Sri Lanka LB Finance March net up 93-pct

ECONOMYNEXT – Sri Lanka’s LB Finance said March 2016 quarter net profit rose 93 percent to Rs1.2 billion from a year ago.

Net interest income rose 8 percent to Rs2.3 billion, with interest income up 11 percent to Rs3.9 billion, while interest expenses fell 15 percent to Rs1.6 billion, a stock exchange statement said.

Fee and commission income rose 19 percent to Rs299 million.

Accounts showed a reversal for loans and other losses of Rs7 million compared with an impairment charge of Rs477 million the year before.

Gold loan auction losses fell 64 percent to Rs3.8 million.

Earnings per share for the quarter were Rs8.76 against Rs4.54 the year before.

In the year ending 31 March 2016, EPS rose to Rs26.84 from Rs15.75 the year before, with net profit up 70 percent to Rs3.7 billion.

Lease rentals receivable and stock out on hire as at 31 March 2016 rose 34 percent to Rs45.1 billion from Rs33.7 billion the year before, while the loan book grew to Rs26.4 billion from Rs22.3 billion.

Deposits rose 17.6 percent to Rs53.4 billion from Rs45.4 billion.

Sri Lankan shares post near 4-month closing high

Reuters: Sri Lankan shares edged up on Monday and hit their highest close in about four months, led by beverage and diversified stocks amid foreign investors' buying.

However, the gains were capped as investors were worried that the island government's move to increase the value added tax (VAT) and impose new taxes effective from May 2 would hit the bottom lines of companies.

The benchmark stock index rose 0.04 percent to 6,594.80, its highest closing level since Jan. 11, and the third session of gains.

The index gained 1.2 percent last week, its fifth straight weekly rise. The 14-day relative strength index ended at 78.277 on Monday, compared with Friday's 78.147, Thomson Reuters data showed. A level of 70 and above indicates the market is overbought.

"Market saw some volatility today as the index is in overbought region, we will see some profit-taking here and there," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Foreign investors, who have sold equities worth 2.85 billion rupees ($19.59 million) so far this year, were net buyers for the third straight session on Monday. They bought a net 27.7 million rupees worth of shares.

Turnover stood at 595.2 million rupees, well below this year's daily average of around 774.9 million rupees.

Shares of Ceylon Tobacco Company Plc rose 0.84 percent, while conglomerate John Keells Holdings Plc gained 0.64 percent. 

($1 = 145.4500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)

Sampath Bank ups 1Q pre-tax profit by 19.4% to Rs. 2.5 b

Sampath Bank, the main entity of the Sampath Group, has registered a pre-tax profit of Rs. 2.5 billion for the period ended 31st March 2016, compared to Rs. 2.1 billion recorded in the corresponding period of 2015, achieving a YoY growth of 19.4%. The post–tax profit of the Bank for the period under review has also improved by 21.5%, from Rs. 1.4 billion in Q1 2015 to Rs. 1.7 billion in Q1 2016.

Sampath Group, which consists of Sampath Bank and four subsidiary companies, also recorded an impressive profit before tax of Rs. 2.7 billion for the 1st quarter 2016, achieving a growth of 15.3% over the previous year’s first quarter pre-tax profit of Rs. 2.3 billion. The Group earned a profit after tax of Rs. 1.8 billion for the period then ended, which reflected a YoY increase of 16.6%.

Amidst challenges such as low liquidity, higher funding cost, lower margins etc. posed by the external market forces, the increase in profitability was mainly due to favourable growth in all core banking income sources such as net interest income, net fee and commission income and other operating income.

Fund based income (FBI)

Continuous shrinking of Net Interest Margins (NIM) adversely impacted on the Net Interest Income (NII) of the banking industry and Sampath Bank was no exception to this trend. Nevertheless, NII of the Bank recorded a remarkable increase of Rs. 616 million or 15.2% during the period under review from Rs. 4,041 million in Q1 2015 to Rs. 4,657 million in Q1 2016, aided by the significant expansion of the fund-base of the Bank since Q1 2015, coupled with prudent fund management strategies adopted by the Bank.

Non fund based income (NFBI)

Net fee and Commission income which mostly comprises of credit related, trade related, credit card related and electronic channel related fee income has increased to Rs. 1,463 million as opposed to Rs. 1,217 million earned for the first three months of the year 2015, reflecting a growth of 20.2%. This growth was derived mainly leveraging on the credit related and trade related segments. Further, it is encouraging to note that Electronic channel offerings have now emerged as new sources of generating non-fund based income. The Bank introduced a number of unique value additions to its card holders which further boosted the popularity of “SampathCards” in the local market.

