The risk of a second COVID-19 wave, together with weak borrower sentiment in an already fragile operating environment, would put further stress on Sri Lankan finance and leasing companies’ credit profiles, adding to existing pressures on asset quality and profitability, Fitch, in a special report said on Oct 21.

Fitch expects Sri Lanka’s real GDP to contract by 3.7% in 2020 due to the pandemic. The economic fallout has pressured the FLC sector’s asset quality with the six-months past due non-performing loans (NPLs) ratio spiking to 14.1% by end-June 2020.

Fitch warns that a prolonged restriction on vehicle importation and the resultant surge in second-hand vehicle prices are likely to hamper Sri Lankan FLCs’ medium-term growth prospects. The sector’s loans contracted by 0.2% YoY during the 1st quarter of FY 2021, and leasing and hire purchases accounted for 55% of the sector’s lending.

https://www.newsfirst.lk/2020/10/21/sri-lankas-finance-companies-on-the-rocks/