Wednesday 3 August 2016
Sri Lankan shares up on hopes of macro economic improvement
Reuters: Sri Lankan shares rose on Wednesday, heading for their fifth straight session of gains, as investors continued buying shares hoping for improved macro economic fundamentals after the central bank rate hike, analysts said.
The central bank last week raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concerns about inflationary pressures.
"The indication given by the rate hike is that the rates will stay at these levels and will not come down and the positive factor is that the inflation will be in check," said Danushka Samarasinghe, research head, Softlogic Stockbrokers.
"We have seen returning interest into the large-cap shares as the valuations are rather attractive and also seen some progress in macro economic factors in snail pace."
The benchmark Colombo stock index was up 0.32 percent at 6,524.25 at 0707 GMT, its highest since June 14.
Turnover was 861.6 million rupees ($5.91 million).
The Sri Lankan rupee edged up as foreign investors sold dollars to buy bonds and stocks after the central bank's policy rate hike, dealers said.
One-week rupee forwards, which have been acting as a proxy for the spot rupee, were at 146.00/15 per dollar at 0709 GMT, up from Tuesday's close of 146.10/15.
"Some foreigners are buying into bonds and also we have seen some foreign inflow into the stock market," said a currency dealer, asking not to be named.
The spot rupee is tightly managed by the central bank, and market participants use the forward market levels for guidance on the currency.
The spot rupee was not traded on Wednesday.
Spot-next, which are rupee forwards settled a day after the spot rupee settlement, were at 145.90/98 per dollar, compared with Tuesday's close of 145.95/146.05.
The central bank last week raised its main interest rates by 50 basis points each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concerns about inflationary pressures.
"The indication given by the rate hike is that the rates will stay at these levels and will not come down and the positive factor is that the inflation will be in check," said Danushka Samarasinghe, research head, Softlogic Stockbrokers.
"We have seen returning interest into the large-cap shares as the valuations are rather attractive and also seen some progress in macro economic factors in snail pace."
The benchmark Colombo stock index was up 0.32 percent at 6,524.25 at 0707 GMT, its highest since June 14.
Turnover was 861.6 million rupees ($5.91 million).
The Sri Lankan rupee edged up as foreign investors sold dollars to buy bonds and stocks after the central bank's policy rate hike, dealers said.
One-week rupee forwards, which have been acting as a proxy for the spot rupee, were at 146.00/15 per dollar at 0709 GMT, up from Tuesday's close of 146.10/15.
"Some foreigners are buying into bonds and also we have seen some foreign inflow into the stock market," said a currency dealer, asking not to be named.
The spot rupee is tightly managed by the central bank, and market participants use the forward market levels for guidance on the currency.
The spot rupee was not traded on Wednesday.
Spot-next, which are rupee forwards settled a day after the spot rupee settlement, were at 145.90/98 per dollar, compared with Tuesday's close of 145.95/146.05.
($1 = 145.9000 Sri Lankan rupees)
(Reporting by Ranga Sirilal and Shihar Aneez)
Singer Sri Lanka records excellent growth
- Revenue grows 23% in first half
- First half net income grows 115% with consolidation of new acquisitions
The Singer (Sri Lanka) Plc Group’s second quarter financial results continued to display excellent growth fuelled by an increase in revenue and net income.
In the second quarter of 2016, the Group’s revenue increased 23% to Rs. 11.6 billion, while net profit improved 60% to Rs. 613.4 million, when compared with the previous year. This included consolidation of new acquisitions.
Group Revenue for the first six months of the year also increased by 23% to Rs. 22.1 billion, showcasing strong underlying growth witnessed last year and an overall increase of 58% growth over a two-year period.
At the end of the first six months of 2016, Group Net Profit was Rs. 1,423 million, an increase of 115% over the previous year. This included consolidation of new acquisitions and related one-time gains.
Contributing to the growth in revenue and net income were the strategic initiatives undertaken by the Group and the continuing customer demand despite increases in interest rates, exchange rates and VAT.
Some of the pursued new initiatives included opening additional shops, adding new dealers and channels of distribution, improving and renovating shops, securing new brands and distributorships and introducing new products and improving processes.
During the first six months, the Group undertook significant initiatives such as the launch of Singer’s own credit card with Visa, the launch of the new Singer Smart TV range under the sub-brand Singer Vista, the opening of digital media corners in retail shops, the expansion of the capacity at its refrigerator factory, the introduction of a new furniture brand for dealers, a thrust into dealer markets for computers and furniture and the creation of an institutional market for digital media and air conditioners.
