Commercial Bank is Euromoney’s Best Bank in Sri Lanka in 2015

Euromoney, widely considered one of the world’s leading financial magazines, has adjudged Commercial Bank of Ceylon PLC the Best Bank in Sri Lanka in 2015 at the magazine’s Asia Awards for Excellence presented recently in Hong Kong.

This is the second major international award presented to Commercial Bank in the past two months, during which the Bank also had the distinction of becoming the only Sri Lankan bank to be ranked among the Top 1000 banks of the world for five consecutive years.

The prestigious Euromoney accolade is based on detailed submissions from market participants and extensive year-round research into the banking and capital markets in the region by the magazine’s editors, journalists and research team.

According to Euromoney, the Asia Awards are seen as the benchmark for the leading firms in financial services in the region, and are fiercely contested across numerous markets and categories.

Country awards in the larger markets in Asia-Pacific included the award for Best Bank in Australia which went to Suncorp; Best Bank in China to ICBC; Best Bank in India to Kotak Mahindra Bank and Best Bank in Singapore to OCBC. Elsewhere, the Best Bank in Hong Kong went to HSBC, Best Bank in Indonesia to Bank Central Asia, Best Bank in Malaysia to Public Bank and Best Bank in New Zealand to ANZ.

"We are further strengthened with this very credible award, which is based on evaluation criteria applied to banks across global markets and regions," Commercial Bank’s Managing Director and CEO Mr Jegan Durairatnam said. "We are grateful to the millions of Commercial Bank customers whose patronage has made this award possible, and to the entire team whose passion and commitment keep the Bank in the vanguard of the industry."

The evaluation by Euromoney covers banks in all major countries in Asia, Middle East, Europe, Africa, North and Latin America, the Caribbean as well as the Nordic and Baltic regions. Euromoney honours institutions that demonstrate leadership, innovation and momentum in the markets in which they excel and presents a number of awards to the Asian region’s banks and securities houses.

Among the aspects examined for the awards are qualitative and quantitative criteria such as market position, volume of business transacted, new product development, management system, credit ratings, efficiency ratios and annual key performance indicators.

In the year reviewed for the award, Commercial Bank reported profit before tax of Rs 15.7 billion, a loan book of Rs 463.6 billion, deposits of Rs 529.4 billion, gross income of Rs 74.4 billion, assets of Rs 795.6 billion and Tier I Capital Adequacy Ratio of 12.93%.

The award for the Best Bank in Sri Lanka in 2015 was accepted by Commercial Bank’s Chief Operating Officer/ Executive Director Mr S Renganathan at the presentation ceremony at Island Shangri La, Hotel Hong Kong. Leading figures from banking and capital markets across Asia were present to hear the announcement of Euromoney’s Asia Awards for Excellence 2015.

Founded by Sir Patrick Sergeant in 1969, Euromoney is read by 140,000 of the world’s top financial decision makers in more than 100 countries, making it the prime magazine of the wholesale financial world, its institutions and its users.

Commercial Bank operates a network of 243 branches and 613 ATMs in Sri Lanka. Ranked the most valuable private sector brand in the country in 2014, the Bank was adjudged the Best Bank in Sri Lanka by FinanceAsia in 2015. Commercial Bank has also won multiple awards as Sri Lanka’s best bank from other international publications over several years. The Bank was adjudged one of Sri Lanka’s 10 best corporate citizens by the Ceylon Chamber of Commerce in 2013 and 2014, and has been rated the Most Respected Bank in Sri Lanka by LMD for the past 10 years. The Bank has also been the second Most Respected Corporate entity in the country overall for the past four years in the LMD rankings, and has been rated No. 1 in Sri Lanka for Honesty in 2013 and 2014 by the magazine.

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Carson’s to de-list four Malaysian Plantation Companies

Carson Cumberbatch PLC. will initiate procedures to de-list their Malaysian Plantation Companies (MPCs) due to the minimum public holding rule of the Colombo Stock Exchange (CSE), Carsons have announced in their latest annual report.

These rules require a minimum public float which is not available in the four companies - Selinsing, Shalimar, Indo-Malay and Good Hope in each of which Carson’s own over 90% of the shares.

These old-established Colombo incorporated companies hold oil palm plantations in Malaysia.

Neither do Carson’s intend diluting their holdings nor issuing new shares to ensure the minimum flat. There would therefore be no option to de-listing, the report said.

The report said that under the "Rules on Minimum Public Float, as a Continuous Listing Requirement" issued by the CSE mandates all listed companies to ensure a minimum threshold of 20% to be held by ‘public shareholders’ effective from January 1, 2014.

However, "on this date if a company does not fulfill this requirement such company is expected to be fully compliant by Dec 31, 2016, the Rules stipulate," CSE has said.

Carson’s said that they made a voluntary offer to all shareholders of the four Malaysian plantation companies they control in March 2011 with the objective of consolidating the ownership of these companies under the plantation sector holding company – Goodhope Asia Holdings Ltd., operating from Singapore.

