Sri Lanka stocks close up 0.8-pct

Oct 03, 2014 (LBO) - Sri Lanka's stocks closed 0.76 percent higher with banking stocks gaining amid continued strong foreign buying, brokers said.

The Colombo benchmark All Share Price Index closed 55.55 points higher at 7,406.60, up 0.76 percent. The S&P SL20 closed 52.95 points higher at 4,160.31, up 1.29 percent.

Turnover was 4.39 billion rupees, up from 2.46 billion rupees a day earlier with 120 stocks closed positive against 82 negative.

Dialog Axiata closed 40 cents higher at 12.50 rupees with off-market transactions of 1.66 billion rupees changing hands at 12.50 rupees per share contributing 38 percent of the turnover.

The aggregate value of all off-the-floor deals represented 46 percent of the daily turnover.

John Keells Holdings closed 80 cents lower at 259.80 rupees with market transactions of 295.32 million rupees contributing 7 percent of the turnover.

Pan Asia Banking Corporation closed 1.80 rupees higher at 25.90 rupees, attracting most number of trades during the day.

Foreign investors bought 2.66 billion rupees worth shares while selling 393.79 million rupees worth shares.

Domestic investors bought 1.73 billion rupees worth shares while selling 3.99 billion rupees worth shares.

Commercial Bank of Ceylon closed 5.50 rupees higher at 165.50 rupees and DFCC Bank closed 16.10 rupees higher at 231.40 rupees, contributing most to the index gain.

Hatton National Bank closed 4.60 rupees higher at 198.20 rupees.

Fitch affirms Seylan Bank at ‘A-’; Outlook Stable

Fitch Ratings Lanka has affirmed Sri Lanka-based Seylan Bank PLC’s (Seylan) National Long-Term Rating at ‘A-(lka)’. The Outlook is Stable. Fitch has also affirmed Seylan’s senior unsecured debentures at ‘A-(lka)’ and subordinated debt at ‘BBB+(lka).

Key rating drivers – national rating and debt
Seylan’s rating is driven by Fitch’s view that the Sri Lankan State (BB-/Stable) would provide extraordinary support to the bank, in case of need, because of its systemic importance. The Sri Lankan regulator has identified Seylan as one of six systemically important domestic banks. However, the state’s ability to support the bank, if needed, is limited as reflected in the sovereign’s ‘BB-’ rating.

Seylan’s recovery efforts have resulted in a significant improvement in its reported gross non-performing loan (NPL) ratio to 10.9% at end-1H14 from the peak of 29.7% at end-2009. However, the amount of Seylan’s NPLs continues to be high compared with higher-rated peers. This is mostly due to large legacy NPLs on which recoveries have been challenging. Seylan’s ratio of unprovided NPLs to equity remains weaker than higher-rated peers.

Seylan’s loan book fell 2.6% in 1H14, reflecting the lower credit demand from the private sector that has hurt loan growth across the banking sector. Profitability in 1H14 was supported by one-off bond gains, which offset the contraction in net interest margin and the higher loan impairment charges that were seen across the sector. Seylan’s cost efficiency has improved, although costs still remain high.

The bank ranked as Sri Lanka’s sixth-largest domestic commercial bank in terms of assets at end -2013. Seylan experienced a crisis in 2009 that prompted regulatory intervention.
Seylan’s senior unsecured debentures are rated at the same level as its National Long-Term Rating as they constitute unsecured and unsubordinated obligations of the company.
Its subordinated debentures are rated one notch below its National Long-Term Rating to reflect their subordination to senior unsecured creditors.

Rating sensitivities – national rating and debt
Fitch does not expect Seylan’s National Ratings to be downgraded as support to Seylan is expected to continue given the bank’s systemic importance.

An upgrade of Seylan’s rating would be contingent upon its standalone rating moving above the support-driven rating through a significant and sustained improvement in asset quality and provisioning while maintaining other credit metrics in line with higher-rated peers.

The debt ratings will move in tandem with Seylan’s National Long-Term Rating.
www.ft.lk

NDB gets US $ 75mn credit line from Proparco and FMO

Proparco, a French development finance institution, has allocated a US $ 60 million credit line to National Development Bank PLC (NDB), with an additional US $ 15 million from its Dutch counterpart, FMO, under a joint facility to support the financing of projects in the renewable energies, agro-industry and water supply sectors.

The signing of the loan agreement took place in Rotterdam in the Netherlands on September 29, 2014 by NDB Deputy Chairman Ashok Pathirage together with Chief Executive Officer Rajendra Theagarajah.

NDB was founded in 1979 by the national authorities as the country’s development bank and started developing on the retail market in 2001. It now offers all the services of a universal bank but retains its DNA as a development bank, which makes it an ideal partner to support projects that contribute to sustainable growth and job creation in Sri Lanka.



