plus CCB and total CAR) would be critical from a rating perspective.

Moderate profitability indicators

NSB’s NIM improved to 2.63% in CY2019 from 2.43% in CY2018 due to reduction in deposit rates and expansion of the loan book during the period.

The NIM marginally declined in Q1CY2020 due to decline in Average Weighted Prime Lending Rates and lending rate cuts. The Bank reported a mark to market loss of LKR 1,159 Mn on the FVOCI equity portfolio during Q1CY2020. The Bank’s PAT improved to LKR 6.7 Bn in CY2019 as compared to LKR 4.5 Bn reported in CY2018.

The main reason was the improvement of the NIM of the Bank. The cost to income ratio of the bank improved to 60.39% in Q1CY2020 as compared to 65.57% in CY2019 (66.47% in CY2018) mainly due to the removal of Nation Building Tax (NBT) and Debt Repayment Levy (DRL) imposed by the Government in Nov-19.

For the Latest quarter ended Mar-20, the Bank reported a PAT of LKR 1.8 Bn as compared to LKR 1.2 Bn reported in the quarter ended Mar-19. The Bank’s RoA (at PAT) and RoE improved to 0.61% and 15.32% in CY2019 as compared to 0.44% and 10.95% in CY2018. In Q1CY2020, the Bank reported a RoA (at PAT) and RoE of 0.60% and 16.23% as compared to 0.85% and 11.02% reported in Q1CY2019.

About the entity

National Savings Bank (NSB) was established in 1972 through the Parliament Act, No.30 of 1971 by amalgamating the Ceylon Savings Bank, the Ceylon Post Office Savings Bank, the savings certificate section of the Post Master General’s Department and the Ceylon War Savings movement. Currently, NSB operates with 258 branches and a network of over 4,000 post offices as at March 31, 2020. The Bank’s subsidiaries, NSB Fund Management Co. Ltd is the dedicated primary dealer and Sri Lanka Savings Bank is a licensed specialised bank.

During the CY2019, NSB reported a PAT of LKR 6,698 Mn on a total asset base of LKR 1,158 Bn as compared to a PAT of LKR 4,500 Mn on a total asset base of LKR 1,037 Bn in the previous financial year. For Q1CY2020, NSB reported a PAT of LKR 1,782 Mn on a total asset base of LKR 1,200 Bn.

Markets

Sri Lanka stocks close down 0.60-pct, dragged by HNB and LOLC

Friday November 13, 2026 3:28 pm

ECONOMYNEXT – Sri Lanka’s Colombo Stock Exchange closed down on Friday, CSE data showed, with the benchmark All Share Price Index moving down 0.60 percent.

The ASPI was down 133.22 points at 22,024.18, while the more liquid S&P SL20 was down 1.06 percent, or 67.55 points, at 6,298.02.

The ASPI ended the week up 784.53 points from last Friday.

Positive contributors to the ASPI were Dialog Axiata (up 0.40 percent at 50.20 rupees), Distilleries Company of Sri Lanka (up 0.52 percent at 58.30 rupees), Aitken Spence (up 3.60 percent at 151.00 rupees), Ceylon Tobacco Company (up 1.05 percent at 1,828.50 rupees), and LOLC Finance (up 1.96 percent at 5.20 rupees).

Hatton National Bank (down 1.88 percent at 403.75 rupees), Richard Pieris and Company (down 6.21 percent at 27.20 rupees), LOLC Holdings (down 2.17 percent at 405.00 rupees), Sampath Bank (down 1.91 percent at 154.00 rupees), and Singer (Sri Lanka) (down 2.40 percent at 77.30 rupees) were top negative contributors.

Market turnover was 3.23 billion rupees. Capital goods led turnover with 869.21 million rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka MP slams budget speech for omitting Tamil national question

Friday November 13, 2026 2:56 pm

ECONOMYNEXT – A Sri Lanka legislator has voiced strong disappointment that the President’s budget speech failed to make a single mention of the Tamil national question.

