Sri Lanka’s HNB to strengthen balance sheet with rights issue

(LBO) – Sri Lanka’s Hatton National Bank is to issue up to 70,082,228 new ordinary shares by way of a rights issue, the company said in a stock exchange filing.

Subject to exchange and shareholder approval, the bank is to issue 55,995,792 ordinary voting shares at 220 rupees each in the ratio of one share for every six shares held.

Under this rights issue, the bank is also issuing 14,086,436 ordinary non-voting shares at 190 rupees each in the ratio of one share for every six.

The bank stated that the number of new shares could increase if any shares are issued to employees of the bank under Employee Share Option Plan.

HNB further said these proceeds will be utilized to strengthen the capital base and balance sheet of the bank and to support the overall business growth of the bank.

The current stated capital of Hatton National Bank is 16,798,244,894 rupees.

Sri Lankan shares close at 11-mth high; foreign buying boosts sentiment

Reuters: Sri Lankan shares closed at a more than 11-month high in heavy trading on Friday as foreign buying for 26 sessions in a row took net inflows into equities to 13.9 billion rupees ($91.39 million) and boosted sentiment.

Foreign investors bought shares worth 708.2 million rupees on a net basis in the session, bringing the year-to-date net equity inflows to 16.4 billion rupees.

The Colombo stock index gained 0.59 percent at 6,610.46, its highest close since May 20. The index added 1.1 percent this week, marking its fifth winning week.

A vote on Thursday in the European Parliament in favour of Sri Lanka gaining a trade concession also brought cheer to the market, traders said.

"Continuous foreign buying and the European Parliament vote helped boost retail investor sentiment. Retail investors bought some shares related to garments," Prashan Fernando, CEO at Acuity Stockbrokers said.

"We believe the market will gain in the next week too."

The index has climbed 10.6 percent in the 21 sessions through Friday, having risen for 18 sessions in that period.

Turnover stood at 1.97 billion rupees, more than double of this year's daily average of 908 million rupees.

Market heavyweight John Keells Holdings gained 1 percent, while garment manufacturers Hayleys Fabric Plc and Teejay Lanka Plc rose 1.8 percent and 2 percent, respectively.

($1 = 152.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Amrutha Gayathri)

EU Parliament rejects motion to deny GSP+ for Sri Lanka

(LBO) – Sri Lanka won the vote in Brussels by 436 against and 119 in favor for the motion to deny GSP plus for Sri Lanka.

A group of EU parliamentarians last week forwarded a motion to deny Sri Lanka access to GSP Plus, citing the slow pace of essential reforms in Sri Lanka.

Foreign Affairs Deputy Minister Dr. Harsha de Silva, who is currently in Brussels, met number of Parliamentarians to lobby EU counterparts on Sri Lanka’s application for GSP Plus.

The European Parliament is made up of 751 members elected in the 28 member states of the enlarged European Union.

The EU is Sri Lanka’s biggest export market, accounting for nearly one-third of Sri Lanka’s global exports and in 2015, total bilateral trade amounted to 4.7 billion euros.

The GSP+ scheme is designed to help developing countries by granting full removal of tariffs on over 66 percent of tariff lines covering a very wide array of products including, for example, textiles and fisheries.

The GSP Regulation sets strict and clear criteria for granting GSP+.

Fitch assigns ‘BBB+(lka)’to DSI Group

Fitch Ratings has assigned DSI Samson Group,a National LongTerm Rating of ‘BBB+(lka)’. The Outlook is Stable.

DSG’s rating reflects leading positions in the domestic rubber tyre and footwear markets, which are supported by its wellknown brand, and an unmatched distribution network of 313 retail and wholesale points and six franchisees.

DSG’s market share also benefits from high tariffs on imports of tyres and footwear. These strengths are counterbalanced by increasing competition from imported footwear products and the weak local currency, which raises the costs of imported raw materials.