The Group also continued its successful campaigns for refrigerators, televisions and air conditioners. Growth was witnessed in the product lines of most sectors. Traditional products such as refrigerators, panel televisions and sewing machines continued to perform very well.
There was stronger impetus in the thrust product categories where smart mobile phones sales grew by 53%, deep freezers by 31%, computers by 24%, washing machines increased by 17%, air conditioners and air coolers by an impressive 77% and 65% respectively.
Singer (Sri Lanka) acquired majority stakes in Singer Industries (Ceylon) Plc and Regnis (Lanka) Plc from its parent company Singer (Sri Lanka) B.V. This resulted in a one-time gain on bargain purchase amounting to Rs. 508 million.
Commenting on the Q2 2016 results, Group CEO Asoka Pieris noted: “We are pleased with this quarter’s growth and expect the trend to continue during the remaining six months of the year. Our growth momentum is a result of the Group’s strategic imperatives throughout the first six months and pioneering new business opportunities organically and from acquisitions.”
Chairman Dr. Saman Kelegama added: “These results are a testimony to the continued strength of the Singer brand in Sri Lanka and the company’s focus on product quality and customer service.”
www.ft.lk
Dhammika Perera steps down as Sampath Bank Chairman
Business leader Dhammika Perera has stepped down as Chairman of Sampath Bank having completed his term of nine years as a Director.
Channa Palansuriya has been appointed as Chairman of Sampath Bank, and Prof Malik Ranasinghe as Deputy Chairman with effect from 1 August 2016.
Perera holds 63% of shares of Vallibel One Plc which holds a 14.95% stake in Sampath Bank. Palansuriya and Prof. Ranasinghe do not have any shareholding in the Bank
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Channa Palansuriya has been appointed as Chairman of Sampath Bank, and Prof Malik Ranasinghe as Deputy Chairman with effect from 1 August 2016.
Perera holds 63% of shares of Vallibel One Plc which holds a 14.95% stake in Sampath Bank. Palansuriya and Prof. Ranasinghe do not have any shareholding in the Bank
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Sampath Bank ups 1H post-tax profit by 41% to Rs. 4.2 b
Sampath Bank posted a profit after tax of Rs. 4.2 b for the first half of 2016, a 41% growth over the corresponding period in 2015.
The bank also managed to cross the Rs. 5 b mark in pre-tax profit to reach Rs. 5.7 b by the end of the period, recording a growth of 29.4% against Rs. 4.4 b achieved in the corresponding period in the previous financial year. The main reason for the higher post-tax profit growth compared to the pre-tax profit growth is the reversal of excess provisions made in previous years.
Sampath Group, which comprises Sampath Bank and four subsidiary companies, too recorded an impressive group pre-tax profit of Rs. 5.9 b during the period under review.
The Group’s post-tax profit achievement for the first half in 2016 was at Rs. 4.3 b.
Amidst several challenges such as low liquidity, higher cost of funds, volatile margins and unstable currency rates posed by the external market forces, the bank’s strong commitment to achieve a sustainable growth in all key business pillars has improved almost all core banking income sources, such as net interest income and net fee and commission income.
Net Interest Income (NII) which is the main source of income from fund based operations and accounts for more than 70% of the total operating income of the bank continued to suffer adversely due to sharp increase in cost of funds during the period. However, the strong growth recorded in the bank’s fund –base, as indicated by more than 10% growth both in deposits and advances, coupled with timely re-pricing of asset and liability products and other fund management strategies adopted by the bank helped to record a notable increase of Rs. 1.7 b (20.5%) in NII during the 1H 2016. Accordingly, the bank recorded a NII of Rs. 10.2 b during the period under review as against Rs. 8.4 b earned in the corresponding period in 2015.
Net fee and commission income, which mostly comprises of credit, trade, credit card and electronic channel related fees has increased to Rs. 3 b in the first 1H 2016 as opposed to Rs. 2.4 b recorded in the comparative period in 2015, reflecting an impressive growth of 23.1%. Leveraging on credit and trade related segments, further expanding the credit card operation and successful launching of innovative value additions through electronic channel offerings have considerably contributed to the growth in NFBI.
Net trading income has recorded a positive figure of Rs. 144.8 m in the 1H 2016 as against the loss of Rs. 124.1 m recorded during the same period of the previous year. This was mainly due to the gain on forward exchange contracts revaluation.
The bank also recorded a marginal growth of 1.7% in other operating income during this period. Other operating income earned during the 1H 2016 amounted to Rs. 1,241.6 m, compared to Rs. 1,220.6 m in the 1H 2015. Exchange income gains on revaluation of FCY reserves resulting from depreciation of the LKR against the USD and income from currency note operations have contributed towards the positive variance in this income source.
