SRI LANKA FINANCIAL SECTOR QUARTERLY UPDATE FOURTH QUARTER 2002 · Highlights · Introduction : This note is prepared by the World Bank Colombo Office to review the trends of some of the key indicators which have an impact on the financial sector performance. The main indicators identified in the report are: (i) banking sector performance in terms assets, deposits, advances, (ii) interest rates, (iii) exchange rate movements, (iii) inflation and; (iv) capital market movements. The data is collected from the Central Bank, individual banks, Department of Census and Statistics and Colombo Stock Exchange. If the data is adjusted by the respective organizations in subsequent reports, we will adjust our records accordingly. Performance of the Commercial Banking Sector : At the end of the 3rd quarter of 2002, out of the total assets in the commercial banking sector, the two state commercial banks (SCBs) accounted for 50% while private domestic banks (PDBs) accounted for 37%. In terms of deposits, the SCBs led with 48%, which was followed by the PDBs with 40%. The PDBs, during the period under review, recorded an increase of 4% in terms of assets, 2 % in terms of deposits and 5% in terms of advances. The four major private banks (HNB, Commercial Bank, Seylan and Sampath) dominated the PDB category accounting for 82% of the assets, 87% of the deposits and 90% of the loans granted. The Non-performing Loans (NPLs) as a percentage of total advances in the commercial banking sector were 15.7% at the end of the 3rd quarter 2002 as against 16.5% in the 2nd quarter. For the first time in Sri Lanka, the Central Bank (CBSL) suspended operations and subsequently after investigations, announced the liquidation of Pramuka Bank, a private development and savings bank. This bank, being a one-branch operation, is unlikely to pose a systemic risk to the banking sector. The HNB is currently in the process of divesting its holdings in the Sampath Bank. The CBSL has commenced publishing the names of the financial institutions regulated by them to ensure that the depositors are made aware of the existence of unauthorized financial institutions. Performance of the Licensed Specialized Banks (LSB) : At the end of the 3rd quarter 2002, out of the total assets of the LSBs, the National Savings Bank (NSB) led with 58% followed by National Development Bank (NDB) (15%), DFCC Bank (13%), Regional Development Banks (5%) and the State Mortgage & Investment Bank (SMIB) (4%). In terms of their lending operations, NDB led by 26%, followed by DFCC (24%), NSB (21%) and SMIB (9%). The NPLs, as a percentage of total advances of the LSBs, increased from 16% to 17%. The CBSL has taken a decision, to transfer a part of its holdings of shares of the Regional Development Banks to the Treasury, retaining only 20%. This is in line with the CBSL aim to focus on its core functions. Financial Sector Quarterly Update:4th Quarter 2002 Open Market Operations & Interest Rates : During the 4th quarter of 2002, average prime lending rate continued its downward trend and ended up at 12.2% in December as against 12.6 % in September. The repo rate and reverse repo rates reduced to 9.75% and 11.75% respectively in December. The short term Treasury Bill rates have also reflected a