DSG is the market leader in the bicycle, motorcycle and three wheeler tyres industry in Sri Lanka, with a 45% export market exposure as of financial year end March 31,2016 (FY16). Furthermore, the company also holds the leading market position in the footwear segment despite competition from imported products.

www.dailynews.lk

New CB rules may boost capital, mergers for small NBFIs - Fitch

New Central Bank regulations to increase minimum core capital levels for all licensed finance companies could spur small companies to improve their capital buffers and may reignite industry consolidation, Fitch Ratings said. 

Fitch believes the new directive is likely to address the need for higher capital buffers for the non-bank financial institutions (NBFI) sector as a whole to ensure financial system stability, given our expectation of a deterioration in asset quality and capitalisation in the sector following aggressive loan book growth in recent years and persistent weak operating conditions. 

The Central Bank directive in February 2017 requiring all licensed finance companies to increase their minimum core capital levels to Rs 2.5 billion by end-2020 in stages from the current Rs 400 million, with the first target of Rs 1 billion to be reached by January 1, 2018. 

Capitalisation for the NBFI sector remains relatively low, with the core capital ratio at around 11.7% at end-September 2016. This level of capitalisation is similar to that of the banking sector, but we feel insufficient, as NBFIs have higher risk appetite than banks.

At end-September 2016, finance companies’ reported six-month NPLs accounted for 5.4% of total advances, compared with the three-month ratio of 2.9% for the banking sector. Fitch estimates that the ratio could be much higher for the finance companies at a three months level.

The new rules follow a previous plan to bring about financial sector consolidation, which did not significantly reduce the number of finance companies. There were 58 NBFIs covered by the “Master Plan for the Consolidation of the Financial Sector” in 2014-2015, some of which merged with larger finance companies or were acquired by banks. The sector currently comprises 46 licensed finance companies, of which the 20 largest ones assets as of end September 2016.

www.dailynews.lk

Corrective actions put economy into stabilisation

Unfavourable weather conditions,sluggish global economic recovery cause economy to grow at a slower rate

The Sri Lankan economy has showed early signs of stabilisation in 2016 in response to corrective actions adopted by the government and the Central Bank.

The Central Bank Economic Review released on Wednesday said unfavourable weather conditions and sluggish global economic recovery caused the economy to grow at a slower rate of 4.4 per cent in 2016 in real terms, in comparison to 4.8 per cent in the previous year, although a steady acceleration in quarterly growth was observed from the second quarter of the year amidst tightened fiscal and monetary policies.

Increased investment expenditure, especially in the construction sector, drove economic growth during the year, while consumption expenditure slowed in response to the policy environment in place.

The financial sector, in the meantime, continued to expand during the year whilst exhibiting resilience amidst challenging market conditions both globally and domestically.

Meanwhile, fiscal operations registered a notable improvement in both revenue and expenditure fronts, resulting in the containment of the overall budget deficit at the envisaged level of 5.4% of Gross Domestic Product (GDP).

In spite of these achievements, central government debt as a percentage of GDP increased, illustrating the narrowing fiscal manoeuvrability within the overall macroeconomic policy framework and highlighting the necessity of continued efforts to sustain the fiscal consolidation process.

In 2016, the Sri Lankan economy grew by 4.4 per cent in real terms, amidst numerous global and domestic challenges.1 Unfavourable weather conditions that prevailed during the year adversely impacted economic activity, primarily in the Agriculture sector.

Services related activities, which constitute 56.5 per cent of real GDP, grew by 4.2 per cent in 2016, on a year-on-year basis, supported by the expansion in financial services, insurance, telecommunications, as well as transportation, and wholesale and retail trade.

Industry related activities, which account for 26.8 per cent of real GDP, recorded a notable growth of 6.7 per cent, year-on-year, driven by the subsectors of construction, and mining and quarrying.

National savings also improved in 2016 as a result of the expansion in net current transfers from the rest of the world while net primary income from the rest of the world declined. Consequently, national savings as a percentage of nominal GDP improved to 28.9 per cent in 2016 compared to 26.0 per cent in 2015.

Sri Lanka’s external sector performance remained subdued in 2016, with foreign exchange outflows exceeding the moderate inflows during the year.

