Dissertation in Finance

Measuring performances of banking

sector in Sri Lanka

BM/2007/133
K.D Lakmali

Department of Finance
University of Kelaniya

03/21/2022
Background of the study
This research carried out to identify the performance of
public sector and private sector banks in Sri Lanka.

Most argued that private sector banks lead to better

performance than public sector banks.
However, it does not guarantee that private owned firms
would always perform better than public sector banks.

Problem statement
Which banking sector is performing better in the banking
industry in Sri Lanka?

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Review of literature
 Hassan Mobeen Alam (2011) A financial performance comparison of
public and private banks.

In here concluded , ranking of banks differ as the financial ratio changes .

Depark Kapur (2011) financial performance and ownership structure of

Ethiopian commercial banks.

Results revealed that private sector banks had better profitability, assets quality,
and capital adequacy performance and public sector banks better in cost
management measure.
M.K Wanniarachchige (2007) can state owned banks outperform private banks.

Here study found that public banks perform better than private banks. And also
revealed that public sector banks perform well since strong government support
and established public confidence.

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Research objectives
 Comparison of performances between private and public
sector banks in Sri Lanka.
 To find whether ownership affects banks performance
 To find the best performing banking sector in Sri Lanka
 To find the best performing bank in Sri Lanka.

Research methodology
Research type: Quantitative research

Sample: 8 banks

Data type: secondary data

Time period : 3 years

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Data analysis & Findings Total assets & Total Equity

LKR '000 Total assets

LKR '000
2,500,000,000
Total Equity
1,967,960,309 120,000,000 112,839,927
2,000,000,000
1,668,998,690
1,547,760,211 100,000,000
1,500,000,000 87,201,829
1,201,843,259 75,339,875 91,028,346
80,000,000
973,873,879
1,000,000,000 855,612,979
60,000,000 70,601,742
60,525,953
500,000,000 Public Banks 40,000,000
Private Banks Public Banks
0 20,000,000
Private Banks
2009 2010 2011
0
Year 2009 2010 2011
Year

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Measure of profitability
% ROA
2.5
1.9 1.96
2 1.81
1.53
1.5 1.26 1.2 Public Banks
1 Private Banks

0.5
0
2009 2010 2011
Year
% ROE
25
19.87
20 18.34
17.13
15 17.1 17.96
15.9
Public Banks
10 Private Banks

0
2009 2010 2011
Year
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 %
5 4.55 4.485
NIM
4.15
4
4
3.73 3.9375
3
Public Banks
2 Private Banks

0
2009 2010 2011
year

Measure of efficiency
%
80
Cost to Income
69.15 68.4
70 64.125
60
50 55.76500000
51.39 52.7675 Public Banks
40 00001
Private Banks
30
20
10
0
2009 2010 2011
year
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Measure of Assets quality

% NPL
8
7.075
7
6
5.2
5.86
5
3.8 Public Banks
4
Private Banks
3 3.54
2.8425
2
1
0
2009 2010 2011
Year

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%4 3.7 Provision to loan
3.5 2.9225
3
2.5
1.8975
2 2.22 Public Banks
1.5 Private Banks
1.53
1 1.295
0.5
0
2009 2010 2011
Year

%
2.5
Provision to assets
2.11
2 1.875

1.5 1.2375
Public Banks
1 Private Banks
1.085
0.8175
0.5
0.525
0
2009 2010 2011
Year
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Liquid management
% Loan to deposits
100 90.1425 94.7675
81.77
80 57.22500000
00001 61.4
60 53.55
Public Banks
40 Private Banks

20

0
2009 2010 2011

Year
%
40 Liquid assets to assets
35 34.82 34.675 30.1224999
30 999999
29.825 26.555
25
20.76 Public Banks
20
Private Banks
15
10
5
0
2009 2010 2011
Year
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Capital management

%
14.5
Capital adequacy ratio - CAR
14.3075
14
13.6025
13.5
13.05
13 13.1425 Public Banks
Private Banks
12.625
12.5
12.575

12

11.5
2009 2010 2011
Year

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 %
Capital to Assets
18 16.225 15.765
16 14.635
14 12.425 14.805 14.3
12
10
8 Public Banks
6 Private Banks
4
2
0
2009 2010 2011

Year

% 16
Capital to deposits
13.775 13.5125 13.165
14
12
10
8 6.7575 Public Banks
6.245
5.04 Private Banks
6
4
2
0
2009 2010 2011
Year
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Conclusion
On the basis of results and analysis, public and private banks has different
ranking based on total assets, total equity and each financial ratio.

 Base on total assets or bank size, public bank are first and private sector
banks are second.
Based on average of total equity, private banks are first and public sector
banks are second.
 Based on profitability ratio, efficiency ratio, assets quality ratio,
Capital/leverage ratio private banks are first and public sector banks are
second.
Based on liquidity ratio public banks are first and private sector banks are
second.

Finally it can be concluded that on average private sector banks outperform

public sector banks during the period 2009-2011.

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THANK YOU

03/21/2022