HNB posts record Group profit of Rs 15.67 bn in 2016

An outstanding performance throughout 2016 on every front culminated in the HNB Group posting the best financial results in its history. Group Profit Before VAT, NBT and Taxes grew by 41.3% to Rs 27.1 bn while Profit Before Tax (PBT) reached Rs 22.5 bn with a 39.2% growth.

Group Profit After Tax (PAT) witnessed an exceptional growth of 41.2% to be recorded at Rs 15.7 bn. Group assets grew by 19.0% to cross the Rs 900 bn mark, representing yet another historical milestone for HNB. The remarkable performance by the Bank was the main contributor towards this exceptional performance by the Group. The Profit Before VAT, NBT and corporate taxes of the Bank increased by 37.1% to Rs 24.5 bn while the PBT improved to Rs 20.1 Bn by 33.9% from Rs 15.1 Bn recorded in 2015, amidst a 54.7% increase in VAT and NBT charge due to the increase in the rate of VAT from 11% to 15%.

The PAT for the Bank also recorded an outstanding growth of 35.4% to Rs 14.1 bn for the year.

The Bank reported a net trading loss of Rs 1.8 Bn due to higher swap cost incurred during the year on swaps taken to hedge foreign currency borrowings.

The corresponding impact on on-balance sheet open positions as well as a significant growth in exchange income contributed to the other operating income of Rs 3.3 Bn recorded for the year.

Portfolio quality which has been considered a strategic imperative by the Bank, saw HNB adopting many initiatives such as the centralisation of Retail and SME credit evaluation, intense training on credit underwriting and rigorous focus on recoveries. The efforts have yielded rich dividends as the Bank’s NPA ratio has improved to 1.8%, well below the industry average of 2.6%. The ratio as at the end of 2016 represents a 63 bps improvement during the year and a quantum improvement of 186 bps over a four year period.

The Bank’s total operating expenses increased by 14.5% to Rs 18.3 Bn for the year. Containing of controllable expenses enabled through the lean transformation journey embarked upon by the Bank through initiatives such as the centralisation of credit and target operating model for branches, resulted in the cost to income ratio improving by 344 bps to 42.51% in 2016 and by more than 10 percentage points since 2012.

The Bank’s total tax allocation for the year amounted to Rs 10.4 Bn which is a significant increase of 39.5% from 2015 (excluding the one off super gains tax paid in 2015) and the highest among the private sector commercial banks.

The growth of PAT in excess of 35% to Rs 14.1 Bn enabled to record a Return on Assets (ROA) of 1.79% and Return on Equity (ROE) of 19.91% which is a significant improvement from 1.61% and 16.59% posted during 2015.

Growth of 18.4% in the Bank’s Balance Sheet to Rs 859.8 Bn easily eclipsed the industry growth of 12%. The instilling of a service culture universally while strengthening sales teams allowed HNB to rebound strongly from a subdued first few months to reach Rs 584.4 Bn in advances which is a growth of 17.3% yoy. HNB during the year has played a key role in driving the economy’s engine of growth through disbursing over Rs 105 Bn to SME and micro finance customers in addition to serving the grass-root micro customers through its subsidiary HNB Grameen. HNB Grameen yet again performed well to contribute strongly to Group results along with HNB Assurance and the Joint Venture Investment Bank, Acuity Partners, also reporting results far superior to those recorded in the previous year. Group ROA and ROE were recorded at 1.89% and 17.69% respectively and similar to the Bank represented a marked increase from the levels of 1.64% in ROA and 14.71% in ROE achieved in 2015.

HNB Managing Director and CEO Jonathan Alles said the adoption of dynamic strategies, focusing on delivering an unparalleled customer experience, relentless focus on operational excellence and commitment to a high level of asset quality woven around a robust business model has been pivotal to HNB’s remarkable performance in 2016.

“Our digital drive towards becoming the most future ready bank also contributed immensely towards this great success”.

The Bank declared a final dividend of Rs 7.00 per both ordinary voting share and ordinary non-voting share consisting of a cash dividend of Rs 3.50 per share and a scrip dividend of Rs 3.50 per share in addition to the interim dividend of Rs 1.50 per share declared in December 2016. Accordingly the total Dividends for the year 2016 amounted to Rs 3.5 bn.
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Car registrations down by 40%, three wheelers by 50%

Motor car registrations have come down by 40% on a month and month basis mainly due to drop in financing share of motor cars. The three wheeler segment came down by nearly 50%,according to the JB Securities monthly review.

