Sri Lankan shares end higher; foreign buying seen in Commercial Bank

Reuters: Sri Lankan shares ended higher on Monday driven by foreign buying in Commercial Bank of Ceylon on hopes of higher profits after the recent policy rate hike announcement by the central bank.

Last week, the central bank raised its key interest rates by 50 basis points to more than two-year high each in a surprise move aimed at curbing stubbornly high credit growth that is adding to concern about inflationary pressures.

Top-listed lender Commercial Bank rose 3.1 percent as foreign investors bought more than 795,000 shares on a net basis.

Overseas investors were net buyers of 428.6 million rupees worth of shares on Monday, mainly due to foreign buying in Commercial Bank. However, they are net sellers of 4.22 billion rupees worth of shares so far this year.

"The margin between the deposit and lending rate is expected to increase after the rate hike. That means banks will have higher profit margins in this quarter," said Danushka Samarasinghe, research head, Softlogic Stockbrokers.

The benchmark Colombo stock index ended up 0.26 percent, or 16.55 points, at 6,410.42. The bourse lost 0.54 percent last week to post its first weekly fall in four.

Stockbrokers said the market is also awaiting an economic policy announcement from Prime Minister Ranil Wickremesinghe, scheduled for this month.

Turnover stood at 898.1 million rupees ($6.16 million), more than this year's daily average of around 726.6 million rupees.

($1 = 145.7500 Sri Lankan rupees) 

(Reporting by Shihar Aneez and Ranga Sirilal; Editing by Sherry Jacob-Phillips)

World Finance names Ceylinco Life as country’s Best Life Insurer

Ceylinco Life has been declared the ‘Best Life Insurer in Sri Lanka’ for a third consecutive year, following an in-depth assessment of key performance indicators by World Finance, the authoritative UK-based international publication.

The magazine’s eminent panel of international experts analysed multiple aspects of sector-specific performance in FY 2015 before naming its country winners for 2016.

Among the areas looked at were average time to underwrite and to issue a policy; how risk exposure is assessed and accommodated; achievements in the 12 months reviewed; how appropriate cover is ensured for new and existing clients; Customer Retention Rate; Average Time in Claim Settlement;New Customer Acquisition Rate; Average Cost per Policy and Net Premium.

“These are indicators that provide an accurate picture of the quality of products and service as well as the operational soundness of a life insurance company,” Ceylinco Life Managing Director and CEO R. Renganathan said. “Such a rigorous examination of performance by independent luminaries is good for any company. We are delighted not only to pass with flying colours, but to be adjudged the best in Sri Lanka for a third year running.”

He said the Word Finance accolade while being an important benchmark for Ceylinco Life, is also a strong endorsement of the strength and stability of the company that will carry weight with existing and prospective policyholders.

Ceylinco Life ended 2015 as Sri Lanka’s No 1 life insurer for 12th successive year, with a characteristically robust performance that generated total income of Rs 19.89 billion, of which premium income accounted for Rs 13.4 billion.
www.dailynews.lk

LOLC Life, LOLC General on sturdy growth momentum

The Insurance arm of the LOLC Group, recorded a satisfactory half-yearly performance for FY2016.

The Life insurance segment posted significant numbers by recording 73% growth in GWP in the first half of 2016 over the corresponding period in FY2015, which is an indicator that the Life Insurance business will most likely end this financial year on a sound note. The company closed first half of FY 2016 with an overall GWP growth of 47% over the previous year, recording Rs. LKR 2,537 Mn in GWP.

The company’s General Insurance business grew by as much as 37% over the previous year’s first half. The company’s Non Motor business grew by 137% over the previous year’s first half result to record LKR 261 Mn. The Motor vehicle insurance business, which contributes the major chunk of revenue for the company, grew by 27% to record LKR 1,441 Mn in the first six months of 2016.

Commenting on the company’s performance, the Chief Operating Officer of LOLC General Insurance Ltd and LOLC Life Assurance Ltd, Nilanga Wickramasinghe, said, “This performance can be attributed to the diversity of our product portfolio and the distribution endeavours through the Financial Services Sector, Personal Lines, Bancassurance, and Takaful Insurance backed by the powerful group synergies accorded by being part of the LOLC financial services platform.”