Depreciation of the Rupee against the US dollar continued throughout the first quarter of 2016. This resulted in the losses recorded on forward exchange contract revaluation. In addition, mark to market losses were sustained on the existing portfolio of Treasury Bills due to increase of market interest rates during the period. The above two issues were the main reasons for the Net Trading Income to report a loss of Rs. 140 million for the period under review.

11.0% growth was recorded in other operating income for the period under review as compared to the corresponding period in 2015. Other operating income earned during the first quarter of 2016 amounted to Rs. 728 million whereas Q1 2015 was only Rs. 655 million. The depreciation of LKR against USD, which boosted the exchange income on revaluation of FCY reserves together with income from currency note operation contributed towards the positive variance in other operating income.

Operating expenses

Operating expenses of the Bank which stood at Rs. 3.0 billion for the first quarter in 2015, increased to Rs. 3.4 billion during the same period in 2016, reflecting a YoY increase of 12.8%. This increase was mainly due to the increase in personnel expenses that resulted from the salary increments given to the staff members coupled with general price increase. However, the Cost to income ratio without VAT and NBT on financial services in Q1 2016 has improved to 50.8% from 53.2% recorded in the first quarter of the previous year. Maintaining the cost-to-income ratio below 55% despite having one of the youngest branch networks in comparison to its closest competitors is an achievement.

Impairment Loss on Loan and Receivables

Impairment charge on loans and receivables for the first quarter of the year 2016 amounted to Rs. 216 million which is an increase of Rs. 187 million as compared to Rs. 29 million impairment charge recorded for the first quarter of the previous year. The increase of collective impairment provision requirement due to growth of the loan book and prudential provisions made against individually significant impaired customers are the main reasons for the said increase in impairment charge.

Business Growth

The year 2016 exposed the Bank to a challenging environment caused by intense competition, high funding cost coupled with the resultant pressure on NIM and low liquidity. Despite these challenges, the Bank’s total asset base grew by 5.8% during the quarter (annualised 23.2%) and stood at Rs. 556 as at 31st March 2016. The gross loans & receivables increased by 5.0% during the quarter (annualised 20.0%) to Rs. 405 billion as at 31st March 2016.The total deposits showed a growth of 6.7% during the quarter (annualised 26.8%) to surpass Rs. 436 billion as at the Balance Sheet date.

Performance Ratios

ROE (after tax) improved to 19.78% as at 31st March 2016 compared to 18.42% recorded as of 31st December 2015 while ROA (before tax) stood unchanged at 1.90% compared to 31st December 2015. The Basic Earnings per share (group) for the first quarter of the year 2016 improved to Rs. 10.69 compared to Rs. 9.16 recorded for the corresponding period of the previous year. This records a growth of 16.7%. Statutory liquid asset ratio (21.14%) was above the mandatory requirement of 20%. Though the Bank’s gross NPL ratio (1.67%) fractionally increased by of 0.03%, compared to 1.64% recorded as at 31st December 2015, this ratio remains as one of the best ratios in the industry.

Other relevant information

During the year, Sampath Bank joined LankaPay Common ATM Switch (CAS) availing Sampath Bank customers to access over 3,000 ATMs. This alliance enables all LankaPay CAS member banks’ customers to make withdrawals and check balance inquiries from Sampath Bank ATMs as well. 

www.ft.lk

Fitch rates Seylan Bank’s debenture at ‘BBB+(lka)(EXP)’

Fitch Ratings has assigned Seylan Bank’s proposed Basel II-compliant subordinated debenture issue of up to Rs 5 bn a National Long-Term Rating of ‘BBB+(lka)(EXP)’.

The debentures will have tenors of five and seven years and carry fixed and floating coupons. The debentures are to be listed on the Colombo Stock Exchange and the bank plans to use the proceeds to fund loan growth, strengthen its Tier 2 capital base and reduce structural maturity mismatches.

The final rating is subject to the receipt of final documentation conforming to information already received.

The proposed subordinated debentures are rated one notch below Seylan Bank’s National Long-Term Rating to reflect the subordination to senior unsecured creditors.

Seylan Bank’s rating reflects Fitch’s view that the government of Sri Lanka (B+/Negative) would provide it extraordinary support in case of need because the regulator has classified it as one of six domestic systemically important banks. Fitch assigns Seylan Bank a lower support-driven rating because it has a smaller market share compared with its peers.

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