REFUGEE

Sri Lanka’s biggest private lender by assets, plans to expand in the island’s northern and eastern regions by the end of 2011, anticipating loans will grow as the economy recovers.

The Colombo-based bank also plans to expand into retail banking in Bangladesh, introducing its own credit card and adding branches and teller machines, Managing Director Amitha Gooneratne said in a speech in Singapore today.

The Central Bank of Sri Lanka is looking at 2010 “with a lot more confidence” and the South Asian island aims to attract investment through improved infrastructure with the end of its 26-year civil war, Governor Nivard Cabraal said today. Cabraal has cut key interest rates to a five-year low to spur credit demand and support the economy.

“The banking sector will do well with the growth prospects,” said Bimanee Meepagala, an analyst at Eagle NDB Fund Management Co., the biggest non-state fund in Sri Lanka. “In the short-run, margins may be squeezed with the sudden cut in lending rates, but Commercial Bank is one of the more efficient banks.”

President Mahinda Rajapaksa last month instructed state banks to slash lending rates by about 7 percentage points from Oct. 28 to government employees, farmers, small businesses and industries including fisheries and tourism. Private banks have followed by reducing their rates.

Gooneratne said the government may increase tax rates for lenders from levels that are already “too high”, adding that the bank has lobbied the government to reduce levies.

Bank Mergers

Sri Lanka’s lenders are also pressing the government to allow mergers as there are too many banks on the island, Gooneratne said. Commercial Bank and National Development Bank Plc. scrapped a plan to merge in July 2007.

Sri Lanka has set up a commission to review tax rates for different industries including banks, Deputy Finance Minister Sarath Amunugama said in an interview in Singapore today.

Lenders want to merge to reduce competition even though there is more room for them to grow in the country and they are making “tremendous profits,” Amunugama said.

“Banks who are functioning say that because they don’t want competition,” Amunugama said. “We have to think about economic growth and what is good for the country.”

Commercial Bank’s third-quarter profit rose 3.6 percent to 971 million rupees ($8.5 million). Its shares have more than doubled this year, compared with a 90 percent increase in the benchmark Colombo All-Share Index.