12 % interest offer to senior citizens with restrictions

The recent budget offer of 12 per cent interest on deposits held by senior citizens, aged 60 years and over, in state banks is being restricted to a cap of Rs.1 million and strictly one account per person, bankers said.

The Central Bank (CB) has directed that applicants should make a declaration that they have one account that would be entitled to this above-market interest rate to prevent senior citizens from having multiple accounts and getting 12 per cent interest on all.

Several senior citizens said that the post-budget developments were very misleading as the proposal itself implied the 12 per cent interest rate was for any eligible person and no amount was stated. “Now they are imposing a limit, which means the first announcement was misleading,” one pensioner said.

Bankers said that no clear instructions have been issued as yet except for verbal directives on the Rs.1 million cap (limit) and one account per person. They said that based on past practice, senior citizens, who have several accounts that total less than Rs. 1 million, may be able to transfer them to one existing account or open a new, single account and apply for this interest rate on the cumulative amount.

Data shows that some 750,000 senior citizens hold accounts worth Rs. 750 billion in 33 banks.
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DFCC-NDB merger on hold in view of polls

The merger between the National Development Bank (NDB) and Development Finance Corporation (DFCC) Bank has been temporarily halted till the conclusion of the January 8 presidential poll due to ‘procedural’ matters relating to the gazette notification, official sources said.

The two banks are being merged under this year’s budget with the banks jointly hiring a foreign consultancy firm to recommend a proper merger structure.

A bill paving the way for the merger was passed by parliament in October this year and the Finance Ministry was expected to issue the required gazette notification within two months of the bill being approved.
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Sri Lanka policy rates unchanged: Inflation declines due to crude oil prices: Central Bank

Dec 12, 2014 (LBO) – Sri Lanka Central Bank says the current monetary policy stance is appropriate and accordingly decided to unchange the policy rate corridor at 6.50 percent to 8.00 percent, respectively.

 

The island’s inflation continued to remain in low single digit levels, for 70 consecutive months and at levels below 5 percent in the last 12 months.

In October and November 2014, headline inflation (YOY) was at 1.6 percent and 1.5 percent, mainly due to the downward revisions to domestic fuel and electricity prices, the bank said in its December monetary policy review.

“The recent decline in crude oil prices in the international market is likely to impact inflation and Inflation expectations favorably,” the regulator said in the policy review.

“Given Sri Lanka’s large dependence on imported sources of energy, lower inflation resulting from declining energy prices would support the expansion of economic activity domestically,” the Central Bank said.

Core inflation remained unchanged at 3.6 percent in November 2014.

In spite of the ongoing recovery of private sector credit growth, Broad Money growth (YOY) moderated to 11.5 percent in October 2014 as a result of the decline in net foreign assets (NFA) of the banking system.

Broad Money growth has averaged 13.3 percent during the first ten months of the year.

Credit to private sector has grown by 5.1 percent in October 2014, year on year and reported a 42 billion rupee increase during the month. 36 billion rupees was disbursed by Domestic Banking Units (DBUs) of commercial banks.

“The impact of the contraction in pawning advances on the overall credit growth that was observed since early 2013 has now ended,” the regulator said.

The bank says going forward, continued improvements in macroeconomic fundamentals would bolster market confidence and nurture positive investor sentiments enabling the maintenance of a high sustainable growth rate in the medium term.

In the external sector, volatile global conditions, cross currency movements and eased monetary conditions widened the trade deficit somewhat in October 2014.

“Given the continued and expected inflow of earnings from tourism, workers’ remittances and inflows to the financial account, the balance of payments (BOP) is projected to record a higher surplus in 2014 than in the previous year.

Accordingly, gross official reserves are expected to remain at comfortable levels by end 2014,” the Central Bank said.

Union Assurance PLC demerges, incorporates separate entity for General Insurance

Union Assurance PLC has been demerged and will continue to carry on its long term insurance business while its General Insurance will be undertaken by Union Assurance General Limited with its registered offices at No. 20, St. Michael’s Road, Colombo 3.

This is following the demerger of the General Insurance business from the Life Insurance business as sanctioned by courts.

www.adaderana.lk

Sanasa Development Bank profits up 90% in September

September quarter profits at Sanasa Development Bank, a leading financier to rural economy rose 90 percent to 138.2 million rupees compared to the same period in the previous year.

