Apr 01, 2014 (LBO) - Sri Lanka's two largest state banks have taken a 20 billion rupee hit on credit losses in 2013 and had slashed their troubled gold-backed loan portfolios as the precious metal's price slumped, interim accounts show.
State-run People's Bank set aside 11.7 billion rupees as general provisions in 2013 up from 3.2 billion rupees a year earlier.
With specific provisions of 1.9 billion rupees, total provisions rose to 13.7 billion rupees, up from 3.8 billion rupees a year earlier.
State-run Bank of Ceylon, made 7.7 billion rupees of general provisions up from 2.6 billion rupees a year earlier, but reversed 898 million rupees of specific provisions made earlier. Last year there was also a 1.7 billion rupees unspecified write down.
The two banks together saw credit loss provisions double to 20.5 billion rupees in 2013 from 9.2 billion in 2014.
Sri Lanka's private banks which were also exposed to pawning or gold-backed loans had to take in credit losses and cut their portfolios. Some were also converting a part of their gold-backed loans to ordinary loans, bankers said.
Provisioning allows early recognition of losses and cleans up the balance sheet.
Accounts of People's Bank showed that gold backed loans fell from 250 billion rupees to 197 billion rupees.
Term loans went up from 180 to 276 billion rupees, with total loans growing only 1.4 percent to 619 billion rupees during the year.
At Bank of Ceylon, pawning loans fell to 131 billion rupees by end December from 146 billion rupees a year earlier. Total loans grew 4 percent to 725 billion rupees.
Gross rupee denominated loans fell 530 billion rupees from 547 billion rupees.
Profits at People's Bank slumped 31 percent to 7.48 billion rupees in 2013. At Bank of Ceylon, profits fell 16.3 percent to 12.0 billion rupees.
Sri Lanka's banks have also seen rise bad loans across the board, as economic conditions tightened in the wake of a balance of payments triggered by a credit bubble in 2011.
Typically in Sri Lanka state banks play a key role in triggering balance of payments trouble by giving credit to state enterprises to subsidize energy, analysts say.
In the aftermath of the balance of payments crisis, there is usually de-leveraging as state enterprises repay loans taken during balance of payments trouble.
In the wake of past BOP crises state banks balance sheets have shrunk nominally despite Treasuries portfolios expanding.
But when interest rates fall, the risk free Treasuries portfolio helps boost profits as well as risk-weighted capital.
At People's Bank gross non-performing loans rose to 5.3 percent of loans by end 2013 from 2.8 percent a year earlier. Capital adequacy rose to 15 percent from 14 percent.
At Bank of Ceylon gross non performing loans rose to 4.3 percent of loans by end 2013 from 2.76 percent a year earlier. Capital adequacy was stable at 11.14 percent only slightly down from 11.38 percent.
State-run People's Bank set aside 11.7 billion rupees as general provisions in 2013 up from 3.2 billion rupees a year earlier.
With specific provisions of 1.9 billion rupees, total provisions rose to 13.7 billion rupees, up from 3.8 billion rupees a year earlier.
State-run Bank of Ceylon, made 7.7 billion rupees of general provisions up from 2.6 billion rupees a year earlier, but reversed 898 million rupees of specific provisions made earlier. Last year there was also a 1.7 billion rupees unspecified write down.
The two banks together saw credit loss provisions double to 20.5 billion rupees in 2013 from 9.2 billion in 2014.
Sri Lanka's private banks which were also exposed to pawning or gold-backed loans had to take in credit losses and cut their portfolios. Some were also converting a part of their gold-backed loans to ordinary loans, bankers said.
Provisioning allows early recognition of losses and cleans up the balance sheet.
Accounts of People's Bank showed that gold backed loans fell from 250 billion rupees to 197 billion rupees.
Term loans went up from 180 to 276 billion rupees, with total loans growing only 1.4 percent to 619 billion rupees during the year.
At Bank of Ceylon, pawning loans fell to 131 billion rupees by end December from 146 billion rupees a year earlier. Total loans grew 4 percent to 725 billion rupees.
Gross rupee denominated loans fell 530 billion rupees from 547 billion rupees.
Profits at People's Bank slumped 31 percent to 7.48 billion rupees in 2013. At Bank of Ceylon, profits fell 16.3 percent to 12.0 billion rupees.
Sri Lanka's banks have also seen rise bad loans across the board, as economic conditions tightened in the wake of a balance of payments triggered by a credit bubble in 2011.
Typically in Sri Lanka state banks play a key role in triggering balance of payments trouble by giving credit to state enterprises to subsidize energy, analysts say.
In the aftermath of the balance of payments crisis, there is usually de-leveraging as state enterprises repay loans taken during balance of payments trouble.
In the wake of past BOP crises state banks balance sheets have shrunk nominally despite Treasuries portfolios expanding.
But when interest rates fall, the risk free Treasuries portfolio helps boost profits as well as risk-weighted capital.
At People's Bank gross non-performing loans rose to 5.3 percent of loans by end 2013 from 2.8 percent a year earlier. Capital adequacy rose to 15 percent from 14 percent.
At Bank of Ceylon gross non performing loans rose to 4.3 percent of loans by end 2013 from 2.76 percent a year earlier. Capital adequacy was stable at 11.14 percent only slightly down from 11.38 percent.
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