Sri Lanka stocks surge 1.2-pct, rupee stronger

Feb 28, 2014 (LBO) - Sri Lanka's stocks surged 1.2 percent Friday with index heavy John Keells Holdings extending gains, while the rupee strengthened against the greenback, brokers and dealers said.

The Colombo benchmark All Share Price Index closed 67.50 points higher at 5,940.31, up 1.15 percent. The S&P SL20 closed 34.86 points higher at 3,223.66, up 1.09 percent.

Turnover was 851.64 million rupees, up from 446.57 million rupees last Wednesday.

JKH closed 8.70 rupees higher at 220.70 rupees, contributing most to the index gain.

JKH also closed 5.70 rupees higher at 212.00 rupees on Wednesday, with brokers say foreign selling pressure is easing.

JKH’s W0022 warrants closed 3.90 rupees higher at 64.30 rupees and its W0023 warrants closed 3.90 rupees higher at 67.70 rupees.

In forex markets the rupee rose to 130.80/95 levels to the US dollar in the spot market amid strong inflows, dealers said.

Sri Lanka's rupee has come under pressure in recent days dipping below 131.00 to the US dollar amid excess rupee liquidity in money markets generated by earlier Central Bank dollar purchases.

In stock markets, foreign investors bought 140.33 million rupees worth shares while selling 115.87 million rupees of shares.

With more confidence returning to the broader market 153 stocks closed up against 46 going down.

SLT closed 1.80 rupees higher at 44.30 rupees and Lanka Orix Leasing Company closed 3.80 rupees higher at 78.90 rupees.

Sampath Bank ended 2.00 rupees higher at 172.00 rupees and HNB closed 60 cents higher at 152.00 rupees.

Ceylon Tobacco Company closed 9.00 rupees lower at 1,089.40 rupees and Distilleries closed 1.90 rupees lower at 203.00 rupees.

Nestle Lanka ended 6.60 rupees lower at 2,010.00 rupees and Carson Cumberbatch ended 80 cents lower at 349.70 rupees.

Ceylinco Insurance closed 1.20 rupees lower at 1,373.30 rupees and Ceylon Grain Elevators closed 70 cents lower at 34.30 rupees.

Sri Lankan stocks at 1-wk high; John Keells gains

Feb 28 (Reuters) - Sri Lankan shares gained for a second straight session on Friday, moving further away from a near 10-week closing low, led by top conglomerate John Keells Holdings despite foreigners investors selling risky assets.

The main stock index gained 1.15 percent, or 67.50 points, to close at 5,940.31, its highest since Feb. 21. It hit a near 10-week closing low on Tuesday.

The index has dropped nearly 7 percent in the last 15 sessions through Tuesday. It returned to its neutral territory from an oversold zone, Thomson Reuters data showed.

Foreign investors sold a net 43.4 million rupees ($331,200) worth of shares on Friday, extending the net outflow in the past 15 sessions to 5.43 billion rupees as some offshore funds exited the market.

It has seen a net 4.04 billion rupees of foreign outflows in so far 2014, after enjoying net inflows of 22.88 billion rupees last year.

Analysts said investors were concerned about further outflows, though local investors are still optimistic about risky assets due to falling interest rates.

Top conglomerate John Keells Holdings gained 4.10 percent to 220.70 rupees as local and forging investors snapped up the battered share.

The day's turnover was 851.6 million rupees, less than this year's daily average of about 1.09 billion rupees.

($1 = 131.0500 Sri Lanka rupees) 

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

Sri Lanka inflation at 4.2-pct in February

Feb 28, 2013 (LBO) - Sri Lanka's consumer prices rose 4.2 percent in the 12-months February 2014, down from 4.4 percent in January, the state statistics office said.

The widely watched Colombo Consumer Price Index rose 0.2 percent during the month.

Annual average inflation, a lagging indicator averaged across two years eased to 6.0 percent in February 2014 from 6.5 a month earlier, the statistics office said.

Inflation showed up a rise in the food sub-index rose 0.2 percent in February after falling 0.9 percent a month earlier. Non-foods rose 0.1 percent in after rising 1.7 percent a month earlier.