Proparco’s financing package is a validation of our country and of NDB’s successful scaling up of its loan portfolio across the country

NDB enjoys real expertise in financing long-term projects (18 percent of its portfolio), particularly in the renewable energies sector. Since 1997, it has supported 26 mini-hydro projects and half of the eight wind farms in Sri Lanka.

NDB is also very active in supporting small and medium enterprises (SMEs), for which it has developed a specific range of banking products. Over 3,000 projects were financed in 2013.

This credit line provided by Proparco and FMO will finance projects in the renewable energies, agro-industry (particularly tea and rubber plantations) and water supply sectors that require long-term financing, which is in short supply on the local market and are among the key sectors for the national economic strategy (Unstoppable Sri Lanka 2020).

The support for independent power producers (hydro, wind or biomass) will meet the strong growth in the country’s electricity needs, while limiting its heavy dependence on fossil fuels, which weigh on its budget deficit (oil accounts for 25 percent of total imports) and its carbon footprint.

In terms of water supply, due to sustained efforts over the past decade, Sri Lanka is one of the first countries in the region to have achieved Goal 7 of the Millennium Development Goals (MDGs). In order to reach universal coverage by 2020, the sector remains a priority for the government, which has launched regulatory reforms with the aim of creating a climate conducive to investments in water supply and sanitation services.

“Proparco welcomes the signing of this co-financing with FMO to support an institution that is committed to the main areas of sustainable development. With strong growth in Sri Lanka’s financial sector, this financing will contribute to reinforcing the local financial system,” said Deputy CEO in Charge of Investments Marie-Hélène Loison.

“Proparco’s financing package is a validation of our country and of NDB’s successful scaling up of its loan portfolio across the country,” said NDB Director and Chief Executive Officer Rajendra Theagarajah.

“The long-term tenor of the syndication enables us to pass on this benefit to our clients.”
www.dailymirror.lk

Fitch rates Siyapatha Finance 'A-(lka)(EXP)'

Fitch Ratings Lanka has assigned Siyapatha Finance Ltd's proposed subordinated redeemable debentures of upto Rs 1 bn an expected National Long-Term Rating of 'A-(lka)(EXP)'.

The proposed debentures will have a five-year tenor with bullet principal repayment at maturity. Coupon payments will made annually at a fixed rate. The debentures are to be listed on the Colombo Stock Exchange. SLFL expects to use the proceeds to strengthen its regulatory Tier 2 capital and to reduce maturity mismatches between assets and liabilities. The final rating is contingent on receipt of final documentation conforming to information already received.
www.dailynews.lk

LRA assigns A- and P2 to Softlogic Holdings

LRA has assigned the long and short-term corporate credit ratings of A- and P2 to be assigned to Softlogic Holdings .Concurrently, LRA also assigned an initial issue rating of A- to the Company’s existing Rs 1 billion Rated, Unsecured, Redeemable Debenture (2013/2016).

All long-term ratings carry a stable outlook. Softlogic is a diversified conglomerate with interests in healthcare, information and communication technology (“ICT”), retail, financial services, automobile and leisure. The company and its subsidiaries are collectively referred to as the Group.

The ratings are upheld by the Group’s well diversified business interests, as the Group has diversified into the retail, ICT, leisure, healthcare, financial services and automobile industries.
www.dailynews.lk

Richard Pieris restrained from using 'Arpico Finance'

Associated Motor Finance buys 40.59% in Arpico Finance

H.D.H Senewiratne hsenewiratne@yahoo.com

The Supreme Court in a landmark decision restrained Richard Pieris Arpico Finance Limited from using the words “Arpico Finance ” as part of its trade name, upholding the Interim Injunction granted by Justice M.C.B. Moraes of the Commercial High Court on July 30, 2013.

After protracted argument in Case No.SC (CHC) Appeal 41/2013 in the Supreme Court, judgment was delivered on Monday (September 29) by Justice B.P. Aluvihare P.C. with Justice Priyasath Dep P.C. and Sarath De Abrew agreeing.

A.R. Surendran, P.C. with Shivaan Kanag-Isvaran,N. Kandeepan and Jude Dinesh instructed byNeelakandan & Neelakandan, Attorneys-at-Law appeared for the Plaintiff-Respondent, Arpico Finance Co. while Harsha Cabral, P.C. with Budhikka Illangathilake and Nishan Premathiratne instructed by Messrs Julius and Creasy, Attorneys-at-Law appeared for the defendant -appellant, Richard Pieris Arpico Finance Limited.

The plaintiff-respondent, Arpico Finance Co. in its submissions said it is the only company in Sri Lanka carrying on the business under the trade name “Arpico Finance” in the financial services sector since 1951 and that it is one of the oldest existing finance company in Sri Lanka with an unblemished record.

