Gold prices continue to hit Sri Lankan banks

March, 9, 2014

A latest research report has revealed that the profits of Sri Lankan banks have decreased by 16 percent during the last quarter in December due to the decline of gold prices in the world market and the heavy losses incurred on gold loans.

While this has been revealed through the latest research report on the stock market published by CAL Research, during the last quarter in December listed banks in Sri Lanka had set aside a sum of Rupees 4.7 billion for non-performing loans.

In 2012 the sum set aside by these banks for non-performing loans had been Rupees 3.5 billion.

However, during this period the banks’ Loan Books had increased by 16 percent the net interest margin had decreased by 30 units to 4.4 percent.

Analysts point out that this country is still one among the world’s largest net interest margin countries and that this is a huge barrier to the country’s development.

Net interest margin means the difference in the percentage of interest paid by a bank on deposits the percentage of interest on loans provided. In other words, it is the profit on interests earned by the bank.

While the net interest margin or the profit on interests earned by banks in Hong Kong is some 1.7 percent, it provided a great stimulus to economic activities.

According to the CAL Research, during the last quarter in December the profits of the listed companies in Sri Lanka had increased by 6 percent to Rupees 51 billion.