Sri Lanka's inflation spiked to 9.8 percent in February 2013 following a balance of payments crisis in 2012 which sent the rupee spiraling down to 130 to the US dollars from 110 levels and has since moderated amid weak credit growth.

The central bank is targeting inflation of low single digits generally understood to be below 5.0 percent in 2014, after keeping it at single digits for several years.

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Sri Lanka's Sampath Bank net down 31-pct

Feb 28, 2014 (LBO) - Profits at Sri Lanka's Sampath Bank Plc fell 31 percent to 1.0 billion rupees, in the December 2013 quarter from a year earlier, amid higher loan losses, interim accounts showed.

The group reported earnings of 6.37 rupees for the quarter. In the year to December Sampath reported earnings of 21.67 rupees, on total profits of 3.6 billion rupees, down 33 percent.

The group said interest income rose 8.2 percent to 10.2 billion rupees, interest expenses rose 9.8 percent to 6.7 billion rupees and net interest income rose at a slower 5.4 percent to 3.5 billion rupees for the quarter.

Fee income rose 18 percent to 710 million rupees. The group reported 257 million rupees gain on financial instruments.

Loan losses charges rose to 907 million rupees for the quarter with general provisions of 753 million rupees.

The bank reported strong loan growth of 24 percent to 265 billion rupees in the year to December 2013, among the highest recorded in the sector for the year.

Deposits also rose 23 percent to 300 billion rupees.

Gross assets rose 24 percent to 391 billion rupees and net assets rose 14 percent to 31.6 billion rupees.

Sri Lanka's Ceylinco Insurance net up 28-pct

Feb 28, 2014 (LBO)- Profits at Sri Lanka's Ceylinco Insurance Plc, rose 28 percent to 1.8 billion rupees in the December 2013 quarter from a year earlier, helped by investment income and lower claims, despite weak premiums, interim accounts showed.

The group reported earnings of 71.4 rupees per share for the quarter. In the year to December the group reported earnings of 98.7 rupees on total profits of 2.6 billion rupees, which were up 34 percent.

Life insurance gains are included in the December quarter.

Gross written premium fell 01 percent to 5.9 billion rupees in the December 2013 quarter from a year earlier. After re-insurance fees of 868 million rupees, which were flat, net written premiums fell 2 percent to 5.0 billion rupees.

Sri Lanka is recovering from a balance of payments crisis and currency depreciation, which tends to hurt disposable income of people, while interest rates also go up to correct previous imbalances.

Investment income rose 26 percent 2.4 billion rupees. Insurance claims fell 19 percent to 2.1 billion rupees.

Ceylinco Insurance had gross assets of 87.4 billion rupees by December 2013 up from 73 billion rupees a year earlier.

Net assets had grown to 18.3 billion rupees from 14.4 billion rupees.

HSBC, Sampath Bank seal deal for SLT

Ceylon FT: Sri Lanka Telecom PLC received a US$ 100 million five-year loan facility from Sampath Bank and global banking giant HSBC to upgrade its telecommunication infrastructure.

HSBC acted as Lead Arranger and together with Sampath Bank participated in raising this loan.

Patrick J. Gallagher, CEO HSBC Sri Lanka and Maldives said, "This further demonstrates HSBC's capability in structuring and arranging deals of this nature. SLT is a key name in the country and for HSBC Sri Lanka as well, and we hope this will further strengthen our relationship and steer SLT towards achieving their development objectives for the benefit of the country."

This deal stands testimony to HSBC Sri Lanka's strong track record and capabilities in syndicated debt financing and corporate banking capabilities. It also reaffirms HSBC's continued commitment to the development of the local telecommunication industry.

Aravinda Perera, Managing Director Sampath Bank PLC said, "We have always been an active partner with SLT, providing an internet payment gateway and solutions to SLT's client base, conveniences via banking channels harnessing Sampath's edge in technology. Also Sampath Bank has over the years been a partner in Syndicated financing for the SLT Group."