"However, since the voluntary offer did not result in the acquisition of the entirety of the balance minority shareholding, the four MPCs continue to remain as listed entities with a ‘public float’ of less than what is now required by the above rule," Carson’s said.

Saying that compliance with the rule would conflict with the objective of the voluntary offer, and that the majority shareholder (that is Carson’s) does not have any intention of diluting its holding, nor did the four MPCs intend to issue further shares in order to conform to this rule, this would therefore entail the initiation of a de-listing process for the four MPCs.

"When so decided, this would be done in consultation with the regulator and the required shareholder approval from the MPCs," Carsons said.

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Some 25% in Lanka Walltiles capacity to be converted to floor tiles

Lack of demand for wall tiles has led Lanka Walltiles (LWL) to convert 25 per cent of its plant capacity to manufacture floor tiles, officials said. ”There’s a gradual accumulation of LWL stock which is about 10,000 square metres (sqm) a month, which is mainly due to diminishing demand. We want to convert 25 per cent of LWL’s production capacity to make floor tiles, as demand for floor tiles is more, an official told the Business Times. LWL has 7500 sqm manufacturing capacity a day. The official added that they plan to do this by October.

Royal Ceramics bought 82 per cent in Lanka Ceramics Ltd (LCL) which owns Lanka Walltiles Ltd some years ago. Royal Ceramics armed with a new strategy for the company had wanted to spruce up the LWL brand which was phased out by its former owners. “This was because the former owners wanted to concentrate on manufacturing floor tiles, but Royal Ceramics, which has Rocel and Lanka Tiles brands, had wanted to bring out the LWL brand, but that didn’t take off as expected,” the official added. 

www.sundaytimes.lk

Seylan Bank records profit growth of 43% to post PAT of Rs 1.740 mn during 1H 2015

Seylan Bank posted a record half-yearly performance with Profit before Income Tax reaching Rs. 2,579 Million for the 6 months ended June 30, 2015. Profits after Tax reached Rs. 1,740 Million a 43% increase compared to the Rs. 1,212 Million reported in the corresponding 6 month period in 2014.

The quarterly (Q-2 2015) Profit after Tax figure of Rs. 1,089 Million was an improvement of 56% compared with Rs. 698 Million reported in corresponding 3 months of last year.

Net Interest income increased from Rs. 5.16 Billion to Rs. 5.83 Billion a 13% increase for the 6 months ended 30th June 2015. Net fee and commission income increased by 13% from Rs. 1,055 Million to Rs. 1,191 Million with the bank showing a continuation of the solid growth trend recorded in the past few years.

During 1H 2015, the Net Advance portfolio grew from Rs. 155 Billion to Rs. 162.7 Billion, while the Deposit base grew from Rs. 185.9 Billion to Rs. 190.5Billion. The Bank's low cost deposit base (CASA) stood at 38% as at end June 2015.

The Bank was also able to improve its asset quality through effective recovery and rehabilitating efforts. This enabled the Bank to reduce its Gross NPA (net of IIS) from 7.69% in December 2014 to 6.53% as at end June 2015. The Bank has consistently been able to improve its asset quality since 2009 through focused, sustained and effective recovery efforts.

The Bank, based on its 4 - year Strategic Plan (2012 - 2016) has focused significantly on areas which include Advance/Deposit growth, Branch Expansion, Customer Service improvement, Staff Development, NPA reduction, Cost Control, New Product Development, IT Infrastructure, Shareholder value, etc. The Strategic Plan also earmarks the opening of 100 libraries in under privileged schools. 70 such school libraries have been opened by the Bank, since 2013.

The Branch relocation and refurbishment project too continued in full steam during 1H 2015, with a view to enhance the customers' service experience. As of end June 2015, over 75% of the branch network has been refurbished. As at 30th June 2015, the Bank network comprised of 159 Branches, 181 ATMs and 93 Student Savings Centres.

The Bank's total Capital Adequacy ratio stands at 13.74% at the end of Q-2 2015, well above the regulatory requirements. In July 2015, Fitch affirmed the Bank rating at 'A -lka' with a stable outlook.

As a result of the impressive performance, Earnings per share were at Rs. 5.04 for Q-2 2015, while Return (profit before tax) on Assets and Return on Equity stood at to 2.03% and 14.52% respectively. The Bank's Net Asset Value per share as at 30th June 2015 was Rs. 71.48 (Group Rs. 74.88).

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Sri Lanka records a deflation of 0.2-pct in July after two decades

(LBO) – Sri Lanka has experienced a deflation of 0.2 percent for July 2015, for the first time after March 1995.

The main contributor for this decline was the major decrease in non food prices, statistics department said.

“This was mainly due to the decrease of electricity and water bills, LP gas, kerosene, petrol and diesel.”

