LTV ratio for vehicle lease reduced again

The Central Bank of Sri Lanka (CBSL) has yet again changed the maximum loan to value (LTV) ratio for vehicle leasing to 70% with effect from December 1.

This is the third time that the maximum LTV ratio had been altered since September.

The CBSL on September 14 directed banks and financial institutions to follow new leasing rates which have been set at a maximum 70 per cent per vehicle.

However, it was increased to 90% from October 29.

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Finance cos. lack scope in doing leases

By Ishara Gamage

Ceylon Finance Today: Sri Lankan bankers seek their regulator Central Bank of Sri Lanka's (CBSL's) assistance to remove several budget proposals which may negatively impact their future performances.

In a letter to CBSL Governor, Sri Lanka Banks' Association (SLBA) said that the cessation of banks to engage in leasing business from 01 June 2016 is a highly unfair and impractical.

"We as bankers can cater to almost all segments of business and customers. We collectively have more than a 3,000 islandwide branch network. Whereas finance companies have very limited scope. They cannot lease large ships, aircraft and also they collectively have only 1,000 branches," SLBA Secretary General Upali de Silva, said.

Speaking to "Ceylon FT", he stressed that nearly half of the banking sector leases cater to the country's small and medium sector businesses. Further, banks can provide low cost leases compared to finance companies.

The letter also said that giving a 100% guarantee for finance companies deposits is also a highly questionable and risky affair.

"Giving 100% guarantee for finance companies may loosen management/ownership awareness of core business, because they know somehow the government will bail out their deposits" the Association warned.

But CBSL officials said that depending on the probability of finance company failures, prudent regulatory mechanisms will provide the necessary background for the government to give such 100% guarantees to finance companies.

"It seems to be wrong to give the guarantee of 100% to finance company deposits, whereas, CBSL is offering only up to Rs 200,000 to Rs 250,000 as compensation in the event of failure of any bank," de Silva however said.

Only National Savings Bank is being given a 100% guarantee in Sri Lanka by the Treasury currently. No other banks are given such a guarantee.

Analysts earlier told "Ceylon FT" that Sri Lankan bankers may find alternative ways to overcome their leasing restrictions which was proposed in the 2016 budget, analysts said. "Instead of giving direct leases, they can utilize similar services as vehicle or personal loans."

Speaking to Ceylon FT, Fitch Rating Country Head Maninda Wickramasinghe said that the budget proposal may dampen banks' profits, but it is good for the leasing industry.
"We are now studying the real outcome of these banks' leasing restrictions, most leasing companies have now become finance companies", he said.

Finance Ministry Secretary Dr.R.H.S. Samaratunga said that main purpose of that proposal was to develop the leasing industry as a separate industry.

"Like other industries, we must give incentives to the leasing industry to grow. What I feel is due to competition among its members, customers can apply for low rate leases," he said.

Samaratunga said most Sri Lankan banks use their low cost funds to give lucrative leases which give them large profit margins.

"We have to stop this culture and let banks focus on their core business", he said.
When asked whether banks' subsidiaries are allowed to do lease business, he said that they will issue a final circular after proper evaluation of the industry.

Budget 2016 proposed that banks should cease engaging in leasing business from 01 June 2016.

Analysts at Bartleet Religare Securities said, "We believe this proposal would be a serious challenge not only to banks, but to the consumer as well.

Motor leasing in particular is a preferred way to drive loan book growth due to (1) attractive yields, (2) asset backed, (3) active second hand market (4) good asset quality as domestic banks refrain from providing facilities to the subprime market.

"We believe almost all banks would see a serious volume impact from this policy decision as the sector's median exposure to leasing stood at 8% by end September 2015. NTB, in particular would need a change in strategic direction as the bank's loan book concentration to leasing is as high as 24%," analysts said.

They noted that finance companies would be the clear winners/beneficiaries of this proposal, growing in both volumes and margins, although from a consumer's point of view, this will restrict access to low leasing advance rates, as banks generally quote low rates due to their access to low cost funds.

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Fish export ban : Rs. 23b annual loss: EU to decide by January

By Rohana Jayalal

Sri Lanka has lost considerable revenue on the export of fisheries products over the past few years due to the EU imposed ban.

Sri Lanka’s fish exports to the European Union make up 68 percent of its total fish exports, which brings in Rs. 23 billion annually.

The remaining 32 percent is sent to the United States, Japan and other non-EU countries.Fisheries and Aquatic Resources Development Minister Mahinda Amaraweera told the Sunday Observer that the recovery of exports will be a great step forward for Sri Lanka’s competitive fisheries products sector and keeping its global image.

According to EU officials Sri Lanka has fulfilled the regulations needed to meet European standards, to lift the ban.

A technical evaluation team from the EU arrived in Sri Lanka earlier this month to assess Sri Lanka’s progress in implementing its recommendations on the prevention of illegal, unreported and unregulated fishing practices.

Amaraweera said the Government was hopeful that the European Union will lift the ban on Sri Lanka’s fish exports before the end of the year.

The EU ban took effect in January this year over the failure of the previous administration to prevent local fishermen from violating international fisheries laws.

The Minister said the government had taken action to ensure that the fishermen complied with all the conditions laid down by the EU.

The government is awaiting the European Union’s assessment of Lanka’s crackdown on illegal, unreported and unregulated (IUU) fishing.

The EU had laid down 57 conditions, for Sri Lanka and 35 of them have been fulfilled. The 35 conditions fall under the 36 essential conditions and the Fisheries Ministry had ensured that all of them are met.

The time stipulated by the European Union for fulfilling these conditions ends on October 31.

“I took up the issue with EU officials during a recent visit to Spain. I also briefed them on how Sri Lanka was fast tracking the implementation process,” the Minister said.

