Tuesday 31 March 2015

Sri Lankan shares recover from over 8-mth low; political woes weigh

(Reuters) - Sri Lankan shares rose on Tuesday, recovering from a more than eight-month closing low hit in the previous session and snapping a six-session losing streak, due to window dressing ahead of the quarter-end, though political uncertainty weighed on sentiment, brokers said.

The main stock index ended 0.56 percent, or 37.91 points, firmer at 6,820.34, after closing at its lowest level since July 24 on Monday. It lost 7.31 percent in the 21 sessions through Monday.

"Being the last day of the quarter, there was a bit of window dressing," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

Analysts expect the market to continue its negative trend with low activities through mid-April ahead of a long traditional Sinhala-Tamil New year holiday and amid political uncertainty.

Shares in Carson Cumberbatch Plc rose 0.38 percent, while Ceylinco Insurance Plc rose 9.07 percent in thin volume.

Market heavyweight John Keells Holdings Plc, which hit a 32-month low on Monday, rose 1.63 percent on Tuesday.

The day's turnover was 665.8 million rupees ($3.44 million), more than half of this year's daily average of 1.19 billion rupees.

Foreign investors were net sellers for the seventh straight session. They sold a net 72.1 million rupees worth of shares on Tuesday, extending the net foreign selling in the past seven sessions to 445.8 million rupees worth shares. But they have been net buyers of 2.91 billion rupees so far this year.

Analysts said concerns that the government's decision-making process would slow down weighed on sentiment after President Maithripala Sirisena formed a national government incorporating the main opposition party in a bid to push through reforms and preserve political stability. 

($1 = 132.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka Inflation declined further in March 2015

Inflation, as measured by the change in the Colombo Consumers’ Price Index (CCPI) (2006/07=100), which is computed by the Department of Census and Statistics, decreased to 0.1 per cent on an year-on-year basis in March 2015, from 0.6 per cent recorded in February 2015. Annual average inflation also declined from 2.9 per cent in February 2015 to 2.5 per cent in March 2015. 

                         
CCPI declined by 0.4 per cent from February to March 2015. The main contributor for this decline was the moderation of food prices during the month. Prices of many vegetable varieties, rice, wheat flour, some varieties of dried fish and bakery products declined in March 2015, compared to the prices prevailed in February 2015. However, prices of meat, some varieties of fresh fish, some varieties of fruits, coconuts and some prepared foods recorded increases during the month.

Within the Non-food category, sub groups of Housing, Water, Electricity, Gas and other Fuels; and Transport declined as a result of the full impact realised from the downward revision of LP gas prices and bus fares as per the interim Budget in February 2015. However, prices in the sub categories of Clothing and Footwear; Furnishing, Household Equipment and Routine Household Maintenance; Health; Recreation and Culture; and Miscellaneous Goods and Services recorded increases. Average prices in Education and Communication sub categories remained unchanged during the month. 

Core inflation, which reflects the underlying inflation in the economy, increased to 1.4 per cent in March 2015, from 0.8 per cent in February 2015 on an year-on-year basis. Annual average core inflation declined to 3.0 per cent in March 2015, from 3.2 per cent in February 2015.
CBSL

Sri Lanka Treasuries yields fall

COLOMBO (EconomyNext) - Sri Lanka's Treasuries yields fell across maturities at Tuesday's auction with the 3-month yield falling 05 basis points to 6.55 percent, data from the state debt office showed.

The 6-month yield fell 02 basis points to 6.68 percent and the 12-month yield fell 04 basis points to 6.76 percent.

The weekly primary auction for the week ending 02 April 2015 for the rollover of 19 billion maturing Treasury bills was oversubscribed with bids received amounting to 58.6 billion.

The debt office said it accepted 19.6 billion rupees from the auction.



Sri Lanka's E B Creasy & Co. buys wire maker for Rs433mn

COLOMBO (EconomyNext) - Sri Lanka's E B Creasy & Company said it has bought Lanka Special Steels Ltd. from Tata Steel Ltd. for 433 million rupees.

The firm, a subsidiary of The Colombo Fort Land and Building PLC, bought 2.5 million shares representing 100 percent of the issued shares of Lanka Special Steels in a deal on Tuesday, a stock exchange filing said.

Lanka Special Steels Ltd. makes hot dip galvanised steel wires and has an installed capacity of 14,400 metric tonnes a year and annual turnover of 1.4 billion rupees.

Singhe Hospitals IPO full

The Initial Public Offer of 100,000,000 ordinary voting shares of Singhe Hospitals Ltd at Rs 2.50 per ordinary voting shares has been oversubscribed.

The company has received applications for subscription of more than 100,000,000 ordinary voting shares of Rs 250 million by 8.30 a.m on 30 March 2015 and that in terms of the prospectus the subscription was closed yesterday at 4.30 p.m.
/www.dailynews.lk

Ceylinco Life market leader for 11th year with income of Rs. 18.54 b

Life Fund exceeds Rs.60 b; assets grow to Rs. 71.07 b

Ceylinco Life has reported total income of Rs. 18.54 billion for the 12 months ending 31December 2014 with premium income of Rs. 12 billion, emphatically retaining its position as the country’s largest life insurer for the 11th consecutive year.


Gross written premium income recorded an increase of 7.9% over the previous year, while investment income improved by 1.78% in the review period to Rs. 6.83 billion, the company said in a filing with the Colombo Stock Exchange.

The value of Ceylinco Life’s investment portfolio appreciated by 12.72% to Rs. 57.2 billion, a noteworthy growth in the context of the generally lower rates of return on interest bearing assets during the year.

Total assets grew by Rs. 7.12 billion or 11.14% to Rs. 71.07 billion.

The company’s Life Fund recorded a net growth of Rs. 7.26 billion or 13.75% over the 12 months to Rs. 60.02 billion at the end of the year in a strong indication of the financial strength of Ceylinco Life, the company said.

“It was a tough year, but our unwavering focus on business fundamentals and prudent investment enabled the company to post an impressive performance without being distracted by challenges or extraneous matters,” Ceylinco Life’s Managing Director and CEO R. Renganathan said. “These results are also an irrefutable indication that Ceylinco Life continues to enjoy the trust and confidence of policyholders and prospective customers.”

He disclosed that Ceylinco Life sold 139,777 new policies in 2014 at an average of 11,648 per month, with improved sales of retirement plans contributing to the growth in premium income in the year under review.

The company’s policyholders received more than Rs. 4.8 billion in benefits in 2014. This included maturity and other survival benefits, claims, and annual bonuses.

At the end of the year under review, Ceylinco Life’s investment portfolio comprised of Government securities (50%); licensed private banks (15%); State banks (9%); real estate (9%); corporate debt (14%) and others (3%). These investments are made in conformity with the investment guidelines stipulated under the Regulation of the Insurance Industry Act No. 43 of 2000 and are subject to regular monitoring by the Insurance Board of Sri Lanka (IBSL).

One of the highlights of 2014 for Ceylinco Life was the international recognition the company received when World Finance adjudged the company the ‘Best Life Insurance Company in Sri Lanka.’ The prestigious UK-based bi-monthly magazine gave Ceylinco Life high markets in several areas of assessment including efficiency in processing new business, focus on customer retention, employee and agent training, ensuring best practices within the company, financial performance, market research and measuring customer satisfaction.

Independently rated one of Sri Lanka’s most valuable brands, Ceylinco Life has maintained its leadership of the country’s long term insurance sector from 2004 onwards. 

The company operates the largest branch network among local life insurance companies, and has won multiple international and local awards for its commitment to the community and success in brand equity building.
www.ft.lk

Monday 30 March 2015

Sri Lanka's Bank of Ceylon December net down 43-percent

COLOMBO (EconomyNext) - Sri Lanka's Bank of Ceylon said December 2014 quarter net profit fell 43 percent to 3.1 billion rupees from a year ago with a sharp rise in interest income but impairment charges growing heavily as well.

Total income for the quarter of the biggest state-owned lender was stagnant at 36 billion rupees, according to audited results filed with the Colombo stock exchange.

Net interest income rose 21 percent to 14 billion rupees as interest income fell 2.4 percent to 31 billion rupees while interest expenses fell at a bigger 16 percent to 17 billion rupees.

But trading income fell 10 percent to below one billion rupees and impairment charges rose 440 percent to 4.8 billion rupees.

Diluted earnings per share were 576.77 rupees in the December 2014 quarter.

For the 2014 financial year, diluted EPS went up almost 10 percent to 2,679.29 rupees with net profit rising almost 18 percent to 14.4 billion rupees.

Total income for the year was stagnant at 133 billion rupees. Net interest income rose 3.6 percent to 41 billion rupees.

Net fee and commission income went up a sharp 40 percent to 8.3 billion rupees.

The share of profits of associate companies before tax doubled to 462 million rupees during the year.

 

Sri Lanka sells Rs20bn in 10-year bonds

COLOMBO (EconomyNext) – Sri Lanka has sold 20 billion rupees in 10-year bonds at a weighted average yield of 10.03 percent and 5.3 billion rupees in five-year bonds at a yield of 5.07 percent, the state debt office said.