Meanwhile, Associated Motor Finance Company has bought more than 3 million shares of Arpico Finance Company at Rs. 66 per share. This is 40.59 percent the total number of shares in issue in Arpico Finance Company, a stock brokering company said.

With Associated Motor Finance Company already holding 55,000 shares in Arpico Finance, the current purchase increases its stake to 3,073,617 shares, an increase from 0.75 percent to 41.33 percent of the total shares issued in Arpico Finance Company PLC.

Where the rationale of the consolidation was explained to bankers and finance company officials as well as auditors and other concerned parties, the CB also held one-on-one meetings with almost all “boards of directors and senior management of the local banks and finance companies with the expectations of the consolidation process was further clarified and specific issues pertaining to particular institutions were discussed in detail”.

The statement said the CB informed the banks and Non- Banking Finance Institutions s to approach the consolidation process in a professional manner by seeking specialized IT, Legal, Tax and HR services in order to ensure the objectivity and integrity of the process. In keeping with the request of the CB, banks and Non- Banking Financial Institutes agreed to submit their preliminary proposals by March 31,2014.

“Associated Motor Finance company was started in 1962, which is the fifth oldest company in the country.

Therefore, they have a lot of plans in the future with this merger”, its Chief Executive Officer T.M.A Salley said.

Arpico Finance Company was incorporated as an associate company of renowned Richard Peiris Group on May 1, 1951 and is the second oldest finance company in Sri Lanka.

Central Bank's consolidation is aimed at reducing by half the number of finance companies through mergers and acquisitions.
www.dailynews.lk

CBSL ups 'benchmark' interest rate

By Paneetha Ameresekere

Ceylon Finance Today: Central Bank of Sri Lanka (CBSL) which only a few days ago said that they will no longer conduct any repo auctions went back on their word yesterday, by conducting three term and one overnight repo auctions to cream off excess liquidity from the market.

The weighted average yields fetched at this auction were 6% or thereabouts, an indication that they don't want the base rate to be a low 5% as was previously indicated, therefore the reintroduction of these auctions, market sources told Ceylon FT.

CBSL, when they made known their monthly monetary policy review hardly two weeks ago, said that they will no longer hold repo auctions. CBSL further said banks parking their excess cash in CBSL's overnight standing deposit facility (SDF) for more than three days a calendar month, will not be paid the SDF rate of 6.5%, but a rate less, that is by 150 basis points (bps) to 5%, effectively making the SDF rate 5%.

But sources said that with savers hit due to a low interest rate regime and elections round the corner, the new 6% base rate as indicated by yesterday's repo auctions was a move by the authorities to appease savers by giving a fillip for them to obtain an enhanced return at the eve of an expected presidential election.

They told this reporter that one of the reasons why the then UNP/UNF Government of Ranil Wickremesinghe lost the April 2004 general elections was due to a low interest rate regime prevailing also then, which had had disenchanted voters.

Sources also attributed yesterday's rejection of the weekly Treasury (T) bill auction by the authorities was due to low rates offered by the market, with fears that such low rates would also cascade down to real interest (deposit) rates.

They further said that with CBSL giving the message that they want interest rates to go up by 100 bps yesterday, that resulted in the 'more liquid' 15 September 2019 maturity gaining by between 10-15 bps at secondary market trading to close the day at 6.85/95% in two way quotes.

In related developments, with CBSL's moral suasion bearing on the exchange rate (ER) at Rs 130.90 to the US dollar in 'spot next' trading, the ER, which at the beginning of trading weakened to be quoted at Rs 130.60/90 to the dollar in two way quotes, however, subsequently strengthened to close the day at Rs 130.35/55 to the dollar due to exporter conversions.

"A mix of moral suasion and CBSL increasing its benchmark rate by 100 bps to 6% induced exporters to encash their dollar proceeds, which, previously they held back from doing so on the belief that the rupee will weaken further," the sources said.

Meanwhile, CBSL bought T bills totalling Rs 13,309.38 million yesterday, helping to swell excess liquidity, as captured by CBSL's SDF facility and overnight repo window to Rs 93,131 million, down Rs 2,471 million (2.6%) from the previous day's figure of Rs 95,602 million.

The depreciation of excess liquidity by a sum of Rs 2,471 million plus CBSL swelling excess liquidity by buying T bills to the tune of Rs 13,309.38 million showed that a minimum of foreign exchange (FX) or US dollars equivalent to Rs 15,780.38 million (US$ 120.97 million) was creamed off for debt servicing.

The required dollars were obtained from CBSL's FX reserves and not from the FX market, for fear that if such an amount was obtained from the FX market, that would have caused further pressure for the rupee to depreciate.

According to latest statistics, the daily average turnover (DAT) in the FX market last week was US$ 79.76 million. Therefore a figure of US$ 120.97 million would be equivalent to 152% of the DAT in the FX market for that week.
www.ceylontoday.lk