Operating expenses of the bank which stood at Rs. 6.2 b for 1H 2015, increased to Rs. 7.2 b in the period under review, reflecting an increase of 15.1%. This increase was mainly due to increase in personnel expenses triggered by salary increments and general price increases, etc. However, the Cost to Income ratio without VAT and NBT on financial services has improved to 49.3% in the 1H 2016 from 52.0% in the 1H in 2015. In spite of having one of the youngest branch networks compared to close competitors, maintaining the Cost to Income ratio below 50% is an important achievement.
Impairment charge amounting to Rs. 561 m recorded an increase of Rs. 195 m over the previous year’s charge of Rs. 366 m. Impairment charge on individually significant customers has increased by Rs. 353.3 m due to prudential provision increases made against impaired customers. However, the Bank’s collective impairment charge recorded a decrease of Rs. 158.5 m compared to the 1H 2015 charge of Rs. 243 m, due to decrease in loss rates resulting from improving credit quality of the loan book.
Sampath’s total asset base grew by 11.1% during the 1H 2016 (annualised 22.3%) and stood at Rs. 584 b as at 30 June 2016. Gross loans and receivables grew by 10% during the first six months of 2016 (annualised 19.8%) and moved up to reached to Rs. 423 b by 30 June 2016. Total deposit base too increased by Rs. 43 b, recording a growth of 10.5% during this period (annualised 21.0%) and surpassed Rs. 450 b as at the reporting date. The CASA ratio as at 30 June 2016 decreased to 44.0% from 47.6% as of end December 2015, due to customers shifting their funds to high yielding products mainly triggered by high interest rates offered by term deposits.
ROE (after tax) substantially improved and stood at 23.4% as at 30 June 2016 when compared to 18.4% recorded as at 31 December 2015, while ROA (before tax) improved to 2.07% as at end of the half year period, as against 1.90% recorded as at 31 December 2015. The Basic Earnings per share (group) for the first half of the year 2016 has substantially improved and stood at Rs. 24.56 as against Rs. 18.12 recorded for the corresponding period in the previous year. This was an impressive growth of 35.6%. Statutory liquid asset ratio (20.7%) was maintained above the mandatory requirement of 20%. Though the bank’s gross NPL ratio (1.8%) has fractionally increased from 1.64% recorded as at 31 December 2015, this ratio still remains as one of the best in the industry.
The Core Capital (Tier I) and Total capital (Tier I + Tier II) adequacy ratios as at 30 June 2016 have marginally improved and stood at 7.97% and 12.35% respectively, as against 7.90% and 12.26% recorded as at 31 December 2015. The two ratios were well above the minimum regulatory requirement of 5% for Tier I Capital and 10% for Total Capital. With the objective of further strengthening capital adequacy, the bank issued subordinated debentures amounting to Rs. 6 b during June 2016 and the issue was oversubscribed on the day of opening.
Year 2016 proved to be another rewarding year for Sampath Bank. The bank won three of the most prominent international awards during the period under review. Sampath Bank regained the ‘Best Bank in Sri Lanka – 2016’ award which is given to top performing financial institutions by the prestigious Business Magazine ‘The Euromoney’. The bank is now endowed with this prestigious title for three years; 2016, 2014 and 2013.
Sampath Bank was once again adjudged as the ‘Best Commercial Bank 2016’ and ‘Best Retail Bank 2016’ in Sri Lanka for the third consecutive year by the UK based World Finance Magazine in recognition of the Bank’s excellence in various spheres including overall performance, financial ratios, variety and clarity of products and services, corporate governance, etc.
Sampath Bank became the first bank to launch Visa payWave in Sri Lanka, which is the fastest and the most convenient way of effecting payments by simply tapping the credit card on a POS machine at a check-out counter, instead of swiping or inserting it.
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The bank also managed to cross the Rs. 5 b mark in pre-tax profit to reach Rs. 5.7 b by the end of the period, recording a growth of 29.4% against Rs. 4.4 b achieved in the corresponding period in the previous financial year. The main reason for the higher post-tax profit growth compared to the pre-tax profit growth is the reversal of excess provisions made in previous years.
Sampath Group, which comprises Sampath Bank and four subsidiary companies, too recorded an impressive group pre-tax profit of Rs. 5.9 b during the period under review.
The Group’s post-tax profit achievement for the first half in 2016 was at Rs. 4.3 b.
Amidst several challenges such as low liquidity, higher cost of funds, volatile margins and unstable currency rates posed by the external market forces, the bank’s strong commitment to achieve a sustainable growth in all key business pillars has improved almost all core banking income sources, such as net interest income and net fee and commission income.