It offered 20 billion rupees in 10 year bonds at a coupon rate of 10.25 percent and five billion rupees in five year bonds at a coupon of eight percent.

The debt office received bids of 48 billion rupees for the 10 year bonds and bids of 22.8 billion rupees for the five year bonds.


Sri Lankan shares fall for 6th session on margin calls, political woes

(Reuters) - Sri Lankan shares fell for a sixth straight session on Monday and closed at their lowest in more than eight months as mostly retail investors sold their stocks to settle margin trading, while political worries also weighed on sentiment.

The main stock index ended down 1.33 percent, or 91.09 points, at 6,782.43, its lowest close since July 24 and moving away from a key psychological support level of 6,800. It has lost 7.31 percent in the past 21 sessions.

"Investors have been selling blue chips and political uncertainty still weighs," a stockbroker said on condition of anonymity.

Analysts expect the next support level at 6,500.

Shares in Commercial Bank of Ceylon Plc, the country's biggest listed lender, fell 2.46 percent. Top mobile phone operator Dialog Axiata Plc fell 2.78 percent.

The market heavyweight John Keells Holdings Plc fell 2.14 percent to a 32-month low of 195.50 rupees.

The day's turnover was 457.3 million rupees ($3.44 million), less than half of this year's daily average of 1.19 billion rupees.

Foreign investors were net sellers for the sixth straight session. They have sold a net 42.7 million rupees worth of shares on Monday, extending the net foreign selling in the past six sessions to 373.7 million rupees worth shares. But they have been net buyers of 2.98 billion rupees so far this year.

Analysts said concerns that the government's decision-making process would slow down weighed on sentiment after President Maithripala Sirisena formed a national government incorporating the main opposition party in a bid to push through reforms and preserve political stability. 

($1 = 132.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Gopakumar Warrier)

People’s Bank posts best ever results in 53 years

Group profit before tax exceeds Rs 21 billion

Notching a host of record breaking numbers, People’s Bank closed 2014 with an impressive performance, posting the milestone of Rs 1 trillion in its balance sheet, only the second bank in Sri Lanka to do so.

People’s Bank also notched the best profitability for an year end, since its inception in 1961. Augmenting its balance sheet of Rs 1 trillion, this year’s Profit Before Tax inclined 67.2% to stand at Rs 17,231 mn, while Profit After Tax was pushed upwards by an impressive 89.9% displayed at Rs 14,219 mn. The Bank’s financial performance for 2014 is unequivocally impressive. Net Interest Income is posted at Rs 30,118 mn, while the Net Interest Margin reached 3.1 %, despite the entire banking industry battling the downward pressure exerted on interest rates. Gross Interest Income reached Rs 84,480 mn, compared to Rs 110,441 mn last year, primarily due to this decline in interest rates, coupled with the downsizing of the pawning portfolio. Interest Expense stands at Rs 54,362 Mn against last year’s.

Rs 73,791 mn with the decrease attributed to the cascading impacts of declining interest rates and replacing of higher cost deposits with low cost saving deposits growth. Observing the details of the impressive Rs 1 Tn balance sheet, Gross Loans and Advances reached Rs 685,310 Mn by end 2014, indicating an incline of 0.6%. With the permeating global gold crisis impacting the pawning industry significantly from 2013 onwards, the Bank was prudent and instituted some dynamics to decrease its exposure which emerged at 16.6% in 2014 of the total Gross Loans, which in 2013 stood at a high of 28.9%. Pawning balance reached Rs 113,946 Mn indicating a reduction of Rs 83,183 Mn in comparison to last year. The Bank focused emphatically on broadening its lending portfolio, heralding an increase to 87,026 Mn in lending to other customers.

With probably the country’s largest savings base now exceeding Rs 318 Bn with increasing customer confidence, Deposits reached Rs 793,342 Mn indicating a 4.1% improvement over 2013. This was due to the Bank taking advantage of the low interest rate regime and aggressive marketing and promotional campaigns aimed at mobilizing low cost deposits. Having a commendable CASA ratio of 46.3% , the Bank’s Saving Deposits grew by Rs 62,967 Mn, although Time Deposits declined by

Rs 42,945 Mn. Advances to Deposits ratio is detailed at 86.4% for end 2014.

Chairman Hemasiri Fernando said the Bank has proven repeatedly that its unique brand of ‘banking by the people, for the people’ is the formula to its success. “We also continue being the most accessible bank in Sri Lanka, possessing the widest branch network of 739 branches and in excess of 3,000 strong ATM network, the largest in the country.

But Fernando adds that the Bank must continue to foster its stringent compliance culture, as well as that unrelenting focus on ethics, transparency and accountability.

“We have earned a rating of AA+ by Fitch Rating, which proves that we are a stable and progressive bank. We have also showcased our leadership prowess in an intensely competitive banking environment with the results you are seeing today and also the continuous progressive initiatives the Bank introduces to optimise performance and build sustainable relationships with our stakeholders.”

CEO and General Manager N. Vasantha Kumar said “Being a state owned bank, we have an ingrained responsibility to ensure that our stakeholders’ trust and confidence is consistent, strong and enduring. This means, that our focus should not only centered on a quantitative sense, though important, as seen in our impressive results, but also in the qualitative dynamics we continue to infuse through the decisions we make. Whatever we do, the impact on our stakeholders must be positive.” www.dailynews.lk

HNB in 'landmark' deal with ADB Raising USD 100 million from 7-year loan

HNB entered into a landmark agreement with the Asian Development Bank (ADB) to raise USD 100Mn by way of a 7 year senior debt. This is the largest transaction by ADB with a Sri Lankan private sector bank and the funds raised would be deployed towards infrastructure development projects with special emphasis on renewable energy, power and irrigation which are key sectors in the economic resurgence of Sri Lanka.

ADB which was founded in 1966, has been driven by an inspiration and dedication to improving people's lives in Asia and the Pacific. It is committed to help developing member countries to evolve towards modern economies that are well integrated with rest of the world.


Commenting on this epic transaction Jonathan Alles, Managing Director, CEO of HNB PLC stated that "we are delighted to partner with ADB to raise long term funding for the Bank. This is testimony to the trust placed by international investors and funding institutions in HNB. Since 2012 HNB has raised nearly Rs 30 billion from foreign sources at attractive rates and this clearly demonstrates the Bank's sustainable business model, robust growth trajectory, strong capital structure and its lead position in the banking industry".

He added that "Sri Lanka in its journey of reaching upper middle class status will spur growth in corporate and SME investments and the availability of infrastructure would be a key enabler. We as a leading private commercial bank in the Country are pleased to facilitate these developments through partnering with ADB".

The agreement was signed in Colombo by Mrs Rose Cooray, Director and Mr. Jonathan Alles, Managing Director/CEO on behalf of HNB and by Ms Sri Widowati Country Director on behalf of ADB.

HNB became the first Sri Lankan bank to obtain an international credit rating and was assigned a foreign currency issuer rating of B1 on par with the sovereign rating by Moody's Investors Service, while it has a national long term rating of AA- (lka) by Fitch Ratings (Lanka) Ltd.
www.island.lk

Sunday 29 March 2015

Sanasa Development Bank profits soar by 100 % in 2014

SANASA Development Bank PLC (SDB) said on Wednesday that it recorded an ‘outstanding performance’ for the financial year ending December 2014 with profits up by 103 per cent.

In a media statement, the development bank said that last quarter profits also rose sharply by 450 per cent. “With these growth rates, SDB recorded a profit after tax of Rs. 504 million during 2014,” the bank said.

Other performance indicators also reflected significant increases indicating a definite growth trend in the bank’s performance in the year ending 2014. The Total Interest Income grew by 10 per cent on a Y-O-Y basis.

The bank’s net fee and commission income grew by 35 per cent from Rs. 120 million in 2013 to Rs. 162 million in 2014, primarily due to the increase in the overall asset base of the bank.

As a strategic move, SANASA divested its equity investment in Peoples Leasing and Finance PLC last year.

The SDB, which started its business in 1997, now has a network of 82 branches and is preparing for the next level of banking which is expanding services to gear itself to cater to the lower end of the SME sector as well.

Bank deposits grew from Rs. 23 billion in 2013 to Rs. 30 billion in 2014 with two new attractive loan products targetting government pensioners and ex-service personnel in second half of 2014 contributing to the growth in the loan portfolio.

Commenting on the success in 2014, SDB CEO Nimal C. Hapuarachchi added, “Over the years, we have been able to support a large number of individuals, households and communities across the country, to empower themselves from the grassroots level to a sustainable level of growth in the medium and long term through responsible financing”. 

Bank Chairperson M.S. Kiriwandeniya said, “While we are gearing ourselves to step into the next level of service in the SME sector we are also constantly keeping our pulse on the needs of our core clientele and improvising products to suit their needs and demands.”
www.sundaytimes.lk

Colombo bourse chugs along the same route – analysts say

Share price trends have been on the lower side for several weeks since a new administration emerged with analysts attributing the downturn to a combination of reasons including uncertainty over impending polls and, as of this week, the approaching April season.