He added that "We are sure that this financing deal will further strengthen our relationship with SLT and contribute our share to the nations' stride towards development through them".

"ICT infrastructure is the backbone of any country, empowering and facilitating all other industries and businesses to function at their best. This is the highest amount raised through a foreign currency loan by SLT so far and is reflective of our commitment and plans to undertake sustainable investments during this year, to support our country's fast track development and vision to achieve a Smart Sri Lanka, through an enhanced ICT infrastructure," commented Lalith De Silva, Group Chief Executive Officer of SLT. "It is a privilege for SLT to partner with two of the leading banks in Sri Lanka, HSBC and Sampath Bank, who have placed their confidence and trust in our financial strength as well as our capabilities and agreed to support us in making our dreams for our nation a reality," he added.

The Fitch AAA (lka) rated HSBC, is the largest foreign commercial bank in the island. HSBC Sri Lanka with its global network and local reach offerscustomized client-led solutions in the corporate and investment banking businesses. Sri Lanka Telecom (SLT), an AAA (lka) rated company by Fitch Ratings, is the nation's number one integrated ICT solutions provider and the leading backbone infrastructure services provider. The company is also the major provider of telecommunication networks and services for top enterprises representing all economic sectors and facilitating them with seamless and sophisticated connectivity to carry out local and global business operations. SLT group provides a full range of ICT facilities and services in the areas of voice, data, broadband, wholesale, enterprise, TV and mobile services.
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GAAM outperforms ASPI, S&P SL20

Ceylon FT: Guardian Acuity Asset Management Limited (GAAM) said it recorded healthy gains in unit trusts it manages, outperforming both the All Share Price Index (ASPI) of the Colombo Stock Exchange and the S&P SL20 index of the largest listed firms.

"Two years in operation, GAAM managed to establish a strong footing in the Unit Trust industry with an exceptional growth in the Guardian Acuity Fixed Income (GAFI) Fund which provided an annualized return of 10.11% per annum within the period January 2013 to January 2014. In the meantime GAAM managed to secure high returns on the Guardian Acuity Equity (GAE) Fund which gave a cumulative return of 29.30%, when compared with a growth in the All Share Price Index of 14.09% since inception to January 2014," the company said. Guardian Acuity Asset Management Limited Fund Manager Sumith Perera, said, "The GA Equity Fund has outperformed the All Share Price Index (ASPI) by 4.92% and the S&P SL 20 by 4.66% within the period of January 2013 to January 2014. The investors enjoyed greater returns on their investments despite the relatively low performance of the overall market. Investors should also have a long term outlook on the Equity market if they are to gain better yields as they can stomach the short term volatilities". The performance since inception was 29.30%.

"The Guardian Acuity Fixed Income Fund objective is to give investors the highest possible return by exposing the fund only to high quality instruments and issuers which are investment grade and above.

Investors in the fund have received a competitive return while being able to withdraw the funds at any point in time. Previous year average return was over 12.18% (2013 Return) which is tax free, while one year Treasury Bills gave a comparatively lower yield after tax," Perera said.

GAAM funds consist of Guardian Acuity Equity Fund and Guardian Acuity Fixed Income fund which has varying investment objectives. The equity fund invests in listed equities on the Colombo Stock Exchange, while the fixed income fund invests in high quality corporate debt and bank deposits, with a smaller exposure to government securities which are risk free. The performance of both funds during the last year has been above the market trends and both funds continue to grow even with market uncertainties and volatility.

GAAM is committed to giving better returns to the investors with the least risk and this is mainly due to the investment strategy which GAAM has adopted. The second year performance is evidence of this strategy and how it has helped GAAM to be right on top in terms of fund performance. Unit trusts give the small investor the opportunity to participate in the returns from a large diversity of financial instruments, which have been pooled together.

Guardian Acuity Asset Management Limited was commercially commenced operations in February 2012 with the purpose of bringing together the expertise of the two joint venture partners, Ceylon Guardian Investment Trust PLC and Acuity Partners (PVT) Ltd. 