Net Interest Income (NII) which is the main source of income from fund based operations and accounts for more than 70% of the total operating income of the bank continued to suffer adversely due to sharp increase in cost of funds during the period. However, the strong growth recorded in the bank’s fund –base, as indicated by more than 10% growth both in deposits and advances, coupled with timely re-pricing of asset and liability products and other fund management strategies adopted by the bank helped to record a notable increase of Rs. 1.7 b (20.5%) in NII during the 1H 2016. Accordingly, the bank recorded a NII of Rs. 10.2 b during the period under review as against Rs. 8.4 b earned in the corresponding period in 2015.
Net fee and commission income, which mostly comprises of credit, trade, credit card and electronic channel related fees has increased to Rs. 3 b in the first 1H 2016 as opposed to Rs. 2.4 b recorded in the comparative period in 2015, reflecting an impressive growth of 23.1%. Leveraging on credit and trade related segments, further expanding the credit card operation and successful launching of innovative value additions through electronic channel offerings have considerably contributed to the growth in NFBI.
Net trading income has recorded a positive figure of Rs. 144.8 m in the 1H 2016 as against the loss of Rs. 124.1 m recorded during the same period of the previous year. This was mainly due to the gain on forward exchange contracts revaluation.
The bank also recorded a marginal growth of 1.7% in other operating income during this period. Other operating income earned during the 1H 2016 amounted to Rs. 1,241.6 m, compared to Rs. 1,220.6 m in the 1H 2015. Exchange income gains on revaluation of FCY reserves resulting from depreciation of the LKR against the USD and income from currency note operations have contributed towards the positive variance in this income source.
Operating expenses of the bank which stood at Rs. 6.2 b for 1H 2015, increased to Rs. 7.2 b in the period under review, reflecting an increase of 15.1%. This increase was mainly due to increase in personnel expenses triggered by salary increments and general price increases, etc. However, the Cost to Income ratio without VAT and NBT on financial services has improved to 49.3% in the 1H 2016 from 52.0% in the 1H in 2015. In spite of having one of the youngest branch networks compared to close competitors, maintaining the Cost to Income ratio below 50% is an important achievement.
Impairment charge amounting to Rs. 561 m recorded an increase of Rs. 195 m over the previous year’s charge of Rs. 366 m. Impairment charge on individually significant customers has increased by Rs. 353.3 m due to prudential provision increases made against impaired customers. However, the Bank’s collective impairment charge recorded a decrease of Rs. 158.5 m compared to the 1H 2015 charge of Rs. 243 m, due to decrease in loss rates resulting from improving credit quality of the loan book.
Sampath’s total asset base grew by 11.1% during the 1H 2016 (annualised 22.3%) and stood at Rs. 584 b as at 30 June 2016. Gross loans and receivables grew by 10% during the first six months of 2016 (annualised 19.8%) and moved up to reached to Rs. 423 b by 30 June 2016. Total deposit base too increased by Rs. 43 b, recording a growth of 10.5% during this period (annualised 21.0%) and surpassed Rs. 450 b as at the reporting date. The CASA ratio as at 30 June 2016 decreased to 44.0% from 47.6% as of end December 2015, due to customers shifting their funds to high yielding products mainly triggered by high interest rates offered by term deposits.
ROE (after tax) substantially improved and stood at 23.4% as at 30 June 2016 when compared to 18.4% recorded as at 31 December 2015, while ROA (before tax) improved to 2.07% as at end of the half year period, as against 1.90% recorded as at 31 December 2015. The Basic Earnings per share (group) for the first half of the year 2016 has substantially improved and stood at Rs. 24.56 as against Rs. 18.12 recorded for the corresponding period in the previous year. This was an impressive growth of 35.6%. Statutory liquid asset ratio (20.7%) was maintained above the mandatory requirement of 20%. Though the bank’s gross NPL ratio (1.8%) has fractionally increased from 1.64% recorded as at 31 December 2015, this ratio still remains as one of the best in the industry.
The Core Capital (Tier I) and Total capital (Tier I + Tier II) adequacy ratios as at 30 June 2016 have marginally improved and stood at 7.97% and 12.35% respectively, as against 7.90% and 12.26% recorded as at 31 December 2015. The two ratios were well above the minimum regulatory requirement of 5% for Tier I Capital and 10% for Total Capital. With the objective of further strengthening capital adequacy, the bank issued subordinated debentures amounting to Rs. 6 b during June 2016 and the issue was oversubscribed on the day of opening.