The Colombo bourse started the week on a slightly higher note on Monday’s early trade in another trading session marked by thin trade, but closed the week on a slump owing to investors opting to wait of a ‘clearer direction’, brokers said.

The momentous coalition between the country’s two main political parties, UNP and SLFP didn’t do much to uplift the listless sentiment in the Colombo bourse with the indices edging higher in early trades during the first three days and ending lower by day’s close. This pattern changed during Thursday when indices slumped right throughout.

During the week a common chorus by analysts was that traders opted to stay on the sidelines amid the developments in the political and economic fronts as the days dragged on. Brokers lamented that the index has fallen below 7,000 after nearly seven months. They added that activity levels weren’t high for the past few weeks, another reason why the market momentum isn’t picking up. “The retail and the high networth investors are waiting on the sidelines till the elections are over,” an analyst said, noting that both these segments are hardly investing based on fundamentals.

“This isn’t the case with foreigners,” he said, noting that this is why they have been net buyers for the most part of this year. A broker added that the market will ‘chug along’

in the same mode till April end. “This has much to do with the lack of direction and the holiday season,” he said.

On Friday, Colombo shares showed early gains with media reports of President Maithripala Sirisena promising the Chinese government that Sri Lanka intends to resume the contentious port project after problems are “sorted” out, only to fall at the close.

“This was a sore point in the share market, where questions were being raised about Sri Lanka halting the US$1.4 billion port city project, which was damaging ties with China. Many investors were questioning this move which impacted the market negatively in the past months,” an analyst said. He said that suspending this project would deter foreign investors.

But the market shed returns on Friday for the fifth consecutive session amid the uncertainties in the government policies which continued to affect the market sentiments, analysts said.
www.sundaytimes.lk

SEC probes take a decisive turn

By Duruthu Edirimuni Chandrasekera

The Securities and Exchange Commission (SEC) is reopening investigations in cases that were closed during the past regime in a bid to determine if ‘all’ information had been considered in scrutinising the alleged malpractices especially when files were closed due to ‘insufficient’ information.

“This was a popular ‘excuse’ when certain probes didn’t see the light of day,” an analyst commented, adding that this should be sufficient cause to restart inquiries pertaining to market misconduct.

This new turn in the SEC has come on the back of Prime Minister Ranil Wickremasinghe slamming corrupt sections of Sri Lanka’s private sector to the extent of naming businessmen like Dilith Jayaweera and Nimal Perera.

“There are a number of allegations of violations of the Colombo Stock Exchange market rules and SEC regulations. The minor ones were compounded. Thirteen large cases were abandoned purportedly on a lack of evidence,” he told parliament, adding that they were not probed or were settled when it should have been probed further.

“I would like this to be recorded in the Hansard. I have requested the Securities and Exchange Commission to go into these cases. If necessary, I will bring legislation to permit such inquiry. I am also seeking the appointment of a Parliamentary Select Committee (PSC) to inquire into these transactions.”

A SEC source said that a PSC is not immediate, but his comments on compounding and abandoning certain cases purportedly were being pursued in all ‘seriousness’. “We want to verify whether earlier they (SEC) had ‘sufficiently’ gone into matters with these probes.” Further he said that many are now coming forward with stock market related complaints as they feel that there’s a free and fair climate for investigations. “They are free from fear and intimidation,” he said, noting that the SEC has got a ‘substantial’ number of complaints pertaining to share market misconduct during the past two months.

“We have received files full of complaints. Some are with names and some anonymous,” he said, adding that these complaints range from manipulation, insider dreading, pump and dump, stockbrokers and investment advisors misleading small shareholders, trading on accounts under third party names, etc.
www.sundaytimes.lk

Saturday 28 March 2015

Several bank heads resign, some likely to challenge Finance Ministry order

Following the resignations of Dr. Rani Jayamaha as Chairperson of Hatton National Bank and Sunil Wijesinha as National Development Bank PLC Chairman and the likelihood of more such resignations, very reliable sources indicated that the Finance Ministry has notified several private commercial bank heads who had been appointed to represent government owned shares to step down.

The government owns nearly 33 per cent of shares in the Hatton National Bank and 28 per cent in the National Development Bank.
www.adadeana.lk

Sri Lanka to ease rules to draw more foreign investment: Ravi

COLOMBO (EconomyNext) - Sri Lanka's new government will loosen regulations to attract more foreign investment, Finance Minister Ravi Karunanayake has said.

Almost three decades of civil war and years of misrule, meant that “Sri Lanka missed the opportunity to be to India what Hong Kong is to China,” he said in his keynote address to the Asian Investment Conference organised by Credit Suisse at session moderated by Sharhan Mushin, who is head of financial institutions group for the Asia Pacific region, which covers Sri Lanka.

The forum draws institutional and hedge fund investors as well as high-net-worth individuals and business leaders who seek access to influential ideas and actionable advice.

Karunanayake said the new government is keen to attract foreign investment to stimulate export-led growth and help alleviate poverty.

The government intends to revise investment rules to attract overseas flows and strengthen trading relationships with other nations through free trade deals planned with China and the U.S. adding to existing ones with India and Pakistan.

Karunanayake acknowledged that the external account is a problem.

With almost half the country’s public borrowing denominated in foreign currencies, Karunanayake said he favours a stronger rupee to reduce debt servicing costs.

However, since a stronger currency penalizes exporters, the solution, he said, is to ease barriers of entry for foreign investment which would raise skill levels and efficiency.

Karunanayake forecasts economic growth this year of 7-7.5 percent driven by sectors like tourism, agriculture and petroleum.

He identified logistics, infrastructure and housing as sectors that need more attention.

 

Friday 27 March 2015

Sri Lankan shares fall for 5th session on margin calls, political woes

(Reuters) - Sri Lankan shares fell for a fifth straight session on Friday and closed at their lowest in nearly eight months as investors sold their stocks to settle margin trading ahead of quarter-end, while political worries also weighed on sentiment.

The main stock index ended 0.71 percent, or 49.31 points, weaker at 6,873.52, its lowest close since Aug. 6 and further moving away from the key psychological support level of 7,000. It has lost 6.07 percent in the past 20 sessions.

"The market fell across the board due to margin calls and month-end settlement selling pressure," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

Analysts expect the next support level at 6,800.

Shares of the country's top mobile phone operator, Dialog Axiata Plc, fell 0.92 percent, while conglomerate John Keells Holdings Plc dropped 0.69 percent.

Shares of the country's biggest listed lender, Commercial Bank of Ceylon Plc, fell 0.71 percent.

The day's turnover was 447 million rupees ($8.28 million), less than half of this year's daily average of 1.21 billion rupees.

Foreign investors sold a net 91.5 million rupees worth of shares. But they have been net buyers of 3.12 billion rupees so far this year.

Analysts said concerns that the government's decision-making process would slow down, also weighed on sentiment after President Maithripala Sirisena formed a national government incorporating the main opposition party in a bid to push through reforms and preserve political stability.

($1 = 132.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Vallibel Finance debentures oversubscribed

Vallibel Finance PLC announced yesterday that applications for the debenture issue worth Rs. 750,000,000 (7.5 million) have been oversubscribed and closed. The company is on the works to issue further debentures.

Vallibel Finance planned to raise Rs.1 Billion via the issuance of a listed debenture. The company issued 7.5 million Rated, Guaranteed (Capital and two interest installments) Subordinated, Redeemable debentures at Rs.100 each with an option to issue a further 2.5 million debentures in the event of oversubscription.

Financial advisors and managers to the issue is Acuity Partners (Private) Limited. Vallibel Finance was rebranded in 2005 after their acquisition by Vallibel Group and was backed by the prestige of their parent holding group, Vallibel Finance PLC. Vallibel Finance has followed an aggressive expansion strategy in 2011 and in time, the company was ranked amongst the top 50 most respected entities in the country by LMD in its 2014 survey. (SP)
www.dailynews.lk

Govt. probing previous regime's CB investments in EPF

By Ravi Ladduwahetty

Ceylon Finance Today: The Government is currently probing the transaction of the Central Bank's investments Employees Provident Fund in the Colombo Stock Exchange.
"All these transactions are heavy probe in a true spirit of transparency and good governance and we are determined to complete the findings within these 100 days," top official and political sources told Ceylon FT yesterday.

A cloud of controversy was looming over these transactions of the previous regime which also prompted the Auditor General also to comment on these transactions.
We are committed to transparency and we have given directions to the Central bank to give the maximum returns to the EPF members, whose lifetime earnings are in the fund, the sources said.

The probe also revolves round how the EPF Funds went into the shares which were making thumping losses and at present investments were being made into shares which were prone to risks, they said, adding that the investments were continued to be made into the stock market even under the present regime as well. "There has not been any directives to us not to invest EPF Funds in the CSE, Central Bank sources said

They said that investments were being made into the Treasury Bills and Treasury Bonds as well but brokers said that they were not given clear directives on what stocks to invest the EPF funds.