decline with one-year Treasury Bill rate dipping down from 11.3% in September to 9.9% in December. The offer rates in the interbank money market have somewhat stabilized at around 10.7%. The downward trend observed is mainly due to the continued high liquidity in the market. The pressure in the money market has significantly slackened due to better cash management of the government while the private sector investments too still have not picked up. The government continued to issue Treasury Bonds of longer term maturities of 3 to 6 years and is expected to issue 10 year bonds starting from January 2003 which will help in developing a long term yield curve. The CBSL will be engaged in more active open market operations. Exchange Rate Movements: The exchange rates have depreciated quite significantly except for the Dollar. This is partly a reflection of further weakening of the Dollar. The foreign exchange market has stabilized and deepened due to the increased forward market activities. The Rupee depreciated marginally against the Dollar by 0.5% while Euro depreciated by 7%, Sterling Pound, SDR and Japanese Yen by 3% during the last quarter of 2002. Inflation: The inflation has shown a slightly increasing trend in the 4th quarter. This is partly due to the adjustments in gas, electricity and telecommunication rates. The Point-to Point Index increased from 10.7% in September to 11.3% in December while the Monthly Moving Average Index declined to 9.6% in December from 10.4%. The inflation has come down substantially in the year 2002; from 14.2% in December 2001 to 9.6% in December 2002. Capital Market Movements : The capital market, which had been in the doldrums since 1994, reflected a remarkable recovery with the election of a new government. The investor sentiments further strengthened with the initiation of peace negotiations in Bangkok and Oslo and the continuing conflict free environment. However, the last quarter of 2002 reflected a slowing down of the growth shown in the earlier part of the year. The ASPI declined from 857 to 815 while both the Milanka and the MBSL Indices reflected a decline of 6% reaching 1375 and 1704 respectively. Monthly turnover ranged from Rs. 1.1 billion (US $ 11.5 million) to Rs. 2.9 billion (US $ 30.4 million). The foreign investor activities indicated a net outflow of Rs. 267 million (US $ 2.8 million) during the 4th quarter for the first time since February 2002. The market capitalization further declined from Rs 174.0 billion to Rs 163.0 billion. There were major IPOs such as Sri Lanka Telecom and Apollo which were over subscribed several fold. It is also reported that the Colombo stock market has been one of the best performers during 2002. The ASPI increased by 31% and the Milanka representing the top 50 companies increased by 33% during the year 2002. Report, Graphic Design & Concept : Sriyani Hulugalle Graphs Update: Krishantha Kumarasinghe 1/9/2003 2 & citse s 2002 snaoL etavi m 3 Pr ankB 41% Do Quarter knaB 4th al ci secn er va Update: Ad mmoC 3: ngier s Quarterly Fo ankB 11% secnavd BI 9% SM B % Sector erugiF eta laicre A NS 21 B s & ND 26% m St m ankB 48% Co snaoL Financial BSL: s B ystemS B3 8% RD Bankingl stisopeD erug e ci % st skn Fi herst 12 C % ativrP % O 24 me DFC Ba 40 