“It is very unfortunate that in His Excellency the President’s speech, there has not been a single word mentioned about the Tamil national question. Not a single word,” Shanakiyan Rasamanickam said.

“A budget speech generally, is a policy direction of the government for the next year. The budget speech is not only a statement of the country’s fiscal position or the economy’s position. It is the country’s, the government’s, plan, or what the government plans to do the following year. That’s a policy statement.”

Former presidents would at least mention the Tamil question even if it was not resolved, he said.

Former President Ranil Wickremesinghe in his speech, in his policy statement, he would mention: “The Tamil national question must be resolved,” Rasamanickam said.

Former Presidents Maithripala Sirisena and Gotabaya Rajapaksa also mentioned that the national ethnic question must be resolved, he added.

“Every President, every country’s Head of State, in their policy statements, have acknowledged the fact that there is an unresolved national issue, the Tamil national question, that it needs to be resolved. Various governments have proposed various mechanisms; none of them have succeeded, but at least it was mentioned.”

This year’s budget made allocations for the Office of Missing Persons, and the Office of Reparations.

“But the domestic mechanism is a mechanism that the victim community has rejected. So you all are allocating money to a mechanism where the victim community is not going to be part of.”

Last year’s budget 1 billion was allocated to be spent on the Trincomalee and Jaffna airports.

“Where was that 1 billion for the Trincomalee and Jaffna airports spent last year?”

“The trajectory of this government, Honourable Deputy Speaker, is worrying to me. It’s really worrying to me. Because if the objective is to say that there is no Tamil national question, if the objective is to say that you all have resolved any ethnic issue that this country faced, then Honourable Deputy Speaker, then I think the Tamil people will teach this government a very, very, very harsh lesson in the future.” (Colombo/Nov13/2026)

Bonds & Forex

Sri Lanka sells extra Rs6.5bn Treasury bills after auction

Friday November 13, 2026 12:32 pm

ECONOMYNEXT – Sri Lanka has sold 6,500 million rupees of treasury bills offered on tap at an average rate of 9.95 percent, the public debt management office said, bringing the total of bills sold in the week to 85.562 billion rupees.

The issue offered 90 billion.

Total market subscription was 6.5 billion rupees.

The debt office sold a 12-month bill at 9.95 percent.

On Wednesday (11) the debt office raised 79 billion rupees of 3, 6 and 12 month bills after offering 90 billion.

The settlement date is November 13. (Colombo/Nov13/2026)

Construction and Real Estate

Access Engineering Sept quarter group net profit surges 200-pct to Rs4.75bn

Friday November 13, 2026 12:15 pm

ECONOMYNEXT — Sri Lanka’s Access Engineering PLC recorded a group net profit attributable to equity holders of Rs. 4.75 billion for the quarter ended September 30, surging 200 percent from Rs. 1.58 billion a year earlier, interim accounts showed.

Basic earnings per share rose to Rs. 4.08 for the September quarter, up from Rs. 1.58 previously.

Quarterly group revenue expanded 36 percent to Rs. 20.39 billion from Rs. 14.94 billion, underpinned by condominium property handovers — reflected in inventories dropping Rs. 7.69 billion since March to Rs. 35.71 billion — alongside strong automobile sales and steady civil engineering execution.

Cost of sales rose at a slower 27 percent to Rs. 14.34 billion, lifting gross profit by 64 percent to Rs. 6.05 billion and expanding gross margins to 29.7 percent from 24.7 percent.

Other income jumped 144 percent to Rs. 259.9 million, while administrative expenses rose 75 percent to Rs. 1.14 billion, leaving operating profit up 64 percent at Rs. 5.16 billion.

However, finance costs more than doubled, rising 107 percent to Rs. 1.18 billion on elevated group borrowings of Rs. 43.74 billion, partly offset by finance income climbing 302 percent to Rs. 42.2 million.

Share of results from equity-accounted investees rose 122 percent to Rs. 26.7 million, pushing pre-tax profit up 56 percent to Rs. 4.05 billion.