However, other sources said that it was conflict of interest for the Central Bank to invest EPF funds in banking stocks when the CB was expected to regulate the banks themselves!
www.ceylontoday.lk

Thursday 26 March 2015

Sri Lankan shares fall for 4th session on margin calls, political woes

(Reuters) - Sri Lankan shares fell for a fourth straight session on Thursday and closed at their lowest in more than seven months as investors sold stakes to settle margin trading ahead of quarter-end, while political uncertainty also weighed on sentiment.

The main stock index ended 0.72 percent, or 50.20 points, weaker at 6,922.83, its lowest close since Aug. 8 and further moving away from the key psychological support level of 7,000. It has lost 5.39 percent in the past 19 sessions.

"The trend will continue until there is political uncertainty. We see the next resistance level at 6,800," a stockbroker said on condition of anonymity.

Analysts said concerns that the government's decision-making process would slow down, also weighed on sentiment after President Maithripala Sirisena formed a national government incorporating the main opposition party in a bid to push through reforms and preserve political stability.

The market also shrugged off a fall in t-bill yields at a weekly auction on Wednesday, brokers said.

Yields on t-bills fell between 17 and 19 basis points, after they dropped 31 to 44 bps last week.

The central bank said on March 18 that the low-interest rate environment was expected to continue benefiting from lower inflation while keeping policy rates steady.

Shares of the country's biggest listed lender, Commercial Bank of Ceylon Plc, fell 2.27 percent, while Ceylon Brewery Plc dropped 22.12 percent, the biggest single-day drop since May 31, 2012. Conglomerate John Keells Holdings Plc fell 1.27 percent.

The day's turnover was 1.1 billion rupees ($8.28 million), lower than this year's daily average of 1.22 billion rupees.

Foreign investors sold a net 210.5 million rupees worth of shares. But they have been net buyers of 3.12 billion rupees so far this year. 

($1 = 132.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Softlogic Finance rights oversubscribed ‘with strong investor interest’

The recent Rights Issue of Softlogic Finance PLC was over-subscribed by over 150% with the new equity infusion of Rs 401 million, boosting the Total Equity position of the Company to Rs 1.9 billion.

The Rights Issue, in which 10 Ordinary Shares were issued at Rs 30 per share for every 28 Ordinary Shares held by shareholders as at February 26, attracted applications for over 20.1 million shares – with over-subscriptions exceeding 6.7 million shares. Applications for 13,376,411 shares at Rs 30 each were accepted by the company and applications were closed on March 16.

In addition to expanding the capital base of Softlogic Finance PLC the Equity infusion is required to facilitate the high growth trajectory of the Company, that has seen its Total Assets increase to Rs 20 billion, an increase of over 10X times within 4 ½ years, compared to an Asset position of Rs 1.8 billion when the Softlogic Group acquired the company. The issue is expected to enhance the capital structure and facilitate the aggressive business plans of the company.

The capital infusion comes at an opportune time with demand for credit by the private sector showing notable increases on the back of reduction of interest rates to multi-year lows, the company said. "Softlogic Finance PLC is greatly pleased at the resounding demonstration of confidence in the company and endorsement of its strategy, by both existing shareholders as well as new investors, especially at a time of bearish sentiment in the stock market," Softlogic Finance PLC Chairman, Ashok Pathirage said. "The capital infusion will add significant further impetus to Softlogic Finance’s journey to achieving its vision of becoming the preferred non-banking financial institution in Sri Lanka."
www.island.lk

Pan Asia Bank sets sights on Rs. 100 b asset base milestone in 2015

Prudent management and successful strategies trigger impressive turnaround in profitability 2014, above industry average growth and strengthening of financial ratios

SMEs, retail, credit card and corporate banking see significant growth
Rolls out Rs. 300 m new core banking IT platform

Plans private banking, new branding campaign in 2015 as it celebrates 20 years of success

Encouraged by the impressive turnaround achieved in 2014, Pan Asia Bank Plc has set sights on the milestone of Rs. 100 billion asset base this year which also marks 20 years of successful operations.


Prudent management as well as successful strategies saw PABC’s assets rise by 22.6% to Rs. 79.6 billion in 2014. The healthy growth was in contrast to 15.7% improvement in 2013 over the previous year.


“We are confident of achieving the Rs. 100 billion asset base and forecast substantial growth in top line and bottom line under our new three year plan which will also see fresh capital infusion,” PABC Chief Executive Officer Dimantha Seneviratne told the Daily FT in an interview.

He also expects further improvement in several key financial ratios consolidating on strong gains achieved in 2014.

This year, PABC expects continuity in its robust SME lending as well as retail, two segments which enabled the Bank to post above industry average growth in 2014.

Gross loans and receivables to customers in 2014 grew by a high 34.30% to Rs. 63.3 billion as opposed to a 4.5% rise in 2013. Of the lending in 2014, over Rs. 4 billion was for SMEs in diverse sectors benefiting from PABC’s positioning as a flexible and dynamic small-sized commercial bank that can offer customised solutions.

On the deposit mobilisation side, as against a 12.3% improvement in 2013, PABC saw a growth of 20.5% to Rs. 65 billion in 2014. The Bank’s “Advance to Deposit ratio” was a healthy 85.30%. An aggressive current and savings account (CASA) drive was launched, resulting in a significant improvement in CASA ratio from 19% in 2013 to 31% in 2014 thereby reducing cost of funds.

Asset growth has been whilst keeping a tight lid on quality of its loan book. For example, the Non Performing Advances Ratio in 2015 was 5.73% (Gross) down by 28% from 8% in 2013 and 3.78% (net), lower by 42% from 6.49%.

PABC also managed to improve its net interest margin by 13% to 3.82% in 2014 thereby enabling a 31% growth in net interest income to Rs. 2.74 billion. Operating income grew by 27% to surpass the Rs. 4 billion mark. Bank’s Profit before tax and impairment losses witnessed an increase from Rs. 972 million to Rs. 1.56 billion in 2014, an increase of 62% despite nearly Rs. 450 million losses booked on gold related lending.

In 2013, PABC saw profit dip by 87% to Rs. 115 million though gross income grew by 17% to Rs. 9 billion.

However last year, profit before VAT and NBT on financial services saw a whopping 230% rise to Rs. 754.5 million whilst after tax profit jumped by 265% to Rs. 415.21 million.
Impressive turnaround

The impressive turnaround at PABC in 2014 wasn’t accidental but due to strong determination, well planned and executed strategies and better risk management techniques.

“We were able to record this performance despite making higher impairment loss provisions in excess of Rs. 800 million. This higher loan loss absorption capability puts the Bank in a better stead to withstand unexpected shocks which could arise in the financial system in times of stress,” emphasised Dimantha who joined PABC in March last year.

The Board of Directors of PABC led by Chairman Nimal Perera and its major shareholder Dhammika Perera headhunted Dimantha, who has over 24 years of banking of which 15 years was with HSBC including senior positions in Thailand, Bangladesh and Saudi Arabia helped PABC. His last three postings with HSBC Group were as Chief Risk Officer in these markets.

In PABC’s 2014 Annual Report, Chairman Nimal Perera said: “Our robust financial performance is a reflection of our turnaround strategy based on lessons learnt in 2013 due to the gold debacle that impacted financial institutions in the country. However, during this year, we worked in a focused manner to mitigate potential threats and offset losses from the previous year by operating with strict performance targets, which were tirelessly pursued by a dynamic team of professionals. We are confident that our strategy will provide the right platform to deliver sustained and profitable growth.”

PABC’s success in 2014 saw global recognition as well. It won the Fastest Growing commercial Bank in Sri Lanka – 2014 Award from the Global Banking and Finance Review as well as the Most Innovative Banking Product in Sri Lanka – 2014 Award for its Sammana scheme for senior citizens.

2014 challenges and opportunities
Dimantha recalled that 2014 saw both tremendous challenges and opportunities. To meet the challenges, the Bank had to re-think its processes, re-strategise and embark on a self-consolidation process, improving governance and risk management strategies.


Given the challenges faced by the industry due to gold/pawning loans, PABC made a conscious effort to clean up and strengthen the Balance Sheet. The improvement in NPLs in 2014 down to 3.78% from 6.49% in 2013 was a testimony to that exercise.

Credit marketing and analysis skills of staff were improved and the strategy of appointing four experienced managers to focus on regions as well as empowerment of SMEs via financial literacy program contributed to healthy growth in assets.

“Through our customised approach we endeavoured to upgrade SME clients to cash flow based borrowing,” says Dimantha, who noted that this segment found PABC responsive and agile to their needs.

In a declining margin scenario PABC also improved the fee-based income via greater Corporate lending and Trade Finance activities. Personal banking segment saw a higher growth with credit card customer base tripling. Housing loans had doubled while leasing portfolio had expanded by a sizeable amount.

PABC is also focused on further improving its cost to income ratio to industry average. It was reduced by 12% in 2014 to 61% from 69% in the previous year and the goal is to graduate to a low or mid 50% by end 2015 or early 2016. With rapidly expanded branch network contributing, the cost to income ratio is expected to improve further.

