Amid declining market interest rates and the gradual uptick in domestic demand, credit growth of the Banking sector witnessed a resurgence particularly in terms of the private sector while the dependence of State Owned Enterprises declined mainly due to the Central Government absorbing certain credit facilities of a major State Owned Enterprise.
Profitability of the Banking sector also improved, significantly supported by the increase in net interest income, according to Financial Stability Review 2024 of the Central Bank. Meanwhile the performance of both the Finance Companies (FCs) sector and the Insurance sector depicted an overall trend consistent with that of the Banking sector, highlighting the impact of improved macrofinancialconditions within the financial sector as a whole.
Accordingly, the FCs sector also reported an improved performance despite the saturation in vehicle leasing activities. Assets of the sector improved, both in terms of quantity and quality, while liquid assets of the sector also recorded a growth with increased investments in Government securities.
Meanwhile, similar to the Banking sector, reduced interest costs supported profit expansion while the capital adequacy levels of the sector also improved. Likewise, developments within the Insurance sector depicted an improvement during the period, as reflected through the increase in Gross Written Premium.
Further, a notable asset growth was observed due to the significant growth in assets of the long term insurance subsector with continued increase in investments in Government securities. Profitability also improved amidst robust levels of capital adequacy within the insurance industry. Accordingly, the recovery, stabilisation and gradual growth of the banking, finance companies, and insurance sectors, were particularly influenced by he developments in the interest rate structure and continued investments in Government securities. Household and Institutional sectors, which constitute key financial services consumers, recorded an expansion in credit during the first half of 2024.