Kapila Jayawardena, Group Managing Director/Chief Executive Officer (CEO), LOLC Group, commented, “The insurance company has brought together a team of experienced and dynamic insurance professionals who are eager to expand the product and service portfolio of the company while widening its geographical reach. The company can avail of strong group synergies and resources of the LOLC Group. Thus far, the company has evolved well even post-segregation, while maintaining the growth momentum.”

www.dailynews.lk

CTC mulls closing Lankan fag production plants

With a proposed 90% tax in the offing for cigarettes by the government and also the embargo on growing tobacco by 2020, Ceylon Tobacco Company is seriously looking stopping producing cigarettes in Sri Lanka.

Cabinet spokesman Health Minister Dr. Rajitha Senaratne said he will draft a Cabinet paper to increase taxes on cigarettes from the present 67 to 72 percent of purchase price to 90 percent of purchase price. Under a Sri Lankan government proposal, taxes on cigarettes will be increased to the point where they accounted for 90 percent of their purchase price.

The minister said he felt very strongly about this measure, which will benefit the people of Sri Lanka. “All the money raised from these taxes will be directly used for public healthcare services,” he said. This move would make Sri Lankan produced cigarettes the highest taxed item in the world that is being produced by a private company. Currently Sri Lankan cigarette prices are the second highest in Asia.

The move by the government will also deprive farmer families an income of around Rs. 100, 000 per acre by growing tobacco every six months of the year, land used for paddy fields. There are 20,000 families supplying tobacco leaf and over 181,000 dependents from the industry.

A Ceylon Tobacco Company official said they have not been officially informed about this. “However with a tax of this magnitude, it would be more profitable for us to import and sell. Maintaining factories and paying such high tax may affect our bottomline to a great deal.”

The CTC is one of the highest tax payers to the country accounting to Rs. 91.6 billion last year which is 7% of the total tax revenue to the government. In the past decade they had paid Rs. 600 billion as taxes making it the biggest individual tax contributor to the state.

CTC official said that in the event of high local cigarette prices it may result in smuggling depriving the government of legal revenue. It was estimated that State revenue loss due to cigarette smuggling in 2015 was Rs. 9 billion.

People would move to cheaper brands such as beedi which is sold at Rs. 3 as against most sold brand of cigarette of Rs. 38.

Figures also show that only 0.01% of Sri Lanka’s arable land is used for tobacco cultivation and government is not burdened for paying fertilizer subsidy or purchase of crop.

www.dailynews.lk

Seylan Bank keeps up momentum

Despite a somewhat turbulent and challenging business environment, Seylan Bank recorded a strong half yearly performance with Profits after Tax reaching Rs. 1,755 million, for the six months ended 30 June 2016, against the Rs. 1,740 million reported during the corresponding period of 2015.

This performance was aided by healthy growth in core banking activities despite the impact of mark-to-market losses due to an increase in interest rates.

Net Interest income increased from Rs. 5,835 million to Rs. 6,147 million, a 5.34% increase for the six months ended 30 June 2016 resulting from selective growth in advances and effective pricing strategy. The bank’s continuing focus on enhancing fee-based income saw it record a robust growth of 20.21% from Rs. 1,191 million to Rs. 1,432 million during 1H 2016.

Other operating income comprising net gains from trading, gains on financial instruments, gains on foreign exchange and other income decreased by 40.97% from Rs. 1,035 million in 2015 to Rs. 611 million during 1H 2016 mainly as a result of mark- to-market losses on Government Securities due to the upward movement in interest rates. However, the volatility of exchange rates and the increase in foreign trade transactions aided the bank to record substantial growth of 16.21% in net exchange income.

As evident by the containment of growth in total expenses to 7.12% from Rs. 4,365 million to Rs. 4,676 million during 1H 2016, the bank maintained its focus on operating efficiency and cost containment. The bank reported a net credit growth of 7.57%, with net advances growing from Rs. 193 billion to Rs. 208 billion during 1H 2016.

