Sri Lanka’s banking sector Earnings Per Share (EPS) are expected to rise by over 5% in 2026 with the removal of the Social Security Contribution Levy (SSCL) from financial services from 1 January, Asia Securities said.

Accordingly, from 1 January 2026, financial services will be exempted from SSCL, providing a 2.5% tax relief to the sector, which will boost post-tax profitability across the banking and non-bank financial (NBFI) sectors.

Asia Securities said that it is estimated that the exemption will increase the EPS of banks in 2026 by approximately 5.1% (range: 4.7%-5.2%) and the Return on equity (ROE) by approximately 78bps.

For NBFIs, based on Financial Year 2024/25 reported earnings, the EPS rise is estimated at approximately 4.2% (range: 1.1%-6.2%), with ROE gains averaging roughly 60bps.

“While this earnings boost is significant, we expect the Central Bank of Sri Lanka to ensure the financial sector lending rates don’t rise drastically, even as credit demand gradually accelerates,” Asia Securities said.

This tax concession aligns with broader fiscal consolidation goals of the Government.

According to the Central Bank, the banking sector reported a profit after tax of Rs.187.5 billion in the first half of this year compared to Rs. 111.8 billion in the same period of 2024, recording a significant growth of 67.8%.