Do ransactions.t 2002 knaB Unit Quarter cialre ankingB Commercia m the Third moC- ngier skn % 12 Fo Ba 2 e laicr Currency of of end erugiF at skn % St mme Ba 48 Foreign Co and the at Structure ticsem B As NS 58% Do ectl ref banks. Market Data 1: Table stessA e ci stessA 2002. commercial ativrP st skn % BSL sB 5% me RD 3, Ba 37 knaB Do B-1erugFi hers dividualin 5% Quarter Ot Banks to and cialre nks Ba BI relate m moC taad ngier skn edz CC %13 SM 4% % 13 1- Fo Ba e laicr DF 1, Department NDB %15 Commercial erugiF at skn % Table St mme Ba 50 Speciali of Co Supervision case nk the Ba in Licensed Licensed Only: CBSL: Note Source 4 2002 dl Quarter 18 38 00 00 00 10 4th Yie. % - - - - - 14. 14. 13. 13. 12. 11. earsY Av s 6 e Update: mlu Vodl Mn.sR - - - - - earY3 000 000 500 500 000 000 1, 2, 1, 1, 1, Quarterly Yie. % - - - - 23 34 34 36 93 80 00 00 14. 14. 14. 13. 12. 12. 12. 11. seitiruceS s earY2 Av Sector Years tne e 5 mlu - - - - 200 500 470 250 000 000 000 000 mnre s 1, 3, 1, 2, 2, 1, 1, ayD Financial VodeliY Mn.sR ov G 364 of % - - - 79 89 92 42 - 40 90 ondsB sr v.A 13. 13. 13. 12. 12. 10. dne Tr eaY dlei syaD2 18 4 e easuryrT umolV Mn.sR - - - 000 660 000 700 - 000 000 2, 1, 2, 1, 1, Y:5 er s gu deliY ayD 30 98 77 76 79 73 31 20 20 20 10 Fi 91 % 4.1 3.1 3.1 3.1 3.1 3.1 13. 2.1 12. 12. 11. 16 15 14 13 12 11 10 earsY v.A 3 e Operations umolV Mn.sR 340 000 100 000 250 1, 2, 2, 1, 3, 3100 1500 2000 2000 2000 2000 del 94. 73. 74. Yi % 14 13 12 earsY v.A 14.08 11.94 Market en 2 e Op umolV Mn.sR 572 500 000 000 500 1, 3, 2, 1, r 2: eldiY 17 16 16 25 00 27 69 24 33 9.9 hcr beme % 13. 13. 13. 13. 14. 13. 12. 11. 11. 11.3 10.6 Ma uneJ pteS Days v.A estii Table e ur 364 umolV Mn.sR 522 240 682 970 35 258 532 159 990 1, 2, 2, 3, 2, 2, 2, 1747 1706 1378 illsB Days deliY.vA 01 99 09 78 41 71 86 43 52 ecs.tvoG % 13. 12. 12. 12. 13. 13. 12. 11. 11. 11.1 10.3 9.9 tyiruceSe of ev thfo yraurb y tsug tyir Fe Ma Au e urC tua M easuryrT 182 mulo lVd Mn.sR 400 290 91 231 415 483 562 563 897 259 401 887 deliY 91 72 75 83 19 98 98 99 88 8 2 9 ankaL 4:e y Yie. % 12. 12. 12. 12. 13. 12. 11. 10. 10. 10. 10. 9. Sri Av ofk guriF anuarJ yluJ Days 2002 lir 02 Ap 20 e 91 mlu Vo Mn.sR 306 116 268 364 327 955 242 780 602 815 698 169 2, 2, 2, 2, 3, 1, 2, 2, 3, 1, 1, 2, Banla 8. 8. 8. 8. 8. 8. 15 14 13 12 11 10 h anJ Centr h l ont t M 2002 ebF arc M priA ay M uneJ yulJ ugA eptS Oc Nov Dec Source: 5 2002 2 9 7 8 8 Quarter 12. 10. 10. 10. 10. 40 89. 8 0 10. 11. 00 06. 18. 10. 05.7 4th ceD 12 9.10 7.10 8.10 0.11 6.10 89. 8.11 00 06. 18. 0.10 08.7 Update: ovN 5.12 10 8.10 0.11 1.11 7.10 5.10 8.12 00 02 00 0.6 18. 11. 12. 0.10 00.8 Quarterly 00-4. 00-8. tcO 75 31 17 88 21 36 05 57 00 10 00 Sector 06. 0 12. 11. 10. 10. 11. 10. 11. 12. 18. 11.-004. 12.-168. 10. 0.28 Financial peS 63.12 13.11 85.10 00.11 13.11 74.10 50.11 75.12 00.18 00.11 00.12 06. 00.1 0.29 00-4. 68-7. guA 43.13 13.11 88.10 96.10 46.11 78.10 50.11 75.12 00.18 00.12 00.14 07. 01.1 9.49 00-4. 25-8. yluJ 04 63 40 54 79 19 50 75 00 00 00 07. 14. 12. 12. 12. 12. 12. 11. 13. 18. 12. 14. 0.11 16.9 00-4. 00-9. enuJ 56 27 17 38 09 77 05 58 00 00 00 07. 0 13. 12. 12. 12. 12. 12. 11. 13. 18. Rates 12.-004. yaM 14.-000.1 11. 1.89 47.13 00.12 00.12 27.12 46.12 71.1 51.1 85.13 00.18 00.12 00.14 07. 