Sale of 45% of the existing issued share
capital of a
LICENSED SPECIALIZED BANK
In Sri Lanka
Transaction Ticket Size US$ 23 Mn
•The Licensed Specialized Bank (LSB) is predominantly
involved in housing finance providing banking products for
housing and housing development projects with 31 branches
covering all the provinces of the country.
• The LSB was incorporated by Government of Sri Lanka in
1984 as a building society with primary objective of providing
housing finance and credit facilities. It was converted to a
public corporation and subsequently became a Licensed
Specialized Bank (LSB) in 2003. The LSB is a listed public
company being listed on the Colombo Stock Exchange
Housing loans are the main income generator of the LSB. Housing loans are broadly
categorized into four distinct areas by the LSB based on the collateral type.
• Loans secured by mortgages - Housing loans secured by primary mortgage over residential
properties accounts for largest component of the loan book (51%). Mortgage loans amounted
to LKR 7bn in 2011 compared to LKR 6.7bn in 2010.
• Loans against EPF - The LSB has a distinct advantage of being one of the 7 banks of the
country who are authorized to issue housing loans against individuals Employee Provident
Fund’s credit balance. The LSB is also one of the two state sponsored banks who are eligible for
Shamodha Home Loan Scheme available to EPF members which was initiated by Ministry of
Labour Relations and Foreign Employment. Loans against EPF amounts to 41% of the total
• Loans given against guarantees and cash backed loans - Housing loans given against
personal and institutional guarantees amounted to 6% of the total loan portfolio. Loans given
against the deposits or cash backed loans amounted for 2% of the total loan portfolio.
• Project Loans -
The LSB also grants special loans for public sector projects but which
amounts to very small amount of the total loans. For 2011 project loans stood LKR 125mn
about 0.8% of the total gross loans.
The LSB has also started providing loans on gold collateral which is a strong growth
area in the country which also leads to improved asset quality of a bank.
Funding sources of the LSB are mainly by way of attracting public deposits and fixed income
investments. The main product lines are:
• Savings Deposits - Being a LSB, the bank has the approval from CBSL to raise funds through
public deposits. Its Savings Deposits have increased by 48% last year to LKR 1.5bn.
• Fixed Deposits - Fixed deposits accounts for highest portion of the deposits of the bank as it
accounts to 75% of overall deposits. Fixed deposits have increased by 38% with the figure
amounting to LKR 9.1bn.
• Structured Investment Product (SIP) - SIP is a fixed income investment product with fixed
maturity value without intermediate interest payments (similar to a zero coupon bond). This
product has seen considerable demand last year with a growth of 95% amounting of LKR 1.6bn
in product sales.
• The LSB has 31 branches and 301 ATMs.
The client base is mainly from the Western
province with 52% of the loan book coming
from the Western Province.
• The LSB’s client base is mainly low and
middle income group which accounts to
about 70% of the portfolio.
• Over the years the LSB has strategically
distributed its loan portfolio proportionately
among the different income segments of the
• The LSB has about 25-30% market share of
housing finance for low and middle income
group. It has about 2-3% of overall housing
• Average size of a housing loan of the LSB is
LKR 0.33mn in 2011, which is approximately
an 18% increase from 2010.
• After the end of 30 year old civil conflict, the island nation Sri Lanka has started to break free of
the economic shackles which have put it considerably behind the world economic growth race In
•With the war ending opening up of new economies in North and East is very robust. Among the
key growth sectors of the economy housing finance is expected be one of the fastest growing
industries benefiting from post war euphoria.
• According to Central Bank of Sri Lanka (CBSL) annual report of 2011, there exists a strong
mismatch between current housing stock (supply) and householder accommodation
• It is estimated there will be an additional 50,000 to 60,000 units per year organic growth in the
•It is expected that in the newly activated economies of the North and East the demand/supply
mismatch is approximately 1 million units.
• It is estimated that up to one third of the current housing stock in the country needs to be
upgraded, creating further supplementary demand.
• The rapid urbanization of the country will play an important role in housing market growth. Sri
Lanka is identified as a fast urbanizing country coupled with rapid economic growth. Currently
urban sector accounts to about 21.5% of the population and it is expected to reach 50% by 2020.
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