Fitch Rates Central Finance's Senior Debt Final 'A+(lka)'

May 15, 2015 (LBO) – Sri Lanka Fitch Ratings has assigned Central Finance Company Plc's issue of senior secured redeemable debentures of up to 3 billion rupees, a final National Long-Term Rating of 'A+(lka)'

The Media Release reproduced below :-

The final rating is the same as the expected rating assigned on 8 April 2015, and follows the receipt of documents conforming to information already received.

The debenture will have a maturity of between three to five years, carry a fixed-rate coupon, and will be listed on the Colombo Stock Exchange. CF expects to use the proceeds to fund lending growth, reduce structural maturity mismatches and diversify the funding mix.

KEY RATING DRIVERS

The issue has been rated at the same level as CF's National Long-Term Rating. Fitch has not provided any rating uplift for the collateralisation as the secured notes' recovery prospects are considered to be average and comparable with those of the unsecured notes in a developing legal system.

CF's rating reflects its strong capitalisation, which is supported by robust profitability and high profit retention. Counterbalancing these strengths are the pressure on loan quality and its low provisioning levels compared with its peers'. The rating also captures CF's high margins, which are supported by the company's strength in raising funds at relatively low rates through the solid franchise developed over a long operating history.

RATING SENSITIVITIES

The rating on the issue will move in tandem with CF's National Long-Term Rating.

Sri Lanka vehicle registrations up 70-pct in April

COLOMBO (EconomyNext) – Sri Lanka's vehicle registrations rose 70-percent from a year earlier to 48,718 units in April 2015 but was down from a historic high of 66,839 reached in March, a research report showed.

Motor car registrations rose 166 percent from a year earlier to 5,107 units in April 2015 despite a plunging sales of hybrid cars after a tax hike in January, an analysis of Sri Lanka's vehicle registry data by JB Securities showed.

In April, 2,037 Indian-made Maruti Alto cars were registered, up from just 185 units a year earlier but down from 2,269 units in March.

Economic activity slows in April with a traditional holiday season falling in the second week.

There were also 338 units of Chinese made Micro branded cars were sold, up from 103 units a year earlier.

JB Securities said the waiting period for a Maruti vehicle was now 6 months.

Registrations of vans rose 700 percent from a year earlier to 927 units in April.

Three wheeler registrations rose 59 percent to 10,814, down from the 12,360 units registered in March, levels not seen since late 2011 when the Central Bank was injecting liquidity into the banking system though sterilized forex sales firing credit and creating a balance of payments crisis.

Lease rental on a 3-wheeler is around 15,000 rupees a month or 600 per working day and three wheelers are increasingly used as a personal vehicle rather than a taxi, JB Securities said.

Motor cycle registrations rose 61 percent from a year earlier to 27,561 units but were down from a peak of 42,331 reached in March.

About 64 percent of the motor cars were bought on credit, up from 51 percent a year earlier. The financing share of SUV's were 58 percent, up from 35 percent a year earlier.



About 90 percent of the three wheelers were bought on credit, the same as last year and 62 percent of motor cycles were bought on credit, slightly down from 62.9 percent a year earlier.

Sri Lanka index at 11-wk high on earnings, political stability hopes

May 15 Sri Lankan shares rose to an 11-week high on Friday as investors bought risky assets on hopes of better March-quarter earnings and political stability after parliamentary elections.

The main stock index ended up 0.3 percent, or 21.80 points, at 7,258.67, its highest close since Feb. 27.

"The market seems to have been driven by increased local investor confidence backed by strong corporate earnings," said Danushka Samarasinghe, head of research at Softlogic stockbrokers.

"There is also the expectation of an early parliamentary election with a higher possibility of the ruling United National Party (UNP) winning with a majority."

Political uncertainty due to Prime Minister Ranil Wickremesinghe-led UNP not having a parliament majority had been a drag on the market. The trend reversed after the central bank cut key monetary policy rates to record lows on April 15.