The bank's third quarter income rose 7 percent to 1.2 billion rupees compared to the previous year's September quarter earnings of 1.1 billion rupees. Net interest income has surged 34 percent owing to a 13 percent decline in interest expenditure from 661.5 million rupees in 2013 to 577.9 million rupees in September 2014. The reduction in interest expenditure indicates the bank's adjustments to the recent lowering of interest rates by the Central Bank. The Bank has recorded a net interest income of 636 million rupees in the third quarter of 2014.

Bank charges and commissions in the third quarter of 2014 stands at 35.6 million rupees which is an increase of 15 percent compared to the 31 million rupees earned during the same period of 2013. Total operational income has increased by 28 percent to 723million rupees compared to the 564 million rupees recorded during the same quarter of 2013.Sanasa Development Bank has also shown progress in lowering its provisions for non performing loans. Provisions for non performing loans have reduced by 26 percent to 41.2 million rupees in the third quarter of 2014. This has significantly reduced both the bank's gross and net non performing loan rates. The gross non performing loan rate which stood at 5.08 percent by the end of 2013 has notably reduced to 4.00 percent by the end of September 2014. Net non performing loan rate has also tumbled from 3.03 percent to 2.76 percent.

Operational costs in the third quarter of 2014 have increased by 30 percent to 466 million rupees when compared to the same period in 2013. The bank's total assets as at 30th September 2014 stand at 34.1 billion rupees a growth of 15 percent from 29.7 billion rupees recorded in the year ending 31st December 2013.Compared to December 2013, total deposits have increased by 17 percent to 27.5 billion rupees reflectingthe trust customers have placed on Sanasa Development Bank and the attractive rates the bank has been offering.

By 30th September, 2014, the bank's total capital stood at 3.5 billion rupees, capital adequacy ratio at 11.6 percent, total capital adequacy ratio at 11.47 percent and the liquidity asset ratio at 22.12 percent. These ratios are all well within the Central Bank's stipulated regulations. In September 2014, the return on assets (ROA) increased to 2.13 percent from a previous 1.22 percent in December 2013. The return on equity (ROE) also surged by 14.04 percent in September 2014 compared to the 7.42 percent recorded in December 2013.

Within the nine months ending in September, 2014, Sanasa Development Bank recorded a profit after tax of 365.3 million rupees compared to the 282 million rupees recorded during the same period in 2013. Interest income has grown by 7 percent to 3.5 billion rupees while interest expenditure dipped 4 percent resulting in a total net interest income growth of 23 percent.

Income from bank charges and commissions have surged 11 percent to 90 million rupees while total operating income has grown 21 percent to 1.9 billion rupees during the first nine months of 2014. Provision for loans has declined by 1 percent to 119 million rupees during the third quarter of this year. New recruitment and salary revisions have resulted in a 1.1 billion rupee increase in the bank's operational cost during the nine months ending in September, 2014. New recruits have been deployed to expand the bank branch network and bolster customer services.

"The primary aim of the Sanasa Development Bank is to provide our stakeholders with long term dividends. These objectives are integrated in our business strategies. Our strong risk and dividend management mechanism and efficient business risk management are the drivers of these core objectives. The main factor that has driven this year's growth is the tireless efforts of all staff members," Nimal C. Hapuarachchi, GM and CEO of Sanasa Development Bank said.
www.ceylontoday.lk

LOLC announces record-breaking production at Hingurana Sugar Factory

The revitalised Hingurana Sugar Factory managed under Gal Oya Plantations Ltd., a subsidiary of the LOLC Group, has recorded the highest-ever sugar production of 19,960 metric tons for the year 2014/15 through successful sugar cane cultivation spanning 3,440 ha of land.

This record-breaking production has been achieved after 38 years and is by far the largest sugar production output compared with other local producers in 2014. This is a significant achievement for the factory considering its tumultuous past.

“The Giant of Asia”
The Hingurana sugar manufacturing factory located in the Galoya valley was first built and opened in the 1960s. Gifted by the Czechoslovakian Government, the factory was fondly known as “The Giant of Asia” and was one of the largest sugar factories to be built using modern machinery in the region.

During the intervening years, it functioned as a government and semi government body providing direct employment to over 1,000 employees and livelihoods to over 4,000 cane farmers, whilst generating direct and indirect employment and revenue streams to over 20,000 people in general, until it was privatised in the 1980s.