“We also appointed Cost Champions as well as Income Champions within the Bank and this initiative has begun to bring desired results,” said Dimantha. He noted with improved internal controls and risk management frameworks and new business development strategies in motion, the Bank saw growth momentum in the second half of 2014.

“We expect this momentum to sustain itself. Our asset growth goal stems from that confidence,” the PABC CEO said. This year the Bank hopes to open three more branches to consolidate the existing network of 78 as at end 2014.

Management changes and new blood
PABC also saw several changes in the management structure whilst infusing new blood into the team with the aim of building up a committed and professional management team and grooming the next generation of leaders. The cadre rose to 1,302 by end 2014 from 1,169 a year earlier.


Personnel expenses which constitute 44% of other operating expenses, increased by 14.7% to Rs. 1 billion due to new recruitments for expanded operations and annual salary increments. Over 220 senior and high potential staff were also promoted in 2014.

In recent times, PABC has drawn several top experts who had served other banks. Among them are Chief Financial Officer and Deputy General Manager Lalith Jayakody who has previously served Peoples Bank and Sampath Bank, ex-Nations Trust Bank’s Indrajith Gunasekara who is the AGM in charge of SME and Pawning (he also worked at Seylan and Commercial Bank), Head of HR Rohitha Amarapala, who has previous experience in Taj, Coca Cola and Hutchison, Head of IT Sajith Sameera who previously worked at NTB and Cargills Bank and Head of Corporate Banking Chandrika Ranawaka, formerly from HNB apart from previous employment in the UAE.

Overall the Corporate Management team, which is the next layer of future leadership, is highly experienced and talented ably supported by the dynamic operation management team, according to the CEO.

New systems and branding campaign
In February 2015, PABC also upgraded its core banking IT platform to be one of the most technologically advanced and versatile following a Rs. 300 million investment.

A roll out of a new system for Treasury operations and leasing is also on the cards. The revamp of IT will enable PABC to become more cost and processes efficient with greater empowerment of staff and customers via an upgrade internet banking facility for the latter. Launch of private banking is also planned for this year.

PABC is also planning a new holistic branding campaign departing from the previous product based driven focus.

The Bank is adequately capitalised as of now but going forward and given growth forecasts Dimantha envisages fresh capital infusion to the Bank to comply with regulatory requirements. Last year the Bank issued a Rs. 3 billion debenture.

Pan Asia Bank’s capitalisation levels strengthened as its core capital (Tier I) and capital base (Tier II) stood above Rs.4.4 billion and Rs.6.9 billion with Capital Adequacy Ratios of 8.97% and 14.19% respectively. This is above the minimum regulatory requirements of 5% and 10%.

Amid pressurising margins Pan Asia Bank improved its return to its shareholders (return on equity) to 9.81 % from 2.89 % from a year ago. The Earnings per Share increased to Rs.1.41 from just Rs.0.39 a year ago whilst the market price per share rose by 67 % to Rs.25.90 during 2014.

Business leader Dhammika Perera owns 29.9% stake in Pan Asia Bank Plc whilst Japan’s Bansei Securities hold 15%. Its public float is 54.3% in the hands of 4,223 shareholders.
The Board of Directors of Pan Asia Bank comprises Nimal Perera (Chairman), Eshana De Silva (Deputy Chairman), M. Goonathilleke, T.G. Thoradeniya, G.A.R.D. Prasanna, T.R. Igarashi, T. Murakami, J.S.B. Rangamuwa and M.A. Abeynaike.
www.ft.lk

Sri Lanka court suspends liquor tax

COLOMBO (EconomyNext) - Sri Lanka's Supreme Court Wednesday issued an interim order suspending the implementation of a new government tax of 200 million rupees on alcohol and beer manufactures.

The excise tax proposal, in the government's interim budget on 7 February 2015, target manufacturers and retailers of alcoholic beverages to address problems of tax evasion.

It was seen as reducing the number of players and acting as a barrier to entry.

Except four big firms which dominate the market, most licensed liquor manufacturers do not produce enough to meet the minimum monthly excise tax of 200 million rupees, according to a report by Fitch Ratings.

The Supreme Court stay order came after small distillery owners objected to the new tax, claiming it would force them to close as smaller players could not afford to pay.

Sri Lanka Treasuries yields fall

COLOMBO (EconomyNext) - Sri Lanka's Treasuries yields fell across maturities at Wednesday's auction with the 3-month yield falling 19 basis points to 6.60 percent, data from the state debt office showed.

The 6-month yield fell 17 basis points to 6.70 percent and the 12-month yield fell 19 basis points to 6.80 percent.

The yields fell despite the debt office accepting 21.6 billion rupees of bids, after offering 16 billion rupees of bids for rollover and receiving bids amounting to 77 billion rupees.

The debt office said four billion rupees of 3-month bills, 6.7 billion rupees of 6-month bills and 10.85 billion rupees in 12-month bills were sold.

Sri Lankan shares close at over 7-mth low on margin calls, political woes

(Reuters) - Sri Lankan shares fell for a third straight session on Wednesday to a more than seven-month low as investors offloaded their holdings to settle margin trading while political uncertainty also weighed on sentiment.

The main stock index ended 0.36 percent, or 24.90 points, weaker at 6,973.03, its lowest close since Aug. 15 and further moving away from the key psychological support level of 7,000. It had lost 4.71 percent in the past 18 sessions.

"The fall is mainly due to margin calls and some big caps also came down on political uncertainty," said Reshan Wediwardana, a research analyst with First Capital Equities (Pvt) Ltd.

Analysts said concerns that the government's decision-making process would slow down, also weighed on sentiment after President Maithripala Sirisena formed a national government incorporating the main opposition party in a bid to push through reforms and preserve political stability.

The market also shrugged off a fall in t-bill yields, brokers said.

Yields on t-bills fell between 17 and 19 basis points at a weekly auction on Wednesday, after they dropped 31 to 44 bps last week.

The central bank said on March 18 that the low-interest rate environment was expected to continue benefiting from lower inflation while keeping policy rates steady.

Shares of the country's biggest listed lender, Commercial Bank of Ceylon Plc, fell 0.81 percent, while Ceylon Tobacco Company Plc dropped 2.32 percent.

The day's turnover was 2 billion rupees ($15.05 million), its highest since March 17 and more than this year's daily average of 1.21 billion rupees.

Foreign investors sold a net 5.59 million rupees worth of shares, but they have been net buyers of 3.33 billion rupees so far this year. 

($1 = 132.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Wednesday 25 March 2015

AMW Capital Leasing & Finance surpasses Rs. 1 b in Fixed Deposits

AMWCL, having commenced Fixed Deposit mobilisation in the latter part of 2013, announced the achievement of Rs. 1 billion in public deposits within a short period of time. This reflects the public trust and confidence in the company and the people behind it.

AMWCL is the only finance company owned by Associated Motorways Ltd., popularly known as AMW, which is a fully-owned subsidiary of the Al-Futtaim Group, UAE.

As the only finance company within the AMW Group, AMW Capital Leasing & Finance PLC commenced operations as a specialised leasing company in 2006 to enhance and add value to automobile operations of the group. Subsequently the company obtained license in 2009 from the Monetary Board of the Central Bank of Sri Lanka to conduct finance business which included deposit mobilisation.

Elaborating on the occasion of surpassing the Rs. 1 billion mark, the company’s Director/CEO Brandon Morris said: “We are very pleased to have achieved this milestone with the trust and confidence of our customers within this short period of time.”

AMWCL is a listed entity in the Colombo stock exchange with a current asset base of Rs. 8.6 billion and an NPL ratio of 2.64%, reflecting the very high asset quality of the company. Further, the company has been assigned a credit rating of BB-(lka) Stable Outlook by Fitch Ratings Lanka Ltd.

“Strategies are in place to double this amount by the end of 2015,” added Brandon, on the company’s future plans. The company has a network of 17 branches islandwide, offering financial products from fixed deposits to leasing, hire purchase, auto loans, working capital loans, micro finance and Islamic finance.
www.ft.lk

Tuesday 24 March 2015

Acting arrangement for the Governor of the Central Bank during his leave in Sri Lanka is legal

In an article published in the newspaper “Daily FT” on March 23, 2015, Mr. W.A. Wijewardena, a former Deputy Governor of the Central Bank, has stated that the law does not provide for an acting arrangement for the Governor when the Governor is in Sri Lanka. As such, the forced leave of the Governor is not recognized by law and all decisions made in the bank without him being present are subject to challenge in courts of law. The Central Bank wishes to state that the contents of the above statement are grossly incorrect and clarify the relevant legal position as follows. 

1. In terms of Section 24 of the Monetary Law Act, in the event of temporary absence from duty of the Governor or of the temporary inability of the Governor to perform his functions and duties, the Deputy Governor designated as senior by the Monetary Board shall act as the Chief Executive Officer of the Central Bank and shall have authority to execute the powers and perform the functions and duties of the Governor under the Act. Therefore, whether the Governor is in Sri Lanka or abroad does not become a relevant concern when the provisions of Section 24 of the Act are invoked. The law in this regard is very clear and straight forward. Communications Department 24 March 2015 

2. The designation of the Senior Deputy Governor was made by the Monetary Board at its meeting held on 17.03.2015 and, therefore, the relevant decision-making process in the Central Bank is legal. 