Meanwhile, Sri Lanka’s gross reserve asset position declined to US dollars 6.0 billion, as at end 2016, equivalent to 3.7 months of imports of goods and 3.1 months of imports of goods and services.

The decline in gross official reserves was primarily due to foreign currency debt service

payments, settlement of international foreign currency swap arrangements, repayments under the IMF Standby Arrangement (SBA) facility and the supply of liquidity to the domestic foreign exchange market, particularly in the first half of the year.

www.dailynews.lk

Pan Asia Bank’s Q1 profit rises 16% to Rs. 353 m amid challenges

• Bank expresses confidence in meeting Rs. 10 billion core capital by year’s end 
• Return on equity high around 19% 
• Maintains NIM around 3.80% 
• Interest income rises 36% to Rs. 3.89 billion
• Overall efficiency level improves as cost-to-income falls, return on asset rises 

Sri Lanka’s fastest growing bank, Pan Asia Banking Corporation Plc, reported an after-tax profit of Rs. 353.4 million for its January-March quarter (1Q’17), recording an increase of 16% from the same period last year.

The performance was largely supported by a significant increase in fee and commission income, slightly lower tax liability and the closer tab kept on costs. However, core banking performance became subdued in response to the tighter credit conditions that remained throughout the period.

The bank’s earnings per share was Rs. 3.41 by the end of the 1Q ’17, slightly less than the Rs. 3.91 reported in the same period of 2016 due to the increase in the bank’s equity resulting from the Rs. 2.0 billion rights issue in March 2017 which was promptly oversubscribed.

Meanwhile, the income tax expense for the period came down by 12% to a little under Rs. 160 million for the quarter from a year ago as a result of effective tax management.

What is also notable is the fact that despite the new equity injection, the bank was able to maintain its Return on Equity (RoE) at 18.95%, which is among the highest in the industry, albeit slightly down from the 19.97% reported three months ago.

RoE is the mostly watched performance indicator to gauge the attractiveness of the banking sector and Pan Asia Bank during its last three years has consistently remained an outlier in the industry. This demonstrates the bank’s ability to generate robust performance, reporting higher quarterly earnings year-over-year, thus ensuring consistently higher returns for its shareholders.

In spite of the mounting pressure on banking sector margins as a whole, the bank was largely able to maintain its Net Interest Margin (NIM) at 3.79%, higher than the industry average of around 3.4% although slightly down from its December mark of 3.87%.

Speaking on the bank’s recent performance, the bank’s newly-appointed Director/Chief Executive Officer Nimal Tillekeratne said this performance was a true reflection of the bank’s ability to report consistently higher financial performance even amid challenging conditions.

“I am happy to announce our financial performance for the first quarter because the bank operated under less than favourable conditions such as rising interest rates, a slowdown in demand for new loans and a risk of new addition to non-performing loans.

“Early identification of market developments, management foresight and the proactive and prudent decision-making of the bank enabled us to generate superior financial performance even in tough times.

Now that we have proved that we can deliver even under trying conditions, I am very confident that Pan Asia Bank can continue to deliver exceptional performances exceeding stakeholder expectations,” Tillekeratne said in the earnings release.

Commenting further on the recent issue of rights, he stated that the bank could meet the minimum core capital requirement of Rs. 10 billion by the end of 2017 with the strong earnings forecast for the remainder of the year.

By the end of 31 March 2017, the bank had a core capital base of Rs. 8.7 billion and a total capital base of Rs. 10.5 billion.

Speaking on the future direction of the bank, he said: “We have developed our new three-year strategy with a clear focus on serving the diverse financial needs of Sri Lanka’s growing middle income class and also to uplift the Micro and Small and Medium Enterprises segment that are considered the lifeblood of Sri Lanka’s economy.

“We are currently rolling out these strategies with the guidance of the Board of Directors, an able management team and the efficient execution by all the staff members across our 83 branches spread across all parts of the island and I am confident Pan Asia Bank is now on its path to becoming a formidable mid-sized commercial bank in Sri Lanka.”

Core banking performance

The bank’s core banking performance was impacted by the tightening of monetary and fiscal conditions because higher interest rates and higher indirect taxes dampened the demand for new loans.

