Sri Lanka’s banking sector recorded stronger profitability in 2025, with cumulative profits after tax increasing by 19.3 per cent year on year to Rs. 369 billion by the end of December, according to the latest data released by the Central Bank of Sri Lanka.

The improvement in profitability was largely driven by higher interest income and a significant increase in non interest income, although operating expenses also continued to rise during the year.

Profits before tax grew by 3.7 per cent to Rs. 583.7 billion, while net interest income increased by 11.7 per cent to Rs. 1.02 trillion. Non interest income expanded sharply by 49.8 per cent to Rs. 275 billion. At the same time, sector wide operating expenses rose by 10.3 per cent to Rs. 493.4 billion.

Impairment for loans and other losses declined notably to Rs. 59.4 billion, supporting overall earnings growth.

Total assets of the banking sector increased by 12.4 per cent year on year to Rs. 24.9 trillion. Net loans and receivables grew by 23 per cent to Rs. 12.9 trillion, while investments reached Rs. 9.4 trillion. The deposit base also strengthened, rising by 11 per cent to nearly Rs. 20 trillion.

The credit to deposit ratio stood at 69.9 per cent, indicating that banks continue to maintain a cautious lending approach while retaining strong liquidity buffers and capacity to expand credit as economic conditions improve.