3. The Governor’s leave at present is not a form of forced leave. As announced in the Parliament on 17.03.2015 , the Governor went on leave to facilitate the inquiry on the issuance of Treasury Bond under the reference subject after informing the Monetary Board of taking such leave at its meeting held on 17.03.2015. Prior to that, the Governor informed it to the media as well. 

4. Only certain decisions made in the bank require the Governor’s approval in terms of relevant legal provisions and internal procedures. The rest of decisions are taken by other authorized officials in the bank. In Sri Lankan legal system, any decision taken by an administrative authority is subject to judicial review and this applies to the Central Bank, too, irrespective of the issue raised in the statement under reference.
-CBSL

Odel PLC acquires 99.99 per cent of Softlogic Brands (Pvt) Limited

Odel PLC acquired 99.99 per cent of Softlogic Brands (Private) Limited for Rs. 599,995,200 from Softlogic Retail (Private) Limited and Dai-Nishi Securities (Private) Limited which are subsidiaries of Softlogic Holdings PLC.

Softlogic Brands has the largest international and branded apparel and accessory portfolio in Sri Lanka and retailing 20 brands through its 41,000 sq. ft. prime retail space in Colombo.
www.adaderana.lk

Sri Lankan shares mark near 7-month low closing level

(Reuters) - Sri Lankan shares fell for a second straight session on Tuesday and closed at their lowest in nearly seven months, led by banks amid political uncertainty while investors waited for cues on interest rates.

The main stock index ended 0.63 percent, or 44.37 points, weaker at 6,997.93, its lowest closing level since Aug. 28 and below the key psychological support level of 7,000. It had lost 4.37 percent in the past 17 sessions.

"This is due to political uncertainty after the formation of national government," a stockbroker said on condition of anonymity.

Analysts said the government's decision-making process would slow down after President Maithripala Sirisena formed a national government incorporating the main opposition party in a bid to push through reforms and preserve political stability.

They said the market was awaiting clarity on interest rates after yields on t-bills fell between 31 and 44 basis points at a weekly auction on Wednesday, after having spiked by 112-124 basis points at the two previous weekly auctions.

The central bank said on Wednesday the low-interest rate environment was expected to continue benefiting from lower inflation while keeping policy rates steady.

Shares of the country's biggest listed lender, Commercial Bank of Ceylon Plc, fell 2.31 percent, while Ceylon Theatres Plc dropped 7.14 percent. Conglomerate John Keells Holdings Plc fell 0.72 percent.

The day's turnover was 394.1 million rupees ($2.96 million), well below this year's daily average of 1.21 billion rupees.

Foreign investors were net sellers for the second straight session. They sold of 15.42 million rupees worth of shares, but have been net buyers of 3.33 billion rupees so far this year. 

($1 = 133.1000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Monday 23 March 2015

Sri Lankan shares slip in thin trade; political woes weigh

(Reuters) - Sri Lankan shares ended a tad weaker on Monday in thin volume led by select shares such as Access Engineering Plc, while investors awaited cues on interest rates.

The main stock index ended 0.17 percent, or 12.28 points, weaker at 7,042.3, hovering near its lowest close since Feb. 2 hit on Wednesday. It had lost 3.74 percent in the last 13 sessions through Wednesday.

"It seems like people are staying out of the market," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

Infrastructure firm Access Engineering was down 5.56 percent, a day after it fell 10 percent after the new government cancelled an $85 million airport runway project awarded by the previous government.

Analysts expect the market to be in the red until the political situation stabilises even after Sri Lankan President Maithripala Sirisena formed a national government on Sunday.

Sirisena, incorporating the main opposition party, has formed a national government in a bid to push through reforms and preserve political stability.

Analysts said the market was awaiting clarity on interest rates after yields on t-bills fell between 31 and 44 basis points at a weekly auction on Wednesday, after having spiked to 112-124 basis points the two previous weekly auctions.

The central bank on Wednesday said the low-interest rate environment is expected to continue benefiting from lower inflation while keeping policy rates steady.

The day's turnover stood at 395.1 million rupees ($2.97 million), well below this year's daily average of 1.22 billion rupees.

Foreign investors were net sellers of 8.02 million rupees worth of shares, but have been net buyers of 3.35 billion rupees worth of shares so far this year.

($1 = 132.9000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

CSE signs consultancy agreement with BTA Consulting, UK to set up a Clearing House

The Colombo Stock Exchange (CSE) signed an agreement with BTA Consulting (BTA) of the United Kingdom to provide Consultancy and Project Management services to set up a Clearing House which will act as a Central Counterparty (CCP) for settlement of securities, including shares, corporate debt, Government Securities and any other financial market instruments transacted in Sri Lanka.

This is a joint initiative between the Central Bank of Sri Lanka (CBSL), the Securities and Exchange Commission of Sri Lanka (SEC) and the Colombo Stock Exchange (CSE). The project was launched in January 2015. The Clearing House is expected to be set up within a two year period.

The CCP will also enable the CSE to move to a Delivery Vs. Payment (DVP) settlement system, thus significantly minimizing the risk of settlement failure and counterparty risk in the secondary market for shares.

Presently for equities the delivery of shares occur immediately upon the execution of the transaction while fund settlement takes place three (3) market days after the transaction date (T+3), thus exposing the seller to a three (3) day settlement risk, while for Government securities the process is bi-laterally agreed. Although some interim measures have been introduced to reduce settlement risk, the globally accepted mechanism for minimizing settlement risk is through a CCP-DVP system where the securities and funds are exchanged simultaneously, finally with full irrevocability on the settlement day.

BTA consulting is a UK based consultancy firm specializing in capital market related assignments globally having specialists with exposure to most capital markets including Bursa Malaysia, the Stock Exchange of Thailand, Wien Bourse (Vienna Stock Exchange),the Swiss Exchange and many other European, Middle Easternand Asian markets. The consultants from BTA Consulting will work with a project team of specialists from CBSL, SEC and CSE.

A Steering Committee consisting of the Governor of the CBSL, the Chairman of the SEC, the Chairman of the CSE, the Deputy Director General of the SEC and the Chief Executive Officer of the CSE will have the overall oversight of the project.
A Working Group consisting of the Chief Operating Officer of the CSE,Director Capital Market Development of the SEC and the Superintendent Public Debt CBSL, will be responsible for the implementation of the project.

The Project Team of seven specialists from the CSE will be headed by Head of IT Project Management of the CSE under the purview of the Assistant General Manager Enterprise Risk Management of the CSE.

In preparation for the CCP, two preliminary phases have already been initiated by the CSE. In November 2014 the CSE launched a new generation Millennium Central Securities Depository (CSD) provided by the London Stock Exchange Group (LSEG)replacing the 19 year old legacy system which will be compatible with a DVP environment for securities settlement.

The second phase is the commissioning of new Broker Back Office (BBO) and Order Management Systems (OMS) for stock brokers. The OMS will contain a Risk Management System which will be a pre-requisite for the market to move to a CCP-DVP system.

Stock Brokers are expected to select and enter into agreements with one of the four (4) shortlisted vendors offering such systems. It is expected that the systems will be in place within 2015.

The CSE is also working in parallel with Primary Dealers, CBSL, SEC and Millennium IT (MIT), the CSE’s Trading System supplier to facilitate secondary trading of Government Securities through the CSE’s Automated Trading System (ATS). Presently the modalities and systems modifications in this regard are being designed by CBSL, Primary Dealers, CSE and MIT.

The CCP will usher in a new era for securities trading in Sri Lanka said Mr. Vajira Kulatilaka, Chairman of the CSE adding that he believes that the introduction of the CCP with DVP will be a ‘game changer’ for our securities market as this was one of the key criteria for re-classification of our market as an emerging market.

The CEO of the CSE Mr. Rajeeva Bandaranaike appreciated the support extended by CBSL, SEC, Stock Brokers and Primary Dealers for supporting the measures that are being taken to mitigate the settlement risk in the securities market. He further stated that the CCP and DVP system of settlement will facilitate plans to diversify the CSE’s product range.
www.adaderana.lk 

Sri Lanka's Colombo Stock Exchange get two directors

COLOMBO (EconomyNext) - Lal Nanayakkara, a senior accountant and Anton Godfrey, who head a company with an international presence have been appointed directors of the Colombo Stock Exchange.

Nanayakkara was a former President of the Institute of Chartered Accountants of Sri Lanka in 1997 and has been board member of the Securities and Exchange Commission.

Anton Godfrey is the founder and chairman of AGXA an AG International Company, which has a Australia, Singapore, India and Sri Lanka, principal network span over Europe and North America, the Colombo Stock Exchange said.

Godfrey holds an MBA from the University Of Leicester UK, Chartered Marketer and a Fellow of The Chartered Institute of Marketing UK and the Australian Institute of Management.