Although the interest income rose by a strong 36% to Rs. 3.89 billion from a year ago, the corresponding interest expense grew by an even higher 54% year-on-year (yoy) to Rs. 2.68 billion, resulting in Net Interest Income (NII) of Rs. 1.21 billion, a modest increase of 7% from a year earlier. This is mainly due to the fact that the rise in deposit rates outweighed the rise in lending rates as the bank had to offer attractive interest rates to mobilise deposits.

The low-cost deposit base measured by the Current and Savings Account (CASA) ratio also declined to 19.6% from 20.3% in December as mid-term deposits grew much faster.

Other income acted as an anchor

Net fee and commission income acted as an important anchor to guard against tightened NIIs as such income grew by a strong 63% yoy to Rs. 339.95 million.

This is predominantly due to credit-related fee income and partly due to the fee income from credit cards.

The bank will continue to explore all avenues to grow its fee and commission income base which will serve as a strong buffer against tightening margins.

The bank is now driving its trade finance portfolio with a renewed focus leveraging its unmatched service quality to the importer and exporter fraternity in the country.

Continued improvement in efficiency

As a result of productivity and efficiency enhancement activities pursued during the last four years, the bank was able to bring down its cost-to-income ratio - a key banking sector efficiency indicator - to 54.24% from 56.03% three months ago.

Meanwhile, return on assets also rose to 1.11% from 1.05% in December.

This is a significant achievement given the general increase in the prices of the economy as well as the recent increase in value added tax.

The staff cost rose by a little under 10%, mainly due to the increased salaries and other emoluments while the other expenses rose by 16% due to the generally increase in price levels and indirect taxes.

The bank is now on an aggressive staff rationalisation program which will see excess head office staff being redeployed to the branch network which will be expanded up to 100 within the next 18 months.

Further, the new management remains committed to streamlining the processes and workflow automation to increase efficiency in all processes to enhance cost savings, speed of deliver and service quality to deliver a better customer experience.

Stronger balance sheet

The bank’s total assets remained largely unchanged at Rs. 129.12 billion during the January-March quarter as growth in both loans and deposits slowed down in response to higher interest rates.

Both loans and advances and deposits grew by a little over Rs. 2.0 billion to Rs. 100.5 billion and Rs.93.8 billion respectively.

Meanwhile, both Tier I and Tier II capital adequacy ratios received a boost from the recent rights issue proceeds of Rs. 2.0 billion and by the end of 31 March 2017, the two ratios stood at 11.07% and 13.83% respectively, significantly up from 8.37% and 11.40% in December 2016.

With the strengthening of capital buffers the bank is now well positioned to expand its asset base much faster than before.

The asset quality came under slight pressure due to new additions to Non-Performing Loans (NPL) amid a slowdown in loans. Therefore the gross NPL ratio rose to 5.63% from 4.74% in December but the bank is confident that the ratio can be brought down with the appropriate strategies already in place.

With a fresh direction under its new CEO and the new strategic plan which in now in place, Pan Asia Bank is now well poised for robust growth during the next three years.
www.ft.lk

AIA delivers ‘record new business performance’ for First Quarter 2017

Mark Tucker, AIA’s Group Chief Executive and President, said:

"We are pleased to report that AIA has made an excellent start to the year with record VONB growth of 55 per cent to US$884 million. This is also the highest quarterly VONB result since our IPO in 2010.

"AIA continues to deliver a strong track record of year-on-year growth and our dedicated teams remain highly focused on building a high-quality, sustainable business for the long term. Today’s headline figures reflect our robust operating performance and the consistent execution of our growth strategy over time.

"I have said many times that the powerful and structural economic, social and demographic changes taking place across Asia present an unparalleled opportunity for AIA. The alignment of AIA’s significant competitive advantages developed over its long history in the region with these long-term structural trends means that the Group is exceptionally well-placed to help customers meet their substantial needs for financial protection, long-term savings and private healthcare provision through insurance.