Acuity Partners is a joint venture between the HNB and DFCC Banks; while Ceylon Guardian is a subsidiary of the Carson Cumberbatch group. Ceylon Guardian's management team contribute to the venture through their fund management expertise, while Acuity bring in their partner network and reach in marketing and distribution of financial products. Currently the unit trusts are marketed through designated branches of the HNB.

The company is an authorized unit trust management company, accredited by the Securities and Exchange Commission of Sri Lanka, holding licences for two unit trust funds – namely the Guardian Acuity Fixed Income Fund and the Guardian Acuity Equity Fund. The company markets a range of investment plans under the brands MoneyMax and MoneyMaker which are structured using these two licensed funds as the underlying investment vehicles.

The Board of Directors of GAAM comprises directors drawn from the two JV partner companies, who carry with them a wealth of experience in the financial services industry.
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Nestlé Lanka profits up amidst challenging environment

Leading nutrition, health and wellness company, Nestlé Lanka PLC, posted a revenue of Rs 7.8 billion for Q4 with a growth of 8.2%. The company recorded a revenue of Rs 30.9 billion and a growth of 8.2% amidst a challenging environment for the full year ending 31 December 2013, the company said releasing its financial results.

The company posted a profit of Rs 698 million for Q4 supported by efficient management of input costs. For the year ending 31 December 2013, the company recorded a profit of Rs 3.3 billion, an increase of 12.5% from the previous year. Nestlé continued to increase investment in trade and marketing activities.

"The macro-environment in 2013 was one of soft growth; fraught with lowered consumer confidence, industry issues and economic ambiguity. Our response was to increase brand support, accelerate innovation, invest in our people, continue responsible business operations and provide consumers with nutritionally superior food and beverages of the highest safety and quality" said Ganesan Ampalavanar, Managing Director of Nestlé Lanka PLC "We have maintained a respectable revenue growth in a challenging environment and, together with efficiencies and structural cost savings, improved margins and sustained a strong cash flow."

Q4 continued to see Nestlé active in the community and recognised for its positive economic and social contribution to the country.

The Ministry of Education Services and Nestlé Lanka PLC announced the incorporation of the Nestlé Healthy Kids Programme into the Government's island wide "Poshanayai Suwadiviyai" (Nutrition for a Healthy Life) nutrition awareness campaign. The Nestlé Healthy Kids Programme material and modules on nutrition education and healthy living will now be available at over 7,500 secondary, public schools across the country.

The company also procured 62 million litres of local fresh milk from 18,000 Sri Lankan farmers in 2013, marking the company's highest ever milk collection in Sri Lanka. The company uses Sri Lankan fresh milk for its popular dairy based products Nespray, Milo and Milkmaid.

The year-end saw the company recognised as one of Sri Lanka's top corporate performers for the financial year 2012-2013 by Business Today, ranked at No. 13 amongst Sri Lanka's top twenty five leading corporates.

Nandu Nandkishore, Executive Vice-President for the Nestlé worldwide group, reconfirmed Nestlé's commitment to Sri Lanka in a visit to the island in December 2013. 

He reinforced the company's desire to create shared value in Sri Lanka and its focus on uplifting nutritional standards via nutritious food and beverages of the highest quality. "We see great value in our emerging markets, including Sri Lanka, and we will continue to invest in its growth, our people and operations and deliver upon our promise of value at every juncture" he added.
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Life sustains Union Assurance profits growth

Ceylon FT: Diversified conglomerate John Keells Holdings' insurance unit, Union Assurance PLC, reported a net profit of Rs 1.12 billion for the year ended 31 December 2013, up 22% from Rs 921.26 million a year ago, interim financial results showed.

Gross written premium increased by 12% to Rs 10.9 billion and net investment income grew 17% to Rs 2.63 billion.

Total benefits and claims amounted to Rs 6.77 billion, up 15% from a year ago.

The basic earnings per share increased to Rs 13.11, up from Rs 12.28 a year ago.

Total assets of the company grew 17.5% from a year ago to Rs 21.09 billion.

Life insurance premium increased to Rs 4.7 billion, up from Rs 4.26 billion a year ago, and Non-life insurance premium grew to Rs 5.17 billion, up from Rs 4.43 billion a year ago.