Vajira Kulatilaka (Chairman)
M R Prelis –Elected
Dakshitha Thalgodapitiya – Appointed
Jeewa Niriella – Appointed
Ray Abeywardena – Elected
Asanga Seneviratne– Elected
Aravinda Perera– Elected
Lal Nanayakkara – Appointed
Anton Godfrey– Appointed

Access Engineering sets record straight on $ 85 m BIA project

Access Engineering Plc (AEL) has issued a disclosure to the Colombo Stock Exchange (CSE) explaining its position in relation to the Government’s annulment of $ 85 million tender for a runway overlay and associated work at the Bandaranaike International Airport (BIA).

AEL said that whilst respecting the decision taken by the Cabinet of Ministers, the disclosure was for the purpose of further clarity. The following is the statement of disclosure.

Access Engineering Plc (AEL) is a responsible, civic conscious business enterprise operating in full compliance with the rules and regulations pertaining to a public company listed on the Colombo Stock Exchange. AEL values as well as practices transparency and principles of good governance in all its dealings and transactions.

Initially, for the execution of the works encompassed under the captioned project, a tender was published in the local newspapers in January 2013 to requesting for Proposals (RFP) with funding arrangements.

Two bids were received pursuant to the aforesaid RFP from two international contractors, namely M/s. Lagan Construction Ltd. of Northern Ireland and M/s China Harbour Engineering Company Ltd. of China where the financial bids were opened on 27 May 2013.

The following local contractors attended a meeting called by the Secretary, Ministry of Finance on 11 and 13 December 2013: Nawaloka Construction Company, Maga Engineering Ltd., Tudawe Brothers Ltd., Sierra Construction (Pvt) Ltd., Access Engineering Plc.

The contractors present were informed that the GOSL has decided to use local bank finance to carry out work with respect to the above project and the tender called in January 2013 for carrying of the project where finance was from overseas, would not be pursued. At this meeting, the local contractors expressed that they would not possess the required experience and would not meet with the required pre-qualification to carry out this work.

The local contractors were informed that they could collaborate with foreign contractors to meet with the relevant pre-qualification and experience criteria and was invited to submit their proposals.

The local contractors present were informed that this is a great opportunity to enhance their capacity and avail to themselves the opportunity to be prequalified for any future works in the region.

In the event the local contractors are unable to form a suitable consortium and submit a proposal, the GOSL will be compelled to proceed with the international contractor selected through the tender called. The RFP document was made available to the local contractors. (Attendance records and minutes would be available at the Ministry of Finance).

AEL submitted its preliminary proposal on 28 January 2014 together with Louise Berger Group (LBG) of USA, Katahira & Engineers International (KEI) of Japan and World Kaihatzu Kogyo Company Ltd., (WKK) of Japan.

Thereafter, having ascertained the exact scope of work and/or parameters of the project, and site visits, in consultation with AASL, AEL submitted its detailed proposal incorporating the scope changes and new requirements of AASL on 24 April 2014.

After further discussions with the Cabinet Appointed Negotiation Committee (CANC) and the Procurement Committee (PC) on 2 July and 12 August 2014, the final revised financial proposal was submitted by AEL on 18 August 2014. Pursuant to further negotiations between AEL and the CANC/PC on 25 August, 10,11 and 12 September and 31 October 2014, AEL agreed to the contract sum of $ 85,770,919.98 (consist of $ 34,308,367.99 and SLR.6,702,740,083.68).

A Letter of Acceptance dated 10 December 2014 was issued by AASL awarding the said contract to AEL. AEL accepted the said award of the contract through letter dated 11 December 2014. The award of the contract was communicated by AEL to their association partners who subsequently mobilised to carry out their respective scope of work.

Thereafter, on two consecutive occasions AASL granted an extension of time until 28 February 2015 for the submission of the relevant Performance Security.

Through letter dated 19 February 2015 AASL advised that the captioned project is under review for which we replied on 27 February 2015 explaining the factual position of the process followed in awarding us the project as mentioned above.
www.ft.lk

Sunday 22 March 2015

Ranil slams stock market mafia

Prime Minister Ranil Wickremesinghe on Tuesday slammed corrupt sections of Sri Lanka’s private sector to the extent of naming businessmen like Dilith Jayaweera and Nimal Perera.

“There are a number of allegations of violations of the Colombo Stock Exchange market rules and Securities and Exchange Commission regulations. The minor ones were compounded. Thirteen large cases were abandoned purportedly on a lack of evidence,” he told parliament. He noted that were not probed or were settled when it should have been probed further.

“I would like this to be recorded in the Hansard. I have requested the Securities and Exchange Commission to go into these cases. If necessary, I will bring legislation to permit such inquiry. I am also seeking the appointment of a Parliamentary Select Committee to inquire into these transactions. Since some of the issues raised are under consideration by the committee, I prefer to give an answer elaborately after the report is submitted. We plan to table this report in Parliament.”

He further said, “We have created a free and fair climate for the business community. They are free from fear and intimidation. This applies to the media in this country too. There are no threats, intimidation or trips in white vans.”

The Premier also said that ‘it’s high time they turn the searchlight into areas that have remained a virtual “no go zone” in the past.’

Nimal Perera unfit to head a bank

“Take for example the banking sector. Take the name of Nimal Perera at Pan Asia or Ranee Jayamaha of Hatton National Bank. Who are they and how did they benefit from certain political personalities of the previous administration? How can Mr. Perera head a bank given the large number of surveillance referrals made to the Colombo Stock Exchange?

The National Savings Bank purchased 13 per cent of The Finance Company at Rs. 50 per share. That is Rs. 20 above market value. The mastermind behind this was Ajith Devasurendera and Dinal Wijemanne. Today, The Finance Company has recorded accumulated net losses of Rs. 16 billion.”

He also added that former Chief Justice Shirani Bandaranayake’s private bank records were forcibly released by the then management of the National Development Bank (NDB) against all norms relating to confidentiality of client data. “It is for those in the banking industry to turn the searchlight inwards. They are not casinos or gambling dens. There are time-tested traditions and conventions.”

He said that similarly in the business sector a closer examination of some of the players becomes inevitable. “Take for example Dilith Jayaweera. His roles in the Colombo Land and Development Company and the Reef Comber have to be probed by the authorities. 


Another such instance is Scott Newman and Kosala Heengama. Similarly their roles in Environment Resources Investments require very close scrutiny. Take the case of John Keells – the Government’s decision to cancel the casino licences has resulted in shareholders dumping their shares. This is the only way to show their protest against questionable choices by the management.”

How much was spent for the country’s development and how much went to fatten the purses of those corrupt is slowly but surely unfolding, he said, adding that sooner than later, the people of this country will realise how their monies have been squandered.

“This sorry state of affairs came about against much touted claims of prosperity. The Central Bank had made losses for the past three years though self-acclaimed financial wizards, through devious campaigns, spoke of growth and gains,” he said, adding that millions of dollars were spent, without express approval by the Cabinet Ministers, on a string of public relations companies in an extravaganza of promoting Sri Lanka.
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Pan Asia poised for expansion

By Duruthu Edirimuni Chandrasekera

The Pan Asia Bank is gearing to strengthen its Return on Equity (ROE) levels in a bid to attract more investment, primarily for expansion, officials say.

“Now ROE is at 10 per cent and our targeted ROE is 15-16 per cent by 3Q this year. This we feel will be an appropriate time for us to tap the shareholders (for funding) mainly for our expansions,” Dimantha Seneviratne, Director/CEO Pan Asia told the Business Times, adding that this is in line with the regulatory direction for higher capital requirement.

In the midst of the consolidation debate, the Rs. 80 billion balance sheet bank, Mr. Seneviratne said is gearing for organic growth. Mr. Seneviratne insists that Pan Asia is comfortable with retail and Small and Medium Enterprises (SME) driven organic growth. 


“When big banks are concentrating on large scale business, the scope for SME and retail become that much more. This is what we’re focusing on,” he added.During the past 3-4 years, Pan Asia has added 35 branches to its total of 78 branches. “We’re eyeing more expansion, he added. “We’re having an asset target of Rs. 100 billion by year end.”

The year began on a low key as the bank’s lending portfolio, which had a significant exposure to pawning related products, had taken a hit in 2013, as did the rest of the industry with the drop in global gold prices, he said, adding that this saw muted profits and higher Non Performing Advances. “We evolved our risk management strategies including hedging arrangements to manage the down side risk which enabled us to curtail losses and systematically reduce this exposure. The diversification of lending and focus on Retail and SMEs enabled us to record a 34 per cent growth in advances, well above the industry average”.

The CEO who’s an year old in this job added that in this challenging backdrop, it was indeed an honour to be recognised as the ‘Fastest Growing Commercial Bank in Sri Lanka 2014′ by London based Global Banking and Finance Review and also with the award for the ‘Most Innovative Banking Product in Sri Lanka 2014′ for Pan Asia Bank’s ground breaking product ‘Sammana’ which is a loan product for pensioners.

The bank has large plans to enhance its corporate image. “We have an idea to reorganise our image – it’s still at a nascent stage,” he added.