Investors had been waiting for direction on the political front, analysts said, with the prime minister saying he would invite the main opposition to join government when he wins the parliamentary polls, which is yet to be scheduled.

Analysts, however, still expect the index to move sideways until the situation becomes clearer.

President Maithripala Sirisena has promised to dissolve the parliament after passing some key reforms next week.

Friday's turnover was 1.09 billion rupees ($8.17 million), around this year's daily average of around 1.11 billion rupees.

Foreign investors net bought 115 million rupees of shares, extending the year-to-date net inflows to 5.76 billion rupees in equities.

Ceylinco Insurance Plc, which boosted foreign buying to a one-year high on Thursday, jumped 6.24 percent, while Carson Cumberbatch Plc rose 3 percent.

The bourse has gained about 5.2 percent since the central bank cut key rates on April 15, while yields on t-bills have fallen 46-61 basis points since then.

As of Friday, earnings of 57 listed companies have on average showed a rise of 26.1 percent year-on-year in the first quarter, said an analyst. 

($1 = 133.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)

Union Assurance posts Rs 101m PAT in Q1

Union Assurance PLC (UA), recorded steady growth in gross written premium (GWP) and profits as at the end of the first quarter of 2015.

GWP for the three months of March 31, 2015 was Rs. 1.6 billion compared to Rs. 1.4 billion in the corresponding period, a growth of 13%.

Total net revenue of the company and investee (including share of profit of the associate) grew by 65% to Rs. 3.3 billion in 2015 from Rs. 2.0 billion in 2014 mainly due to gains recorded from disposal of non-life business. Increase in total net revenue excluding gains from the disposal was 4%.

Profit after tax (PAT),excluding disposal gain of non-life business increased from Rs. 40 million in 2014 to Rs. 101 million in 2015.

The company has not recognised a surplus from the life business during the 1st quarter of 2015, as the surplus is transferred at year end following actuarial valuation.

As at March 31, 2015, UA's life fund stood at Rs. 24 billion with a healthy solvency ratio indicating the financial strength of the business.

Union Assurance was recognised at the Celent Model Insure Asia Award 2015.

UA's e-learning platform which provides access to learning and development tools 24x7 to the life sales force was adjudicated the winner under the category of Operational Excellence in Non-Core Systems.

This is the third time UA has been recognised at this prestigious event, which draws entries from global as well as regional insurance companies.

UA has received a number of awards for its commitment to good governance, accountability, transparency, and innovative use of technology, including recognition from the Asia Insurance Technology Awards (AITAs), South Asian Federation of Accountants (SAFA), the Institute of Chartered Accountants of Sri Lanka (ICASL) and Association of Chartered Certified Accountants (ACCA) during the years.
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New 19th Amendment to boost investor confidence

Shirajiv Sirimane

The successful implementation of the 19th Amendment to the Sri Lankan constitution will bring in numerous benefits both locally and internationally, State Finance Minister Mahinda Samarasinghe said.

Speaking at the launch of the United Nations Economic and Social Survey of Asia and the Pacific report launch yesterday he said that the amendments has created committees which underlines good governance and fair play.

"This is something an investor will look before investing in a country and Sri Lanka should aggressively market this message specially to the international community.

Economic growth in Asia and the Pacific continues to fare well in the global context, but is expected to increase only slightly to 5.9% in 2015 from 5.8% in 2014,"Samarasinghe said.

"This slowdown in the rate of expansion of economic growth is happening at a time when lower oil prices could potentially have lifted growth in oil importing countries if the enabling environment was right.

"Unless reforms are vigorously pursued, downside risks to the growth trajectory could increase, Samarasinghe said at the launch of the Economic and Social Survey of Asia and the Pacific (ESCAP) held at the JPS auditorium yesterday. While the private sector has an important role to play in making growth more inclusive, greater efforts are particularly needed of the public sector to lay the appropriate framework and create an enabling environment, especially as addressing income inequalities is a key entry point for increasing inclusiveness.