During this time, other sugar producing factories located in Sevanagala, Pelwatte and Kantale also had successful operations, steering Sri Lanka towards becoming a self-sufficient nation in sugar production and sugar cane cultivation.

Re-establishing operations
The Hingurana factory functioned well into 1993, until it was forced to cease operations due to poor management, labour and union issues. The Sri Lankan Government at the time took over the property under its wings until an investor was found to re-establish operations. 

As a result, in 2009, restructuring of the once abandoned Hingurana Sugar Factory was begun subsequent to a joint venture between the Government of Sri Lanka and a private sector consortium led by Brown & Company PLC and LOLC.

This venture marked a milestone in history as the first public-private partnership in the country. According to this partnership, 51% of the ownership of the property was retained by the Government while 49% owned by the Browns Group together with LOLC.

The revitalised sugar factory commenced operations under the Management and Board of Directors of the new managing company, Gal Oya Plantations Ltd., which was formed in 2009. The factory, after initial renovations, commenced operations on 16 July 2012, for the first time after 15 years.

At present, the operations of the Hingurana factory are overseen by Gal Oya Plantations Chief Executive Officer Gamini Ratnayake and Chief Operating Officer Danesh Abeyrathne. Under this new management, steps have been taken towards restoring the operations of the factory from the bottom up. They reappointed skilled workers who were previously employed by the factory as they possessed vast experience and seasoned knowledge about cultivation, existing machinery, etc.

Uphill battle
Ratnayake said: “Once the Gal Oya Plantations was formed, it was an uphill battle to reinstate the Hingurana Sugar Factory to its former glory. By the time we restored operations, many of the employees and farmers who had previously engaged in sugar cultivation and production had abandoned hope due to various issues they had experienced in the past. 

Therefore, initially, great efforts and investments were made towards creating awareness among them by way of door-to-door campaigns, group discussions, meetings etc to restore their faith and confidence once more.”

Research division
In addition, the company set up a separate research division, the Agronomy Department, in 2010 to oversee and improve the production of sugar cane seeds and to conduct research on various aspects of sugar cane cultivation.

This division has been successful in multiplying eight SRI bred varieties including the popular commercial varieties in Hingurana, and maintains over 134 SRI sugarcane clones as future planting material sources as well as for trial programs.

In addition, the Agronomy Department conducts extension programs and provides regular awareness on sustainable agronomy practices to farmers to yield high, disease-free crops.

Major achievements
Illustrating major achievements to date, Ratnayake said: “By 2013/14, we have been extremely successful in cultivating more than 3,800 ha of land which is 85% of the total cultivable extent. We hope to cultivate the remaining extent of land by next year.”

According to him, new sugar cane cultivation has increased by 10 folds since 2010/11 which had only occupied 1,562 ha of land. By 2013/14, the total cultivated area had been increased by 13-fold spanning 3,440 ha of land. As a direct result of this revitalisation program, 3,718 farmers are currently engaged in sugar cane cultivation which is 82% of the total number of farmers required. The company hopes to increase this number up to 100% by next year.

Ratnayaka added: “Our objective is to uplift the income and socioeconomic standard of the farmers and the community as a whole. We have also aimed at developing domestic production of sugar and contribute towards uplifting the national economy by helping to retain outflow of foreign currency for sugar imports.”

Sugar production and demand
According to statistics made available in the Agriculture Symposium 2014, the annual sugar requirement of Sri Lanka is 600,000MT. However, the country produces only 9% of this total requirement whilst the rest is imported. In 2012 alone Sri Lanka has spent Rs. 45 b on sugar imports.

With the Government planning to increase domestic production by 40% by 2020, and with four existing sugar factories identified to be upgraded to meet this demand, the Management and Board of Directors of Gal Oya Plantations are confident of the future output of the Hingurana sugar factory, which has already demonstrated notable progress.

Third successful year
Abeyrathne said: “We are celebrating the third successful year of sugar production after commencing operations in 2012. 

Within a short period, we were able to record the highest production of sugar, the highest sugar recovery percentage from sugarcane cultivation and the highest percentage of cane crushing in Hingurana since its launch in 1960. In addition, we became the highest sugar producer in Sri Lanka for the year 2014. We expect higher output records in the near future. We have also been able to elevate our sugar cane cultivation and sugar production standards to reach global industry levels.”

