Traditional Banks - Sri Lanka

Sri Lanka

In 2024, Sri Lanka's Traditional Banks market market is expected to witness a substantial increase in Net Interest Income, reaching a projected value of US$10.91bn.
The market is largely dominated by Traditional Retail Banking, which is projected to have a market volume of US$7.58bn in the same year.
Looking ahead, the Net Interest Income is anticipated to exhibit an annual growth rate of 5.63% (CAGR 2024-2029), resulting in a market volume of US$14.35bn by 2029.
In a global context, China is projected to generate the highest Net Interest Income, amounting to US$3,869.0bn in 2024.
In Sri Lanka, traditional banks are facing increasing competition from digital banks, leading to a shift in customer preferences towards convenience and online banking services.

Key regions: Germany, United Kingdom, France, Japan, China

Definition:

The Traditional Retail and Commercial Banks market refers to the financial services sector that provides a range of financial products and services to individuals and businesses through store-based branches and other traditional channels. Retail banking focuses on offering financial services to individual consumers, such as personal loans, savings and checking accounts, credit cards, and mortgages. Commercial banking, on the other hand, provides financial services to small and large businesses, including loans, lines of credit, and other financial products designed specifically for businesses.
The traditional banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. These banks have a long history of serving customers and have established relationships and a deep understanding of the financial needs of their communities. They offer a wide range of services and are able to provide personalized advice and support to their customers.
In this market, banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. However, they also face challenges, such as increased competition and changing customer preferences, which are driving the need for continuous improvement and adaptation.
Overall, the traditional retail and commercial banking market provides a wide range of financial services to both individuals and businesses through established, trusted channels and continues to play a vital role in the financial landscape.

Structure:

The market consists of two segments:
- The Traditional Retail Banks market refers to financial services provided to individual consumers (e.g., personal loans, savings and checking accounts, credit cards, mortgages).
- The Traditional Commercial Banks market refers to financial services provided to businesses, including small and large enterprises (loans, lines of credit, other financial products specifically designed for businesses).

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Industrial and Commercial Bank of China Ltd., JPMorgan Chase & Co., and HSBC Holdings.

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Analyst Opinion

Traditional Banks market in Sri Lanka has been experiencing significant developments and trends in recent years.

Customer preferences: Customers in Sri Lanka are increasingly seeking personalized banking services and digital solutions from traditional banks. This shift in preference is driven by the convenience and efficiency offered by digital banking platforms. Additionally, customers are placing a higher emphasis on security features and competitive interest rates when choosing traditional banks for their financial needs.

Trends in the market: One notable trend in the Traditional Banks market in Sri Lanka is the expansion of branch networks to rural areas. Traditional banks are focusing on increasing their presence in underserved regions to tap into new customer segments and drive financial inclusion. Moreover, there is a growing trend towards sustainable banking practices, with traditional banks in Sri Lanka incorporating environmental and social considerations into their operations.

Local special circumstances: Sri Lanka's Traditional Banks market is influenced by the country's unique demographic and cultural factors. The increasing adoption of mobile banking and digital payment solutions is driven by the tech-savvy younger population in urban areas. However, traditional banking services still hold significance in rural areas where personal relationships and face-to-face interactions are valued. This diversity in customer preferences presents both challenges and opportunities for traditional banks operating in Sri Lanka.

Underlying macroeconomic factors: The macroeconomic landscape in Sri Lanka, including factors such as GDP growth, inflation rates, and government policies, plays a crucial role in shaping the Traditional Banks market. Economic stability and regulatory reforms impact the overall performance and competitiveness of traditional banks in the country. Moreover, the changing interest rate environment and foreign investment inflows influence lending practices and profitability for traditional banks in Sri Lanka.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.