01.1 0.001 Interest 3: liprA 00-4. 00- 10. 553.1 832.1 532.1 432.1 652.1 532.1 051.1 563.1 008.1 00 12. 1.101 Table hcraM 12.-004. 004.1-00.10 48. 0 42.13 40.12 23.12 33.12 56.12 02.12 12 14 00.18 00.12 50.14 48. 02.1 4.401 ka beF 00-4. 50-9. Lan 84 35 44 56 75 22 12 14 00 00 50 naJ2 48. 0 Sri 13. 12. 12. 12. 12. 12. 18. 200 12.0-04. 14.0-59. 13. 35.01 of 0 0 Bank ntraleC ic )%(setaRgnind setaRgndineLemirPegarevAknaBlaicrem Le omC setaRgndineLemirPtsewoL )%()ROBILS(eatRreffOkanBretnIaknaLirS rtment,a yaD1 yaD7 htnoM1 )%()vA(etaRtkeraMyeonMlaC )%(etaResahcrpueRknaBlartneC )%(etaResahcrupeResreveRBC )%(etaRknaB )%(setaRsgnivSa sitsopeDsginvaSknaBliacremmoC stisopeDdexiF.rY1knaBliacremmoC stispoeDsgnivaSknaBsgnivaSlaonitaN stispoeDdexiF.ry1knaBsgnivaSlaonitaN )RDWA(etaRtisopeDdethgieWegarevA Dep Research Econom Source: 6 2002 Quarter 4th ecD )vA(et Update: oneyMlalC voN tcO Ratekra Myeno Quarterly and epS Mll Ca Sector atesR guA erffO Financial ankB- teaRtekraM yluJ htno e unJ M1 ay nterI M a li prA ayD7 anklirS- hc ar M 7e beF yaD1 guriF anJ setaR 02 20 ing 16 12 8 4 0 nd )RD Lee W % atesRt imrPe es ag ternI ervA etaR etaRtis ealR 8: ceD e nkaBliacre ngi nd (AetaRtisopeDdet poeD Lee ighe ed m mirP We htige ag voN guriF moC aleR ervA WlaeR tcO es peS ) s guA DR ateRti yluJ atRgnidneLe WA(e h poseD atRtiso ont M enuJ mirPe es g/n ag er 16 14 12 10 8 6 4 2 0 -2 -4 ndi yaM Av atRgnid Le:6 ) e lirpA knaB enLe %( Depdethgie urgiF alci et hcraM er mirPt m Ra kn Wegare beF moC eswoL Ba Av naJ 2002 20 18 16 14 12%10 8 6 4 2 0 7 2002 Quarter 4th Update: Euro.eht Quarterly with Sector rrencies Financial cula tionan their acedl SDR 117.86 117.62 116.74 116.14 116.25 119.03 121.12 123.98 126.98 127.34 127.69 126.99 126.30 127.92 130.57 rep R st Areayc SD 83.11 82.58 82.24 80.36 81.31 83.73 85.73 90.02 94.94 94.92 94.75 93.97 94.20 95.85 100.31 Euro Curren or Movemen 76.00 76.00 71.00 70.00 70.00 72.00 74.00 78.00 80.00 81.00 82.00 79.00 78.00 79.00 81.00 Euroeth estaR Eu JPY* of ankaL ge Rate Sri of members BSG 134.69 132.75 135.01 131.94 132.83 136.38 139.28 140.81 146.80 150.33 148.96 150.00 146.76 149.61 154.90 12 Bank anhcxE:9 htn *Y JP Mo all ralt er S Exchange 4: 2002, Cent, guiF GB 91.95 93.03 93.07 93.45 93.68 95.57 96.07 96.09 96.08 96.19 96.25 96.19 96.33 96.51 96.64 US$ Table January $ US ct of ovN ecD Jan Feb arM April ayM partmeneD June July Aug Sep tcO ovN ecD From 0 0 0 0 0 011 010 16 15 14 13 12 90 80 70 60 50 seepuR End 2001O JPY; 2002 Research Rates 100rep mic ees Econo Rup Exchange Note: Source: 8 2002 Quarter 4th Update: 2. Quarterly c 52. 3 11. 69. A N/ A/N A/N De 3321 Sector 99. ovN 0.2 1.9 5.9 33. 11 323 31 1.8 1 5 5 Financial Oct 175.3 80. 28. 99. 309. 58. 11. 8. epS 80.- 47. 4 7 9 3150 10. 30 87. 11. 6 guA 75. 7.2- 31 10.1 4 11 07.3 99. 32.1 yl 15. 80.- 8. 1. 6. 9. 3. 10 11 10 12 A/M Ju 326 312 2001-2002 1. uneJ 82. 7 4 5 1 3 3292 10. 11. 313. 11. 12. x onthm Index 4 7 3 2 2 denI 12- ay M 320 64. 10 11. 309. 11. 12. Price lirpA 3063 21.- 38. 2 5 8 2 12. 302. 10. 12. ecirPre htn nt 7 um 4 7 1 7 1 Mo ar M 098.3 50. 11. 12. 306. 14. 12. Consumer:5 84. 31. 58. 8. 3. 6. 6. nsoC:01 poi-ott-nioP ebF er 308 12 307 13 11 Jan2 4. 12. 98. 6 2. guiF 7 3 200 3046 13. 304 13. 11. Table onthm-ot c De 2984 50. 8 2 4 10. 14. 