While growth in Asia and the Pacific has overall been inclusive across countries, between the 1990s and the period 2000-2012, the gap is widening between the "haves" and the "have nots" within countries.

For instance, economic inclusiveness is largely a result of countries' success in reducing rates, of extreme poverty, masking the fact that compared with the 1990s, in most countries the richest 20% of the population are capturing a larger share of income than t he poorest 20%.

It also masks deterioration in labour markets, with fewer people being in formal employment. Similarly, despite a general improvement in access to health care and education, in all countries since the 1990s, opportunities within countries are determined largely by one's economic circumstances, or those of one's parents.

Thus, concerted actions of the public and private sector are needed to address such concerns, the Minister said.
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NDB Bank ups 1Q after tax profit by 30% to Rs. 1.6 b

National Development Bank PLC has concluded the first quarter of 2015, posting a Profit After Tax (PAT) of Rs. 1,558 million. 

In a statement NDB said the PAT translates to a 30% growth compared to the first quarter of 2014, alluding, promising performance for the year ahead, and affirming the ‘Best Bank in Sri Lanka’ status conferred on NDB by the prestigious Global Finance Magazine of USA.

The bank’s total operating income before impairment charges for loans and other losses and operating expenses grew by 18% year-on-year (YoY) to Rs. 3,631 million in the first quarter of 2015. This commendable growth was supported by a Net Interest Income (NII) growth of 7% and net fee and commission income growth of 8% over the first quarter of 2014.

The bank’s net gains from its total investment portfolio declined by 49%, a rupee equivalent of LKR 284 million as compared to the prior year, primarily due to the higher marked to market profit realized from the portfolio in the first quarter of 2014.

Other operating income increased by Rs. 673 million over the prior period, which was predominantly due to the increased Group dividends of Rs. 569 million received during the period. However, at a Group level, total operating income recorded a marginal decline of 3% which was due to the reduction in net gains from the Group’s total investment portfolio.

Impairment charges for loans and other losses was a release of Rs. 64 million for the current quarter as compared to a charge of Rs. 28 million for the corresponding quarter of 2014. This was a direct outcome of the improved asset quality of the bank despite a static loans and advances portfolio, compared to the prior year.

The resultant Non Performing Loan (NPL) ratio of the bank was 2.49% and compares with an NPL ratio of 2.51% at the end of 2014. This is one of the lowest NPL ratios of the industry and reflects the sound risk management practices embedded within the bank’s loan origination, disbursement, recovery and monitoring processes.

The NDB Group strengthened its strategic cost management initiatives during the first quarter of 2015 as cost optimisation remains a key strategic priority of the bank. The NDB Group recorded only a 9% increase in its total operating expenses, whilst expanding its network by three new branches. The Cost to Income Ratio (CIR) was 39% for the quarter and is one of the lowest CIRs in the industry.

Total assets of the Group reached Rs. 270 billion at the end of the first quarter in 2015. The bank’s Loans and receivables to customers were Rs. 175 billion. Loans and receivables to customers recorded only a marginal increase over the portfolio at 31 December 2014. However, Loans and receivables recorded a YoY growth of 21% as compared with March 2014. Customer deposits of the bank grew by 7% from 31 December 2014, to reach Rs. 163 billion. The YoY change of the customer deposits was 20%.

The NDB Group continues to focus on the effective utilization of its assets base, and recorded a Return on Assets (ROA) of 1.29% for the concluded quarter.

The total capital base of the bank as at 31 March 2015 was Rs. 29,406 million, whilst the same at the Group level was Rs. 36,648 million. Core capital and Total capital adequacy ratios of the Bank were 10.11% and 14.86%, whilst the same ratios for the Group were 12.70% and 17.56%. The capital adequacy ratios of the bank and the Group have always remained well above the minimum regulatory requirements and the capital base has amply facilitated the ambitious growth of the Bank and the Group.