The life insurance segment saw profits after tax increase by 48.44% to Rs 790.96 million and the non-life segment saw profits fall by 17.62% to Rs 391.64 million.
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HNB surpasses Rs 500bn in assets; Rs 10bn in PBT

‘The year 2013 was one of the most challenging years faced by the financial services industry with demand for credit remaining low, margins coming under pressure, asset quality continuing to deteriorate and declining gold prices affecting the pawning business. In this backdrop, HNB has successfully weathered the challenges as demonstrated by its credit growth of 16.8% which is well over the industry growth of 8.8%, above industry interest margins, NPA ratio of 3.6% compared to 5.6% for the Banking sector and pawning NPA of 1.1% for the Bank against the industry average of 12.7% a press release said.

Commenting on the performance of the year 2013 Dr Ranee Jayamaha, Chairperson of Hatton National Bank PLC stated that "year 2013 has been one in which our sustainable business model and the collective skills of our team have been put to test on many fronts. The results speak for themselves and is a testimony of the resilience of the Bank and the collective strength in responding to change and remaining focused".

Interest income which is by far the largest contributor to the Bank's total revenue grew by 18% to Rs. 55.7 Bn driven by the aggressive credit growth achieved by the Bank. While the high interest rates witnessed during major part of 2013 also contributed towards the growth in interest income, the interest write-offs from pawning advances had an adverse impact. Interest expenses increased at a faster pace of 24% during the year, thereby compressing margins. The growth of 13%, in deposits coupled with higher interest rates resulted in the surge in interest cost during the year. Despite the drop in margins the Bank posted a 11% growth in net interest income to achieve Rs 24.3 Bn as a result of the strong balance sheet growth.

‘ Fee and commission income witnessed a 16% yoy growth, driven by fees from card acquisitions, remittances, guarantees and trade income despite overall slow down in international trade during the year. In addition several initiatives in electronic and mobile banking rolled out in 2013 will drive the Bank's fee income in the medium term.

‘The revaluation loss on swaps that were obtained to hedge exchange risk created due to foreign borrowings increased by 11% to Rs 1.8 Bn. This is a reflection of higher swap costs during 2013 compared to 2012.

‘Net gain from financial investments of the Bank increased by Rs 159 Mn due to higher dividends received during the year from its equity investments in the available for sale category.

‘Other income of the Bank mainly reflects exchange gains from customer transactions and revaluation of foreign currency borrowings. The higher depreciation of the Rupee in 2012 compared to 2013, resulted in a lower revaluation gain, resulting in a decline of 24% in other income compared to the previous year.

The total operating income of the Bank stood at Rs 28.6 Bn for 2013, reflecting a growth of 9% over 2012.

The Bank was successful in marginally improving its NPA ratio to 3.64%, by end of 2013 compared to 2012, despite adverse conditions experienced by the industry. The provisions increased to Rs 3.2 Bn largely due to the decline in gold prices, which in turn has resulted in maintaining a healthy provisioning cover of 62.5%. Accordingly, the net NPA for 2013 improved to 1.37% compared to 1.82% in the previous year. The NPA calculations are based on time based provisioning method as per CBSL guidelines.

The overall operating expenses dropped by 1% due to an18.5% reduction in personnel expenses largely on account of the reversal made with regard to the Employee Share Benefit Trust. Other expenses increased by 14.5% mainly due to higher investments made to upgrade technology. Accordingly, the cost to income ratio for 2013 reduced to 47.8% indicating an improvement, compared to 53.0% in the previous year.

The financial VAT increased by 33% to Rs 1.7 Bn in 2013 whereas the corporate tax expense increased by 28% to Rs 3 Bn. Accordingly, the effective rate for VAT & corporate tax increased to 40% from 32% in 2012. In 2012, the Bank had a substantial amount of tax reversals which resulted in the effective tax rate been substantially low compared to 2013.

The Bank's Profit before VAT & Tax grew by 5% to Rs 11.7 Bn while net profit after tax recorded a decline of 7% to stand at Rs 7 Bn for the year.