Year 2016 proved to be another rewarding year for Sampath Bank. The bank won three of the most prominent international awards during the period under review. Sampath Bank regained the ‘Best Bank in Sri Lanka – 2016’ award which is given to top performing financial institutions by the prestigious Business Magazine ‘The Euromoney’. The bank is now endowed with this prestigious title for three years; 2016, 2014 and 2013.
Sampath Bank was once again adjudged as the ‘Best Commercial Bank 2016’ and ‘Best Retail Bank 2016’ in Sri Lanka for the third consecutive year by the UK based World Finance Magazine in recognition of the Bank’s excellence in various spheres including overall performance, financial ratios, variety and clarity of products and services, corporate governance, etc.
Sampath Bank became the first bank to launch Visa payWave in Sri Lanka, which is the fastest and the most convenient way of effecting payments by simply tapping the credit card on a POS machine at a check-out counter, instead of swiping or inserting it.
www.ft.lk
Fitch affirms ten finance companies
Fitch Ratings has affirmed the ratings of ten finance companies.They are,People’s Leasing & Finance (PLC), Central Finance Company (CF), Melsta Regal Finance (MRF), HNB Grameen Finance (HGL), LB Finance (LB), Siyapatha Finance (Siyapatha), Senkadagala Finance (Senka), AMW Capital Leasing and Finance (AMCL), Singer Finance (SFL) and Mercantile Investment & Finance (MIF).
The rating actions follow Fitch’s periodic review of the large and midsized finance companies in Sri Lanka.
The companies in the peer group remain predominantly exposed to vehicle financing.
Fitch expects growth potential in the vehicle financing segment to be limited due to the increase in import tariffs for cars and the central bank’s imposition of a 70% cap on loan to value ratio for loans extended for the purpose of acquiring or using motor vehicles.
Fitch expects asset quality and capitalisation to deteriorate in the sector following aggressive loan book growth in recent years and challenging operating conditions, which were signaled in Fitch’s downgrade of Sri Lanka’s sovereign rating to ‘B+’ from ‘BB’ in February 2016.
Fitch’s ratings on the finance companies in the peer group are driven by their business model and franchise, and their risk appetite, which is reflected in their exposure to more vulnerable customer segments.
Finance Companies with Institutional Support Driven Long Term Ratings PLC’s Issuer Default Rating (IDR) and National Long Term Rating continue to reflect Fitch’s view that PLC’s parent, the state owned and systemically important People’s Bank (AA+(lka)/Stable), would provide extraordinary support to PLC, if required.
People’s Bank’s propensity to support PLC stems from its 75% shareholding in PLC, common brand and PLC’s position as a “strategic subsidiary” of the bank.
The negative Outlook on the IDR mirrors that on the sovereign’s. Fitch maintains a Stable Outlook on the National Long Term Rating, in line with that of People’s Bank, as this is a measure of relative strength between issuers within Sri Lanka.
The rating actions follow Fitch’s periodic review of the large and midsized finance companies in Sri Lanka.
The companies in the peer group remain predominantly exposed to vehicle financing.
Fitch expects growth potential in the vehicle financing segment to be limited due to the increase in import tariffs for cars and the central bank’s imposition of a 70% cap on loan to value ratio for loans extended for the purpose of acquiring or using motor vehicles.
Fitch expects asset quality and capitalisation to deteriorate in the sector following aggressive loan book growth in recent years and challenging operating conditions, which were signaled in Fitch’s downgrade of Sri Lanka’s sovereign rating to ‘B+’ from ‘BB’ in February 2016.
Fitch’s ratings on the finance companies in the peer group are driven by their business model and franchise, and their risk appetite, which is reflected in their exposure to more vulnerable customer segments.
Finance Companies with Institutional Support Driven Long Term Ratings PLC’s Issuer Default Rating (IDR) and National Long Term Rating continue to reflect Fitch’s view that PLC’s parent, the state owned and systemically important People’s Bank (AA+(lka)/Stable), would provide extraordinary support to PLC, if required.
People’s Bank’s propensity to support PLC stems from its 75% shareholding in PLC, common brand and PLC’s position as a “strategic subsidiary” of the bank.
The negative Outlook on the IDR mirrors that on the sovereign’s. Fitch maintains a Stable Outlook on the National Long Term Rating, in line with that of People’s Bank, as this is a measure of relative strength between issuers within Sri Lanka.
www.dailynews.lk
ComBank to raise Rs 7 bn in debentures
Commercial Bank will raise Rs 7 billion from a listed debenture issue.The bank has decided to issue listed unsecured rated redeemable, subordinated debentures for five billion with an option to go up to Rs seven billion. The proposed issue will be carried out after obtaining necessary regulatory approvals,upon other conditions acceptable to the bank.
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