During 1H 2016 the overall deposit base grew from Rs. 225 billion in December 2015 to Rs. 241 billion. The bank’s CASA ratio stood at 34.38% despite the general shift witnessed from low-cost deposits towards higher yielding fixed deposits during the six-month period.

The Gross NPA ratio (net of IIS), which stood at 4.63% as at the end of 1H 2016, has been on a continuous downward trend since 2009 due to the bank’s relentless efforts to achieve high credit quality and effectiveness in recoveries.

The bank’s core capital and total capital adequacy ratio remained strong at 10.93% and 11.33% respectively as at 30 June 2016, as against the statutory minimum. In July 2016, Fitch affirmed the bank’s rating at ‘A-lka’ with a ‘stable’ outlook.

On 5 July 2016, the bank opened the issuance of 30 million unsecured subordinate redeemable debentures to the public at an issue price of Rs. 100 with the option to issue a further 20 million debentures in the event of an oversubscription. It was oversubscribed on the same day and accordingly the allotment was made on 15 July 2016 which will boost its CAR further.

The bank continued its program for modernising and increasing its branch network throughout the country. During the period of six months, the bank has opened eight new branches. As at 30 June 2016, the bank network comprised 166 branches, 193 ATMs and 100 Student Saving Centers.

Overall, as a result of the performance during the six months, the bank’s Earnings Per Share (EPS) stood at Rs. 5.09. The bank recorded a Return (profit before tax) on Average Asset (ROA) of 1.64% and Return on Equity (ROE) of 14.66%. The bank’s Net Asset Value per share as at 30 June 2016 was Rs. 70.49 (Group Rs. 74.01).

The bank also continued its CSR initiatives focusing on education and accelerated its libraries project for underprivileged schools. During the period of six months ended in 2016, 20 more school libraries were opened, taking the overall number of libraries opened under the project to 100 with plans to take this number to 250 in the medium term.

www.ft.lk

Public officers back in the driving seat of new duty free vehicles

The Finance Ministry said yesterday that the Government had decided to reintroduce its previous program with amendments to provide vehicle permits to public officers, officers of state corporations and statutory boards on a concessionary basis.

Minister of Finance Ravi Karunanayake presented the Cabinet paper in this regard on 26 March 2016 and it received Cabinet approval on 16 July 2016. Accordingly, the Industry and Investment Department has issued the Circular No. 01/2016 in this regard.

Public officers and executive officers attached to the state corporations and other statutory boards, doctors and legal officers attached to government service, university vice chancellors, university lecturers and executive grade officers attached to university non-academic staff are entitled to receive vehicle permits under this concessionary basis vehicle permit scheme.

Under the new circular, the period of service completed by individual officers in the state sector will be taken into consideration before concessionary vehicle permits are issued. Accordingly, an applicant should complete more than six years in state service to be eligible to receive a vehicle permit. However, this limit of service in the state sector will differ for the officers of state corporations and statutory boards.

One officer is entitled to only two concessionary vehicle permits.

After claiming the first vehicle permit, the second vehicle permit will be issued 10 years after the purchase of the first concessionary vehicle. In addition to Circular No.01/2016, Public Administration Circular No.22/99 will also be equally effective in this regard and, under this circular, government officers of Executive Grade will be issued permits under the concessionary basis at the time of their retirement.

The face value of each concessionary vehicle permit is $ 30,000. A permit holder is entitled to 50% tax waive of the total tax to be paid for his or her selected vehicle.

The state sector officers, who have already claimed two concessionary vehicle permits or more than that, will not be entitled to the new concessionary vehicle permits scheme.

The Government has issued more than 38,000 vehicle permits to state sector officers under the previous concessionary scheme since 2010. The value of tax waive by issuing concessionary vehicle permits to public officers exceeds Rs. 143 billion.

The circular relevant to this vehicle permit scheme can be downloaded from the official website of the treasury, www.treasury.gov.lk under its Trade and Investment Policy Department tag.

www.ft.lk