Income tax swung to a net reversal of Rs. 186.6 million from an expense of Rs. 804.1 million, boosted by deferred tax assets on unrelieved losses from a 100 percent enhanced capital allowance claimed by 60 percent-owned radiopharmaceutical subsidiary Access Medical Tracers (Private) Limited.

Total period profit rose 136 percent to Rs. 4.24 billion, with non-controlling interest declining 24 percent to Rs. 164.9 million following last year’s buyout of minority shareholders in Harbour Village (Private) Limited.

No separate exchange gain or loss was itemized in quarterly earnings, though foreign currency translation via associates recorded a Rs. 17.4 million loss in other comprehensive income, alongside USD 16.6 million in corporate guarantees.

Notes also flagged an expected Rs. 1.45 billion recovery from the terminated South Asia Commercial and Logistics Hub project, a Rs. 225 million post-quarter legal settlement already provided for, and a Supreme Court appeal over a 2011/12 PAYE tax ruling.

Group assets stood at Rs. 132.4 billion as of September 30, with net asset value per share at Rs. 46.70, as the Employees’ Provident Fund raised its stake to 5.69 percent.

Access Engineering shares closed at 80.00 rupees at the end of September and are currently trading around 85.80 rupees. (Colombo/Nov13/2026)

Economy

Sri Lanka private sector says timely implementation of Budget 2027 key

Friday November 13, 2026 11:43 am

ECONOMYNEXT – Private sector body, The Ceylon Chamber of Commerce, said it was encouraged by the broad direction of Budget 2027, noting that it reinforces Sri Lanka’s commitment to economic transformation while maintaining policy continuity, macroeconomic stability, and fiscal discipline.

“This continuity is particularly important as the country seeks to transition from economic stabilisation to a more durable, investment-led growth trajectory.”

The chamber also noted several areas where the Budget could have placed greater emphasis to strengthen the country’s growth prospects.

“In particular, there is a need for a stronger focus on attracting Foreign Direct Investment (FDI), accelerating factor market reforms, particularly in land and labour, and fast-tracking public procurement reforms to improve the efficiency and speed of project implementation.

“More targeted and actionable proposals could have been introduced to unlock the potential of sectors with significant growth opportunities, including tourism, agriculture, IT/BPO and logistics.”

The chamber said the budget contains positive measures aimed at enhancing competitiveness, and external sector resilience, while presenting opportunities for focus on sectors that can accelerate growth.

“A number of the key structural reforms identified in last year’s Budget have been carried forward and strengthened, providing greater certainty and predictability to businesses and investors.

“These include the continued implementation of the Trade National Single Window (TNSW), the phased removal of para-tariffs, the rollout of the Digital ID framework, efforts to expand market access through new Free Trade Agreements (FTAs), the strengthening of one-stop-shop investment facilitation mechanisms, progress on Customs reforms, the expansion of Bandaranaike International Airport (BIA), enhanced financing support for SMEs, and reforms relating to the management of State-Owned Enterprises.”

The CCC said that more than 20 proposals submitted by it have been reflected in Budget 2027.

These include measures to strengthen investor facilitation through the establishment of a professionally managed investment promotion agency; continued efforts to improve trade facilitation and export competitiveness; the Government’s consideration of a successor programme with the International Monetary Fund (IMF); accelerated progress on key legislative reforms; the expansion of digital government services; and the promotion of cashless payments and broader digital adoption. The Budget has also captured several priorities relating to energy security, including the accelerated deployment of Battery Energy Storage Systems (BESS) and investments in fuel storage infrastructure, initiatives to optimize underutilized agricultural land, measures to support the expansion of the digital economy and the IT/BPO sector, and tax reforms to support exporters, including the acceptance of newly VAT-registered exporters as eligible exporters.

“The inclusion of these priorities reflects the value of sustained public-private dialogue and demonstrates increasing alignment between national policy objectives and the needs of a competitive, export-oriented economy.

“The priority now must be effective and timely implementation to translate policy commitments into investment, competitiveness, exports and sustainable growth.” (Colombo/Nov13/2026)