Implementation of the budget proposal to restrict credit to new cars (50% LTV) and three wheelers (25% LTV) is the primary factor accounting for a plunge in registrations.The full impact of the directive will only be felt this month, the report said. However there have been a surge in Hyundai Eon cars (100% increase)According to JB Securities monthly review in contrast there have been an in increase of used cars, especially Toyota’s and also electric cars are picking up.

There was also a big jump in Hybrid used cars where Axio witnessed a large increase (200+) while there was also an increase in Mini Vans(268% increase) with the biggest mover being Suzuki Every.

“Three wheelers may be a menace on the road but it has been a huge contributor in creating inclusive growth both in terms of being a production asset (taxi) and/or personal vehicle providing mobility to the owner which in turn increases his radius of employment opportunities,ability to work flexible work hours due to not being reliant on public transport, access to markets.

The segment also saw Bajaj losing market share to TVS,” the J. B. Securities said.

The report also says that mini trucks have come down by 20% while the registration for Buses have gone up by 40%.
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Lee Hedges PLC - Scaled down project in place of Collpetty Mills

Lee Hedges PLC, said that they are planning a scaled down operation in place of the proposed multi storied residential service apartment building on Lot D of the land called Collpetty Mills.

The Board of Directors having considered the status of the company’s present investment portfolio and having further assessed the present economic climate are of the view that it is the best interest of the company that the company invests its time and expertise on maximising the

returns to the Company with its existing investments and accordingly and will not to proceed to invest the Rs. 2.8 bn in Lot D of No 353, Galle Road,Colombo 3.

An official from Lee Hedges said that their current BOI approved ongoing Mixed development Project on the former Cashew Corporation premises facing Galle road will be ready by end July this year.

This project is being built on a land leased from the Urban Development Authority (UDA) on a 99 year lease. The project consists of 100,000 sq.ft. on a total of 15 floors.The second floor to eighth floor is designed for corporate offices and the upper floors for service apartments.

This building is owned by the Lee Hedges Investment Limited, a subsidiary of Lee Hedges, the Company will rent the building for the long term tenants. “This will be an eye mark building in Colombo 3,and we hope to launch pre sales soon,”a company official said.
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Ceylinco Insurance posts record Rs 4.7 bn after tax profit

Ceylinco Insurance, the holding company recorded a consolidated after tax profit of Rs. 4.7 billion, for the year ended December 31, 2016.The profit before tax stood at an exceptional Rs . 5.9 billion.

Contributing to this remarkable performance, Ceylinco General Insurance and Ceylinco Life Insurance recorded profits after tax of Rs. 1.3 billion and Rs. 2.9 billion, respectively.

Ceylinco Insurance Managing Director and Chief Executive Officer Ajith Gunawardena said Ceylinco Insurance sector, in 2016, remained far ahead of competition. Thus, the Insurance sector managed to return an impressive premium income of Rs. 31.1 billion in 2016, with Ceylinco General Insurance recording Rs.16.1 billion, marking a growth of 18.9 % ; an increase of over Rs.2.5 billion year on year, just as Ceylinco Life Insurance registered a premium income of Rs. 15 billion, marking a growth of 11.7 % ; an increase of Rs. 1.5 billion.

Ceylinco Life Insurance Managing Director and Chief Executive Officer, R. Renganathan said in 2016 they embarked on a huge market expansion programme once again. Not only Ceylinco Life but the entire life insurance industry benefited through this.

The year 2016 marks a thirteen year period of unbroken market leadership for Ceylinco Life Insurance in the long term insurance segment. This is an incredible achievement, given the context of ever-increasing competition and the short - sighted tactics employed by smaller players in the market, in a bid to achieve short-term growth”

Ceylinco General Insurance Managing Director Patrick Alwis commenting on the remarkable performance of Ceylinco General Insurance said “ the premium income of our flagship brand ‘Ceylinco VIP’ alone stood at a staggering Rs.9.9 billion, with Non Motor Insurance contributing an impressive Rs.6.2 billion, allowing the total premium income of Ceylinco General Insurance to record yet another fantastic year. Ceylinco General Insurance has maintained its unassailable lead. This is in the midst of stiff competition. What we have achieved in 2016, is all the more important, as the industry is not a level playing field, with government entities still enjoying distinct advantages. Despite such challenges, we have worked hard and worked together, and we have exceeded expectations, once again. Ceylinco General Insurance paid claims amounting to Rs. 10.4 billion during 2016. The sharp increase in claim settlement is a result of the large number of claims we paid, during the floods in May 2016. Claims were paid within a period of 14 days, enabling our customers to return to normalcy in the fastest possible time. Some customers had only insured their vehicles, but not their homes, while some had insured their shops, but not their houses. However, Ceylinco General Insurance, looking at the situation from a humane angle, decided to pay a percentage to compensate the damages to their homes as well.”
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Amana Bank records Rs.102 mn PBT in 2016