The ministry had already installed Vessel Monitoring Systems (VMS) free on 1,615 multi-day fishing craft. The location of the boat could be monitored through the operation centre at the Department of Fisheries and Aquatic Resources, he said.

Recently, officials of the Indian Ocean Tuna Commission came to Sri Lanka to study the facts regarding the withdrawal of the EU fish export ban.

It is expected that the European Union will adopt a proposal to remove the fish export ban imposed on Sri Lanka after the representatives submit their reports to the European Parliament.

Minister Amaraweera said that Cabinet approval had been granted to amend the Fisheries and Aquatic Resources Act No, 02 of 1996 to impose penalties for the offences committed in international seas to conform with international standards, to determine the penalties regarding the quantity of fish and the size of the vessel at the time of the offence, to enhance the penalty for offences regarding import and export to five times the value of the quantity of fish, to introduce a method of administrative penalty which is absent in the current Act and to create a sustainable and responsible fisheries culture in Sri Lanka.

The Minister said that If needed, the government is ready to answer any questions the EU might have and to clarify its policy and plans to overhaul the country’s fishing industry.

Meanwhile, an European Union official said the ban on fishery exports to the EU will be lifted after further necessary steps are taken.

According to the official, the Council commended the steps Sri Lanka has taken to comply with the regulations of the Indian Ocean Tuna Commission.

“The council encourages the Sri Lankan authorities to take further measures necessary to address the shortcomings in the context of the EU legislation on illegal, unreported and unregulated (IUU) fishing,” the official said.

He said that the legal processes were slow, as the EU has to go through a rigorous evaluation process before taking the final decision.

Sri Lanka received a ‘yellow card’ or a strict warning in November 2012 before the ban was imposed, as the country was not complying with international rules on illegal fishing.

But the Council banned fish imports from Sri Lanka last year due to EU concerns that illegal fishing is environmentally harmful and unsustainable.

The EU expressing appreciation over the new government’s policies on improving human rights and strengthening democratic institutions, is seriously re-evaluating Sri Lanka’s call to grant the concession once again for exports to the EU and to lift restrictions imposed on the export of fish products.

According to records, Sri Lanka’s sea food exports to the EU Zone accounted for nearly 68 percent of its total sea foods exports.

Sea food exports declined from 21 million dollars in February 2014 to 11.2 million dollars in February 2015 a plunge of 46 percent while fisheries exports plummeted from 42.7 million dollars to 27.7 million dollars a reduction of 35 percent, according to records.

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People's Bank 3Q PAT grows 7.5%

Having ended 2014 on a high note, not only surpassing Rs 1 tn Balance Sheet but also amassing a number of global accolades, the third quarter results for People's Bank points towards the closing of a successful year by end 2015.

Having gained the best results ever posted in any 3Q by the Bank, all key performance indicators notch consistent growth paradigms, a testament to People's Bank's commitment to maintain an ethos of stability, strength and sustainability.

Profit Before Tax 3Q, therefore, stands at Rs 12.5 bn, well above the Rs 11.5 bn notched in the corresponding period last year with 8.5% growth.

Similarly, Profit After Tax also had a YoY growth of 7.5%, to post an impressive Rs 8.9 bn in profitability. This is compared to Rs 8.3 bn last year.

Chairman Hemasiri Fernando said that the Bank's emphasis on being the pulse of the people has been the underlying tenet for success.

"Balance sheet growth has maintained its phenomenal upward trajectory to stand at Rs 1.1 Tn, which shows the prowess we possess and the financial stability we have retained. Our Group too has done exceptionally well, showcasing PBT of Rs 16.9 bn compared to Rs 15.3 bn last year, reiterating that we have astutely mooted businesses within our Group that are sustainable and aligned with macro growth paradigms."

People's Bank's accent on being accessible and available to a wide demographic through nearly 740 branches and one of the largest ATM networks of over 2,500 well spearheaded by a team who take customer service to new realms has seen deposit mobilization continuing with its upward trajectory.

Total Deposits hence have grown by 9.6%. While the CASA Ratio stands at a prudent 47.3%, total deposits reached Rs 869.8 bn and the savings deposit portfolio, which yet stands as the largest in the country, is an impressive Rs 363.3 bn 3Q. Growth notched in savings deposits is a commendable 13.9% for the period December 2014 to September 2015. General Manager and CEO N. Vasanthakumar said, "The fact that we were able to increase our loan income and garner low cost deposits that enabled business growth is surely one of the positive dynamics that enabled us to showcase the good results."

He said net interest income growth stands at 62.5%, up from Rs 19.9 bn last year to Rs 32.4 bn this year, while total gross loans grew by 18.4% to Rs 811.4 bn. Return on Assets (before tax) is 1.5% while Return on Equity is 25.7%.

Having amassed a number of internationally prestigious awards including Bank of the Year at the European Global Banking and Finance Awards for two years consecutively and adjudged Sri Lanka's Best Banking Group and Most Sustainable Bank at the World Finance Banking Awards also for two years consecutively, Vasanthakumar points to People's Bank's deeply embedded values and ideals as being the fundamental for its success.

"We have never believed in being complacent," he said. "We've always been a pioneer and because of this, we are on constant quest to raise the bar.

This means that from our service standards, to network reach for greater accessibility, to innovative products and services, People's Bank is always striving to be the best. Into this equation, we have augmented our IT platform, where our 16 million customers are given products and services in real-time.

We recognize that the entire world is moving into a digital age and that means that we must be up in front, leading the way.

State of the art IT initiatives are already being implemented on a sophisticated framework which undoubtedly will soon make People's Bank the Most Digitalised Bank in Sri Lanka."

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