296 12. 11 onth-M 16 14 12 10 8 6 4 2 0 -2 -4 htworG % exdnIecirP' partmenteD eicrP'sre ers um tistics Sta Cons musnoC and % h ob % ob s teaR ont m ntoi mo Col 100) s teaR ntoi Census m =100) A/Mht A/Mht looC 1952( metillA thworG o-t-h ontM o-pt-ntoiP on er = 2-m1 eat Gr 1989( metillA thworG o-pt-ntoiP on 2-m1 Source: 9 2002 Quarter 4th 158 75 04 56 42 53 13 17 18 10 12 803 012 751 134 36 26 351 834 594 47 35 981 82 26 129 069 12 11 781 312 53- 361 Update: ecD 2 9 80 57 7 3 9 5 6 2 2 6 5 2 9 5 0 2 2 1 6 6 3 7 133 38. 184 101 125 35 19 18 40 271 14 47 46 353 20 268 97 82 138 16 45 28- 061 Quarterly 16 ovN Sector 0 4 6 7 7 6 3 2 7 4 1 5 3 9 4 4 0 0 1 3 7 4 82 138 172 193 100 124 36 20 17 40 280 14 48 47 358 20 286 99 81 293 33 26 37 661 Financial tcO 7 4 5 4 8 4 7 7 6 6 6 2 2 4 0 0 2 9 0 4 6 9 7 85 146 181 201 101 118 39 21 18 42 298 17 50 52 341 21 256 97 82 508 74 46 27 471 epS 752 1327 1562 1900 919 1048 352 188 140 329 1831 101 445 408 3444 196 2409 840 732 3052 1357 730 627 351 ugA 2 700 1214 1454 1722 872 997 316 171 133 312 97 1752 425 384 3444 181 2391 768 682 1993 260 257 241 Movements yluJ 711 2221 4681 7431 890 0161 322 168 146 322 7241 106 431 378 7303 193 4712 711 678 2055 6271 953 674 441 e Market unJ 685 1781 3751 6351 898 0101 333 166 82 288 6131 99 411 348 8063 195 3902 683 660 2863 0301 266 764 931 Capital ayM 6: 617 0261 2131 3721 783 955 300 151 80 262 6471 100 382 271 8063 200 3082 686 635 2851 565 261 304 521 lirpA Table 186 07 21 32 10 12 13 977 00 10 123 481 85 692 34 14 041 843 692 84 39 062 08 23 876 456 68 24 888 103 785 521 hcarM 046 889 15 17 12 13 587 229 063 441 88 472 04 16 041 943 802 84 39 092 36 23 046 915 86 13 251 173 921- 121 ebF 625 109 06 04 11 12 147 848 682 341 85 302 78 98 14 523 013 84 39 082 23 21 036 695 32 13 981 235 5 32- 211 anJ aniespm aniespm co co 2002 25 25 )sn e nca oc 1* salciute )snM s.R(r oven )snM.sR( largest largest the ) next Exchange the ent sm dexnIeci 2* ursnI Tobac ces nc Pha eslitxeT selva st Stock us yt esil Tur es illioB.sR(niota Tr ashc nsM.sR( )snM.sR( Covers- es ssesAt Pre dexnIeci macr ngsdiolH & oper s ar Pra Foo, age &salc onit Covers- ke ucrt edifis Tr Pr gniurt Supp ashc Shl earw ment s ml oniat gni Colombo Mar Al ankliM paCdiMLSBM &e &d dinI ort naiF,sk Sec Ban Bever emihC nsoC &d acuf &se etkarMyhlt veriD Foot &seltoH or nvestI Lan anM orotM paloi ant esciv ad Pl Ser St Tr noitazliaitpaCtekraM urPngie esalSngie onM For For urPteN liztaipaCtekraM MILANKA- MBSL 1* *-2 Source: 10 2002 Quarter Dec occ 4th Nov obaT & Update: secidnIr Oct oodF ngi tur Sep age, ac er Quarterly Aug evB nufaM Sector toceS-tekraM July e June anc ur Financial tyiuqE:21 nsI May & e April ceD erugiF snoti ) March nanciF,skn Ba stsurTtnemtsevIn tanalP voN Feb nsM.sR( 2002Jan tcO esalS gnei 0 orF 5003 0003 5002 0002 5001 0001 500 peS . secidnI ecna guA ) mrorf yluJ nsM.sR( 2* paC d PeterkaM:31 htn ess enuJ Mo hac urP yaM ngieroF )snioillB.sR(niotaizlaitpaCtekraM Mi LS MB reugiF lirpA )s hcraM .sR( Mn sec 1* dinI xednI beF : etk eicrP ervonruTtek )snM. naJ2002 ar akn arM M yt ilaM yhl 0 0 0 0 0 0 0 0 600 500 400 300 200 100 uiqE 100- ntoM Rs(sesahcruPt Ne 11 er dexnI guiF ecirP e harSl A 00 00 00 00 00 00 00 00 19 18 17 16 15 14 13 12 0011 00 0 0 0 0 0 10 90 80 70 60 50 secidnI