As at 30 September, Gal Oya Plantations has invested Rs. 3.2 b towards the resuscitation of the Hingurana Sugar Factory. The year’s turnover has risen to Rs. 1.8 b from the previous Rs. 938 m in 2013/14. The company further hopes to invest Rs. 2.6 b towards the completion of the distillery and power generation projects currently in the pipeline.

An agreement has been already drawn for a new 21.5 KLPD distillery which is expected to commence operations in October 2015 and a power generation project to commence in May 2015.

In addition, the company already possesses capacity to produce 2MW of electricity for the factory’s usage and has a separate water treatment plant with capacity to generate up to 250,000 litres per hour. The water generated is used for factory operations while the excess purified water sold to the national water supply and drainage board.

Creating employment
Abeyrathne said that Gal Oya Plantations had been able to successfully create more than 20,000 direct and indirect employments, whilst extending employment opportunities to areas such as Ampara and Siyambalanduwa.

He added: “In addition to employment generation, the re-opening of the Hingurana Sugar Factory has uplifted livelihoods in surrounding communities and generated new revenue streams. We have witnessed development seeping into the surrounding areas during the past few years, especially in infrastructure development. Development efforts of roadways and canals have helped the communities immensely. Inner roadways have been upgraded for easy access and transportation, while canals have been renovated with the assistance of the Department of Irrigation and Drainage for irrigational purposes.”

www.ft.lk

Arpico Insurance eyes more growth via IPO

By Senuri de Silva

Arpico Insurance has launched its initial public offering (IPO), with shares being available for subscription from 11 December 2014.

A total of 6.6 million shares will be issued, with Rs. 79.5 million to be raised upon full subscription.

The decision behind the IPO is threefold; firstly to fulfil a regulatory requirement of the IBSL, secondly to fulfil a requirement of the risk-based capital regime, and finally to fund an expansion plan of the company.

Of the funds raised, Rs. 31 million will be used for the expansion plan to open 12 new branches by the end of 2015 and widen its reach.

Richard Pieris Director Professor Lakshman R. Watawala spoke of the benefit of the IPO to the public saying, “While engaging in business we also want to ensure that a part of this success is also enjoyed by the public of this country.”

He also described how the company has not yet reached its full potential, saying “Arpico Insurance is still in its infancy. That’s why we see that there is a great future for this company.”

According to him, a large part of the untapped market for insurance remains in the rural and urban areas, which have not been focused on by other insurance companies. “This country is hardly being utilised in the Life insurance sector. Even though there are much larger companies that have built up over a period of time, they still have not been able to penetrate the rural areas and the urban areas so we will be looking at these areas.”

In its third year of operation, the organisation is said to be showing tremendous results in the insurance industry of Sri Lanka.

“Arpico Insurance started in 2012 with a new value proposition – insurance for the living. 

The company was able to set new standards in insurance with a record-breaking GWP of Rs. 100 million in the first year of operation. In the second year of operation the company made a GWP of Rs. 200 million and is targeting to surpass Rs. 340 million this year,” said Arpico Insurance Director Viville Perera.

Describing Arpico Insurance’s rapid growth, Professor Watawala said: “As a new company we have tremendous growth, a 300% growth from the first year to the third year. In the fourth, fifth and sixth year we will definitely have immense growth taking place in this company and there after we will be able to give the benefits that we derive from this company to our shareholders.”

Speaking of the valuation of the share, he said the shares being sold for Rs. 12 had in fact been valued at Rs. 16 per share. “The expert valuers valued the share at Rs. 16 but we are giving a bargain to our new customers.”

Arpico Ataraxia Vice President Tharanga Gamage spoke of future plans for the company, which includes reaching Rs. 1 billion GWP by 2017 and high retention rates by 2018. 

“Arpico Insurance hopes to earn profits in 2015. It is already on its way to achieving profits in 2015 in its third year of operation. In addition it hopes to hit a GWP of Rs. 1 billion in 2017 and have Rs. 1 billion in the Life fund by 2018. It also hopes to reach retention targets of 65% for the second year and 75% for the first year by 2018. Currently retention targets are on par with industry standards of 40-50%. It also hopes to increase the branch network and penetrate more into the market.”
www.ft.lk