Increase of NPL likely to affect quarterly results of banks and financial companies

Hiran H. Senewiratne

The increase in Non Performing Loans (NPL)  in banking and financial sector has affected the profitability of companies in the industry. As a result, the stock prices of these companies are likely to come down when their quarterly results are released during the course of the week or so, stock market analysts said.

Due to the drought and other natural disasters and coupled with economic slowdown has resulted in increasing the non performing loan ration which amounts to Rs 184 billion alone in the banking and financial sector. This amount could even be much lower, the analysts said.Loan growth is anticipate at a low or mid digit percentage in 2017, and is estimated that the reported non-performing loan (NPL) ratio will rise to about 3.0-3.2 percent over the next year from about 2.6 percent as of December 31, 2016," S&P Global ratings credit analyst said in a statement.NPL ratio in banks may climb this year after two years of strong loan growth, as capital buffers are also getting thinner, S&P Global Rating said.

"The NPL ratio has improved for the past three years due to the removal of non-performing gold-backed lending from the books. Now that the positive impact of the removal is fully played out, the NPL trend could reverse."

Amid those developments yesterday the Colombo Stock Exchange was down and both indices shown negative reaction. All Share Price Index went down by 18.82 points and S and P SL20 moved down by 27.96 points. But the day's turnover stood at Rs 884.6 million with tree crossings.

Those crossings were HNB 2.12 million shares crossed to the tune of Rs 536 million and per share value Rs 255, CCS  132,000 shares crossed for Rs 126 million and per share value Rs 950 and Central Fiance 300,000 shares crossed for Rs 30 million and per share valaue Rs 100.

In the retail market companies that mainly contributed to day;s turnover were Commercial Bank Rs 45.2 million (321,000 shares traded), Central Finance Rs 20.6 million  (266,000 shares traded) and TJL Rs 20 million (55,800 shares traded). During the day HNB crossings contributed more than the half of the day's turnover over and the balance contributed around Rs 348 million from the entire listing companies. During the day 9.2 million share volume traded in 2452 transactions.

animated gif
Processing Request
Please Wait...