Year on year inflation of food group has decreased from 4.0 percent in June 2015 to 2.5 percent in July 2015 while non‐food group increased by ‐3.2 percent to ‐2.5 percent during this period.

The overall rate of inflation measured by Colombo Consumer Price Index on year on year basis is ‐0.2 percent in July 2015 and inflation calculated for June 2015 was 0.1 percent.

The CCPI for all items for the month of July was 182.8.

An increase of 1.2 index point or a percentage of 0.68 has been recorded in July compared to June 2015.

The moving average inflation rate for the month is 1.3 percent and the corresponding rate for June 2015 was 1.7 percent.

Sri Lanka’s Dankotuwa Porcelain to raise Rs722mn through rights issue

July 30, 2015 (LBO) – Sri Lanka’s tableware exporter Dankotuwa Porcelain is to raise 722 million rupees by way of a rights issue, the company said in a stock exchange filing.

Subject to the necessary approvals, the company is to issue 90.31 million ordinary shares at 8.00 rupees each in the ratio of 5 for every 4 shares.

The proceeds will be utilized for plant modernization and to settle short term loans which would improve the gearing ratio, the company said.

The stock closed at 14.50 rupees on Wednesday.

Sri Lanka’s Fitch affirms Lion Brewery at ‘AA-(lka)’ with stable outlook

(LBO) – Sri Lanka’s Fitch Ratings has affirmed Lion Brewery (Ceylon) national long-term rating at ‘AA-(lka)’ with a stable outlook.

The agency also affirmed Lion’s senior unsecured rating and the rating on its debentures at ‘AA-(lka)’.

The full text of the announcement is reproduced below.

Fitch Affirms Lion Brewery at ‘AA-(lka)'; Outlook Stable

Fitch Ratings-Colombo-30 July 2015: Fitch Ratings has affirmed Lion Brewery (Ceylon) PLC’s (Lion) National Long-Term Rating at ‘AA-(lka)’. The Outlook is Stable. The agency also affirmed Lion’s senior unsecured rating and the rating on its debentures at ‘AA-(lka)’.

The National Long-Term rating takes into account Lion’s strong business profile as the leading beer producer in Sri Lanka. The rating also factors in the growing demand for beer driven by increasing urbanisation and preference for lower alcohol content beverages. The company faces risks from regulation and financial risk following a debt-funded expansion and acquisition of the second-largest brewer Millers Brewery Limited (MBL).

KEY RATING DRIVERS
Market Leadership: Lion is the largest producer of beer in Sri Lanka, where beer is the second most-consumed alcoholic beverage after arrack. Its flagship brand, Lion, accounts for close to 80% of its revenue, with its domestically produced and imported brands making up the rest. Lion’s leading position helps the company secure new brands and access a wide distribution network.

Debt-Funded Investments: Lion’s leverage increased to 2.9x during the financial year ended 31 March 2015 (FY15) from 2.2x at end-FY14 after the MBL acquisition was completed in October 2014, and following capacity expansion over the last two years. However, Fitch believes the financial risk is partially offset by improvement in its competitive position stemming from the investments. The acquisition of MBL will bring brands such as Three Coins, Sando, and Grande Blonde under Lion’s portfolio.

The added capacity will also support Lion’s business profile. Lion, which is currently operating at around half its capacity, will be able to meet additional demand over the medium term without extensive production-related capex. In the medium term, the company will undertake less capex, which will free up cash flow to pay down debt.

Highly Regulated Sector: The government regulates the alcoholic beverages sector heavily, including a complete ban on advertising and licensing of participants. There is a high risk of regulatory change, with the most recent being a rise in excise duties to make up for the elimination of offsets under the new value-added tax, which increased Lion’s effective tax burden to 50% of gross revenue in FY15 (FY14: 44%). Fitch expects the importance of the sector in terms of its contribution to government revenue to reduce the likelihood of excessive regulation and taxation.

Growing Demand for Beer: Beer production is increasing to meet demand as lifestyle changes stimulate a preference for beer. Fitch expects demand for locally manufactured hard liquor to decline in the longer term, driven by lower alcohol consumption, and the greater affordability of lower-alcohol content beverages.

KEY ASSUMPTIONS
Fitch’s key assumptions within the rating case for Lion include:
– Low double-digit revenue growth in the medium term
– Profitability, as measured by EBITDA margin, of around 24%
– Maintenance of current dividend policy
– Capex of LKR1.5bn-1.7bn to upgrade warehousing and raw material procurement in FY16
– No material capex from FY17

RATING SENSITIVITIES
Negative: Future developments that may, individually or collectively, lead to a negative rating action include:
– Adjusted net leverage (adjusted net debt to operating EBITDAR) of over 2.0x on a sustained basis (end-March 2015: 2.9x)

No positive rating action is expected over the next 24 months as leverage is likely to remain high. However, future developments that may individually or collectively lead to a positive rating action include adjusted net leverage of below 1.5x on a sustained basis