The Group Earnings Per Share (EPS) for the first quarter was Rs. 21.12 and Return on Shareholders’ Funds (ROE) was 12.42%. These shareholder returns indicators are expected to improve with planned aggressive business expansions which will improve the profitability of the bank and the Group.

The share price of the bank closed at Rs. 248 on 31 March with a market capitalisation of Rs. 41 billion. The Group Price Earning (PE) Ratio was 12 times.

NDB commenced the year on a high note with the bank being awarded the Best Bank Award for Sri Lanka under World’s Best Emerging Markets Banks in Asia-Pacific - 2015 of the prestigious Global Finance magazine of USA. The award speaks volumes on the significant blueprint NDB has established in the Sri Lankan banking landscape, especially with regard to growth in assets, profitability, strategic relationships, customer service, competitive pricing and innovative products.

NDB Chief Executive Officer Rajendra Theagarajah, commenting on the first quarter results, reiterated that NDB is committed to adding tangible value to its stake holders through excellent financial performance. The CEO also mentioned that the bank has embarked on an aggressive growth trajectory to gain significant and systemically important market share in the Sri Lankan banking and financial services sector.

The opening of three new branches during the first three months of the year affirms this stance of the bank. The bank is driven by a target to expand its branch network to 100 branches in 2015. The CEO also reiterated that whilst expanding its reach, the bank is committed to disseminating inclusive and responsible financial services penetrating all segments of the Sri Lankan society, empowering them to make valuable contribution towards the overall national development.

NDB is strategically focused and robustly aligned for a stellar performance in 2015. The bank and the Group have set ambitious growth targets for the year ahead and are energetically pursuing the achievement of same. In the meantime, the bank is open to growth opportunities arising in the industry, and NDB’s appetite for inorganic growth remains strong as ever before.
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Employees fund sells 11% stake of Ceylinco Insurance for Rs. 3.5 b

* India’s Shriram City Union Finance buys 6.3% for Rs. 2 b, existing shareholder Pictet picks up 2% and balance by a local corporate and individual

An employee fund and the largest shareholder of Ceylinco Insurance divested 11% stake in the company for Rs. 3.5 billion yesterday, boosting the market’s turnover to top Rs. 5 billion, the highest in eight months.

Ceylinco Insurance Employee Share Ownership Trust of Ceylinco Insurance (CIESOT) Ltd., which owns a 23% stake, sold down 11% amounting to 2.2 million shares at Rs. 1,602 each through six crossings. The counter closed at Rs. 1, 600, up by 3.37% or Rs. 52.10.

Chennai-based and listed Shriram City Union Finance, a non-banking financial company, bought 6.3% for Rs. 2 billion whilst an existing shareholder with a 10.68% stake Banque Pictet & Cie S.A picked up a further 2% shareholding.

The balance had been bought by a local institutional and an individual investor.

The part divestiture by CIESOT is following a Supreme Court ruling to Ceylinco Insurance that CISOT must reduce holding in the company to 5%.

Yesterday’s turnover was the highest at the CSE since 11 September 2014 and nearly five-times more than this year’s daily average of around Rs. 1.11 billion.

Buying into Ceylinco as well as few other stocks saw a foreign inflow of Rs. 2.73 billion, the highest since 9 May last year, extending net inflows so far this year to Rs. 5.65 billion.

Apart from strategic deals, the Colombo Bourse closed negative.

Reuters said investors had been optimistic about earnings in a lower interest-rate regime, but political uncertainty ahead of a parliament election has weighed on sentiment.

The Bourse has gained about 4.9% since the Central Bank cut key rates on 15 April, while yields on t-bills have fallen 46-61 basis points since then.

As of Wednesday, earnings of 37 listed companies have on average shown a rise of 19.5% year-on-year in the first quarter, said a stockbroker.

Investors are waiting for direction on the political front, analysts said, adding that the market could be dull in the medium term until the perception of political uncertainty was addressed.

Sri Lanka’s Parliament is expected to debate and pass some key reforms next week and President Maithripala Sirisena has promised to dissolve Parliament after that.
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