Pan Asia’s net interest income rose from Rs. 2.095 billion to Rs. 2.740 billion last year, recording a growth of 31 per cent. As a result, net interest margin improved by 13 per cent to 3.82 per cent. “We were also successful in improving our Non Interest Income by 21 per cent to Rs. 1.392 billion, diversifying the revenue sources,” Mr. Seneviratne added.

By the end of 2014 the bank’s Core Capital Ratio (Tier 1) stood at 8.97 per cent as against the statutory minimum requirement of 5 per cent whilst the Total Capital Ratio strengthened to 14.19 per cent (from 11.91 per cent in 2013) against the statutory minimum requirement of 10 per cent.
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SEC halts UDA debenture, calls for audited accounts

The Securities and Exchange Commission (SEC) has halted the Urban Development Authority’s (UDA) Rs. 10 billion debenture issue and called for its audited accounts of 2012 and 2013, officials said.

The state entity was gearing to launch the bond for low-cost housing before last year end, but owing to the political changes it was put off. “When they had made a fresh application, we saw that they hadn’t audited their accounts for the past two years. 


Earlier they had approval to launch the debenture as they had got a state backed guarantee. Now they haven’t got it as the Treasury hasn’t done so,” a Colombo Stock Exchange (CSE) official told the Business Times. This was also confirmed by a SEC official.

Last week the UDA sent the 2012 accounts to the CSE but the exchange is awaiting the 2013 accounts.

“We’re waiting to close our financials and then we will announce the debenture,” a UDA official told the Business Times.

He said the UDA had got calls daily from interested parties on this debenture last year as the earlier budget proposed an exemption on the interest or discount accruing from the investment in any Corporate Debt Security issued by on or after 1 January 2015. This is not the case now.
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SEC swamped with complaints over stock trades

The Securities and Exchange Commission (SEC) has received a ‘substantial’ number of complaints during the past two months pertaining to share market misconduct, SEC sources say.

“We have received files full of complaints. Some are with names and some anonymous,” a source told the Business Times. She said these complaints range from manipulation, insider dreading, pump and dump, stockbrokers and investment advisors misleading smal shareholders, trading on accounts under third party names, etc.

Recently addressing the National Law Conference of the Bar Association of Sri Lanka under the theme ‘Sri Lanka Legal Summit 2015 – Governance, Regulation and Investment – The Way Forward’, Thilak Karunaratne, Chairman SEC said many stocks were pumped and dumped on unsuspecting investors during a stock market bubble which peaked around 2011, adding that those who lost money during the period are still calling and making complaints against some brokers and margin providers to the SEC.

“I am trying to do justice to those who got really played out,” he said, adding that the amendments to the SEC Act may take up to 18 months to be passed in parliament. The new law will no longer allow serious frauds to be “compounded” or to settle with a fine without agreeing to guilt and there will be provisions to encourage whistle blowing and to give bounties.

According to the SEC official, it maybe sometime before all this will be screened. She added that they will have to prioritise.


“We don’t know where to start from, because we’re swamped,” she added.

Industry analysts noted that confidence in the new regime has prompted all these complaints.
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Parliamentary probe on stock market ‘pump and dump’

Slow and steady wins the race. That appears to be the formula, with fresh winds blowing, at Sri Lanka’s watchdog stock market regulator, the Securities and Exchange Commission (SEC).

Slow, it seems, is the way it is progressing in investigations that were shelved by the former administration. To add to the woes, still around at the SEC are a few senior officials who went beyond their brief to woo the earlier powers-that-be. To the new administration’s dismay they continue to hold office and either block or slow the process of vigorously re-starting investigations against corporate fraudsters and white collar criminals who greedily resorted to ‘pump and dump’ in the market some years back.

This scenario is similar to what is happening at the Foreign Ministry where officials, who were at the beck and call of the former regime and did their biding, continue to hold positions. ‘Yahapalanaya’ means one is not guilty until decided by the law and thus these once arrogant and corrupt officers continue to hold sway. Action needs to be swift otherwise the public is losing patience with an administration that is only seen as talking, and not acting speedily against the enormous corruption that occurred during the last regime.

Pressure on the Government to deliver on what was promised may also be the reason why Prime Minister Ranil Wickremasinghe assured Parliament this week that a Parliamentary Select Committee (PSC) would be appointed to probe serious violations in the past few years in the stock market.

Thank heavens … he didn’t appoint a (in-house) committee – like the 3-member committee probing the allegedly, tainted Treasury bond issue – to oversee the manipulations of the stock market mafia.

The Prime Minister, in attacking mode in parliament, named and shamed prominent corporate personalities and professionals like Nimal Perera, Ranee Jayamaha, Ajith Devasurendera, Dinal Wijemanne, Dilith Jayaweera, Scott Newman and Kosala Heengama in driving home the corruption that prevailed in the past.

Conflict of interest questions have also been raised, in the past, over the appointment of retired Central Banker Dharma Dheerasinghe to the board of the Commercial Bank after heavy EPF investments in the banking sector. Along with him the appointment of Preethi Jayawardene was also questioned at that time. There are many others connected, directly and indirectly to the stock market whose names have figured in dubious transactions. All these need not only a proper but also a transparent investigation. 


Naming and shaming the earlier individuals seems unfair (furthermore protected by parliamentary privilege) if the due process of the law isn’t followed where they are able to clear their name if there is no evidence to prove they were guilty. On the other hand, finding hard evidence is what is grappling the Government at the moment as in many instances the culprits have left no paper trail or vanished with the files or hard disks!

PM Wickremasinghe has taken the right step in recommending a parliamentary-led probe which is as independent as it can get to investigate the stock market.

While a parliamentary committee could also include MPs who backed corrupt individuals who are being probed, this is still a welcome and transparent move unlike the step taken by former President Mahinda Rajapaksa to force the removal of Thilak Karunaratne (a few years after his predecessor Indrani Sugathadasa resigned in disgust over pressure from the ‘mafia’) at the behest of a group of powerful players in the market, who had the gumption to advise Rajapaksa that the SEC’s strict regime of rules was killing the market. The real reason for enforcing the rules was massive pump and dump trades in which small 


investors lost badly while other tainted deals like the NSB purchase of shares in The Finance Co (TFC) meant the SEC had to crack the whip. The NSB deal linked to insider dealing was subsequently reversed and is an example that is increasingly being suggested in the latest case of the Treasury bond issue (ie. cancel the February 27 bond issue). If matters are clean as the Government attempts to infer in the controversial bond issue, the Central Bank should have – as reported in the Sunday Times a few weeks back – officially informed market dealers on February 26 (when the Government decided to urgently raise Rs. 15 billion in bonds) that they plan to increase the accepted offer and submit fresh bids by the next day, February 27 when the auction was closing.

Meanwhile another step towards ensuring governance and ethics in the stock market is the formation of a body to protect small shareholders, primarily those who have invested their hard-earned retirement funds in multiple stocks in small quantities starting as low at 200-500 shares.

Such investor protection bodies are active in the West and parts of Asia and work closely with the regulator, while maintaining their independence. During a symposium in Colombo this week on protecting small investors, SEC Chairman Thilak Karunaratne referred to the emergence of such a small investors group mooted by the Business Times which however didn’t succeed due to infiltration by elements connected to the mafia.

Small investors fall into two categories – investors (who have assets and wealth) but belong to a minority in the overall shareholdings of a company and middle-class investors who buy a few shares in companies. Noted Good Governance activist K. C. Vignarajah, driver of the proposed small investors association, refers to both categories of investors as independent minority shareholders (IMS), a term he coined himself that has come to stay and accepted in the market.

The forum to create awareness about protection mechanisms while being a laudable idea didn’t appear to address the people who actually deserve to be protected. Small, middle-class investors cannot afford even a Rs. 1,000 fee to attend an event like this. In hindsight the SEC should have picked up the tab for this event and offered a free invitation to all – including for example members of the path-breaking Kurunegala Small Investors Association – to attend the event, which should also have had a Sinhala translation (or even presentations). That is if the motive and objective of the organisers of the event was to reach out to the majority of investors who are small, middle class individuals.

The forum was dominated by corporate lawyers (many who are like the metaphor “a double-edged sword”) spoke on the rights of small investors and providing them clues to assert their rights against the big corporates. In the presentations, there should have been a balance of both corporate lawyers and others who understand the simple needs of small investors like for example the inability to read annual reports (also in English) and now to challenge high profile board directors surrounded by corporate secretaries and powerful lawyers – and in quite a few cases where company employees have been donated shares to make up the numbers and shout down ‘troublesome’ small shareholders at AGMs!

In today’s world, money talks! Given a choice between being hired by a board of directors (read: fat fee) or a group of small investors, seeking justice and able to pay a small fee, to which side will a corporate lawyer eventually turn to? Your guess is as good as mine.

Here is a suggestion: The SEC needs to make small investors welcome to seek advise or make complaints at its head office. An environment must be created at the office where small investors are not only welcome but seen as being welcome (the front desk needs to be polite, warm and welcome to everyone irrespective of their status), and a special unit set up to meet investors and process their complaints, concerns and even suggestions.

Bringing sanity to the stock market and ensuring a level playing field for all investors – big or small – is a tall order for the new administration which many hope will succeed.
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