Amana Bank continued its positive growth momentum in core banking, leveraging on its strategic focus of being primarily an SME and Retail Bank in 2016.

Financing Income crossed the Rs 4 billion mark by end of 2016, corresponding to YoY growth of 40% whilst Net Finance Income during the same period grew by 30% to Rs 1.9 billion.

The Bank continued to gain from Net Fee and Commission Income which recorded a growth of 46.3% in 2016 to reach Rs 246.5 million. Total Operating Income during the year under review grew by 17.7% to reach Rs 2.4 billion. Despite the impressive growth in Core Banking, the Bank was able to record only a Profit Before Tax of Rs 102.8 million for the year, owing to the loss on impairment of Rs 149.1 million from non-core banking activities. This is attributed to recognizing the impact of underperforming capital market investments which were prevalent in the portfolio.

The Bank’s Total Assets crossed the Rs 50 billion milestone during the year and closed at Rs 54.3 billion, a growth of 13.8%. Owing to the strong demand for its multitude of products and services, the Bank’s Deposits and Advances grew by 22% and 16.3% to read at Rs 46.9 billion and Rs 38.4 billion respectively in 2016. Chairman Osman Kassim said “Amana Bank has been growing significantly with overwhelming customer acceptance of its unique banking model and we look forward to further acceleration in our growth journey strengthened by the forthcoming capital infusion.” Chief Executive Officer Mohamed Azmeer said although the one-off impairment has had an impact to profits,the Net Assets were not affected as a result, due to such losses being captured in the Bank’s reserves previously, and set off against profits in the fourth quarter.
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Sri Lankan shares edge up; turnover rises to 12-wk high

Reuters: Sri Lankan shares ended slightly stronger on Tuesday after posting their lowest close in more than two weeks in the previous session, although concerns about rising interest rates continued to hurt investor sentiment.

Turnover rose to a 12-week high at 2.41 billion rupees ($15.93 million), around four times this year's daily average of 670.8 million rupees, boosted by a stake sale in Kotmale Holdings Plc.

The Colombo stock index ended up 0.2 percent at 6,134.28, after closing at its lowest since Feb. 9 on Monday.

"Crossings pushed the turnover," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Investors are still worried about economic conditions and rising interest rates."

Kotmale shares closed unchanged, while conglomerate John Keells Holdings Plc jumped 1.64 percent and Ceylon Cold Stores Plc rose 4.28 percent.

Foreign investors, who have been net buyers of 487.7 million rupees worth of equities so far this year, net sold 93.02 million rupees of shares on Tuesday.

Yields on treasury bills have risen to a more than four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.2800 Sri Lankan rupees) 

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

Sri Lankan shares hit 2-1/2-week closing low; block deals boost turnover

Reuters: Sri Lankan shares fell on Monday to hit their lowest close in more than two weeks as investors were worried over rising interest rates, but foreign buying and block deals in Expolanka Holdings boosted the turnover.

Foreign investors net bought 716.2 million rupees worth of equities on Monday, reversing the year-to-date net foreign outflow to an inflow of 580.7 million rupees worth of equities so far this year.

The Colombo stock index ended down 0.24 percent at 6,122.04, its lowest close since Feb. 9.

"Selling pressure on John Keells brought the market down," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Investor sentiment is negative due to the rising interest rates and most of the investors are on a wait-and-see approach," he added.

Shares in conglomerate John Keells Holdings Plc slid 1.20 percent, while Hatton National Bank Plc slipped 2.04 percent.

Expolanka Holdings Plc, which accounted almost half the day's turnover, climbed 1.72 percent on foreign buying.

Turnover stood at 1.35 billion rupees ($8.90 million), well more than this year's daily average of 625.2 million rupees.

Yields on treasury bills have risen to a more-than-four-year high since October, while the central bank has kept key policy rates on hold.

($1 = 151.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)