Sri Lanka’s leading private banks have posted a marked improvement in asset quality for the first quarter of 2025, with average non-performing loan (NPL) ratios dropping to 3% from 5% year-on-year, according to their latest financial statements.
The country’s top three private lenders—Commercial Bank, Hatton National Bank (HNB), and Sampath Bank—attributed the decline in NPLs to a combination of enhanced risk management, aggressive recovery efforts, and macroeconomic stabilization.
Commercial Bank, the largest private bank in Sri Lanka, reported an NPL ratio of 2.58% as of March 31, down from 2.76% in December 2024 and a significant improvement from 5.59% a year earlier. The bank’s total group assets reached Rs. 2.9 trillion, although stage 3 impairments rose by Rs. 3.8 billion to Rs. 88 billion.
HNB also reported notable gains, with its net stage 3 ratio improving to 1.82%, down from 1.88% in the previous quarter. The bank recorded a stage 3 impairment reversal of Rs. 379.7 million, crediting its “robust risk management framework and intensified recovery efforts” for the turnaround. HNB’s group assets totaled Rs. 2.35 trillion at the end of March.
Sampath Bank, meanwhile, reduced its NPL ratio to 4.61% from 4.69% at the end of 2024 and 5.53% in March 2024. The bank posted a total impairment reversal of Rs. 81.8 million and noted a 102% decline in impairment charges on loans and advances, citing improved customer credit profiles and a proactive provisioning strategy implemented in previous years. Sampath’s group assets stood at Rs. 1.92 trillion.
The collective improvement reflects a broader recovery in Sri Lanka’s financial sector, as banks strengthen their balance sheets and adapt to evolving credit conditions amid signs of economic stabilization.