Mr. Jonathan Alles, Managing Director / CEO of HNB stated that "during the year 2013 we crossed the Rs 500 Bn mark in assets and achieved a PBT of Rs 10 Bn notwithstanding the challenging conditions experienced. In 2013, HNB embarked on a journey united in purpose as one team, towards being the best in class service provider. We made significant investments in technology, enhanced our service delivery through electronic channels and commenced a Business process re- engineering initiative to drive sales by optimising the business operating model. Going forward, the Bank will leverage on these initiatives to reach greater heights".

Other group companies including HNB Assurance PLC, Acuity Partners and Sithma Development (Pvt) Ltd performed very well during the year with profit growth of 11%, 169% and 37% respectively. Accordingly the Group posted a net profit of Rs 7.8 Bn for the year 2013.

The Bank proposes a final cash dividend of Rs 7.00 per share in addition to the interim dividend of Rs 1.50 per share declared in December 2013 resulting in a total cash dividend of Rs 8.50 per share for the year.

The Capital adequacy of the Bank remained strong with the tier I capital ratio at 12.95% and total capital adequacy ratio at 16.52% through internally generated funds and tier II capital raised through subordinated debenture issue.
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Seylan reports Rs. 2.3 b profit after tax for 2013

Seylan Bank’s Profit after Tax reached a record Rs. 2,315 million compared to the Rs. 2,064 million reported in 2012, an impressive 12% growth in PAT for the year ended 31 December 2013.

Profit after Tax for Q-4 2013 (final quarter) was reported at Rs. 780 million as compared with Rs. 466 million for the same period last year reflecting a growth of 67% over Q-4 last year.

Despite slow credit growth and industry wide pressure on interest margins, Net Interest income increased from Rs. 9,014 million to Rs. 9,830 million for the 12 months ended 31 December 2013. Fee and Commission income increased 25.5% from Rs. 1,695 million to Rs. 2,127 million showing a consolidation of the solid growth in core banking activities achieved by Seylan Bank over the past few years.

During the year under review the bank also focused considerably on cost containment. As a result of many effective cost containment initiatives, total other expenses were reduced by 6% from Rs. 3,299 million in 2012 to Rs. 3,091 million in 2013. Total personnel expenses increased by 13%, due to a salary revision granted to all staff at the beginning of the year.

The bank also successfully implemented a core banking system upgrade in February 2013. 

This will have significant cost efficiencies through process improvements to the bank in the coming years. The upgrade will also facilitate many additional functionalities, enabling better product and service delivery to its customers.

The bank grew its deposits base by 14% from Rs. 146.7 billion to Rs. 167.3 billion during 2013 and its net advances portfolio by 9.5% from Rs. 124.7 billion to Rs. 136.6 billion during the year under review.

Even more significantly, despite an industry wide trend of deteriorating asset quality, Seylan is one of the few Banks who was able to improve its asset quality through effective recovery and rehabilitating efforts which resulted in a significant reduction in its Gross NPA (net of IIS) from 12.99% in December 2012 to 10.58% as at end December 2013.

In September 2013, Fitch affirmed the Banks rating at A- lka, with a ‘Stable’ outlook.

The bank also successfully concluded a review, update and extension of its current Strategic Plan to 2016. The areas of focus 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 privilege schools over a period of four years. In the latter half of 2013, 11 such school libraries were opened by the bank.

During 2013, the bank opened four new branches, fully refurbished 16 branches and relocated a further six branches to more customer friendly locations. As at 31 December 2013, the bank network comprised of 151 branches, 158 ATMs and 86 student savings centres.

The bank’s total capital adequacy ratio stands at 15.75% as at 31 December 2013, well above the regulatory requirement.

As a result of this impressive 2013 performance, Earnings per share stood at Rs 6.74 (Group Rs. 6.78), while return (profit before tax) on assets and return on equity stood at to 1.72% and 11.4% respectively. The bank’s net asset value per share as at 31 December 2013 was Rs. 63.08 (Group Rs. 65.69).
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