"We were delighted to announce on 13 March that Keng Hooi will succeed me as Group Chief Executive and President upon my retirement from the Group. Keng Hooi has an outstanding track record of operational execution and strong leadership throughout his extensive experience in Asia.

"Since the announcement, Keng Hooi and I have been working very closely together to ensure a smooth and orderly transition and I am pleased to report that this process will be completed ahead of plan. As a result, we have announced today that Keng Hooi will formally assume his new role effective from 1 June 2017. I will remain a director of AIA Group Limited, in a non-executive capacity, from then until 31 August 2017.

"It has been a great privilege to lead AIA and I am enormously proud of the Group’s achievements since IPO. AIA is an extraordinary business and I am highly confident that the Group will continue its success under Keng Hooi’s leadership."

"VONB increased by 55 per cent to US$884 million with strong double-digit growth across the significant majority of our individual markets.

"AIA’s wholly-owned operation in China was our fastest growing business in the first quarter. Our focus on the sustained execution of our differentiated strategy through developing full-time professional agents who provide high-quality advice on comprehensive protection. - AIA
www.island.lk

Sri Lanka's Union Bank continues strong balance sheet growth Q1 2017

The first quarter of 2017 saw the Bank attaining strong Balance Sheet growth, and laid a solid platform for the remaining period of 2017. The Bank showed a strong 95% growth on Results from Operating Activities, recording Rs. 147Mn in comparison to Rs. 75Mn in the previous year, reflecting the successful implementation of the Bank’s strategic initiatives.

This was mainly attributable to the healthy increase in Net Interest Income of 73% despite the challenging Macro-Economic environment. During the period under review, the Bank remained focused on aiding the growth of Net Interest Income through prudent management of the Net Interest Margin coupled with the Total Asset growth. Net Fee and Commission income grew to Rs. 166Mn recording a 43% increase as a result of the successful implementation of the Bank’s long-term strategic plans for fee based products.

A change in the Asset Mix of the Bank brought about a decline in the Net Trading Income as funds were shifted to Interest Earning Assets from Investments in Units. This trade-off in income is a partial contributor to the increase in Net Interest Income.

The Impairment charge for the period increased by Rs.91Mn owing to one particular asset being reported under Non- Performing Assets.

In order to support the strong growth in the Balance Sheet, operating expenses of the Bank increased to Rs. 771 Mn, reporting a 15% growth YoY, in line with the Bank strategic growth and expansion focus along with its investment in Human Capital development.

The Profit before tax grew by a robust 45% to Rs. 167Mn. An increase of 138% in tax expense was experienced as a result of shifting in the assets from investments in tax-free asset classes to higher yielding taxable interest earning asset classes, which caused an increase in the effective tax rate. Profit after tax for the period was Rs. 95Mn.

Total Assets of the Bank grew to Rs. 101Bn, a 8% growth YTD. Contributing to the same, the Loans and Receivables of the Bank grew to Rs. 61Bn, a 10% growth YTD. Customer Deposits grew by 10% to Rs. 57Bn in the quarter. 

The maintenance of strong capital ratios continues to be a management priority. The Bank’s Total Capital Adequacy Ratio at March 31, 2017 was 21.49% well above regulatory requirements. 

The Group comprising UBC, National Asset Management Ltd and UB Finance Company Limited, recorded a healthy increase in its Net Interest Income by 61% to Rs. 922Mn YoY. Net Fee and Commission Income grew by 94% to Rs. 204Mn YoY. Group Profit after tax for the period was Rs. 120Mn.

Operational Performance 

Continuing on its envisioned growth trajectory, Union Bank focused its strategic investments on expansion and enhancement of banking services in 2017. 

In step with its accelerated growth plans, the Bank continued to implement its focused channel expansion strategy within the first quarter of 2017; reinforcing its presence in strategic localities while strengthening its position as a full—fledged commercial bank. Within the first quarter of 2017, Union Bank relocated two branches in Pettah and Balangoda in a bid to offer a more convenient banking experience to the clients in these regions with enhanced banking services offered at more spacious, ambient locations. Three branches in Negombo, Marawila and Batticaloa were remodeled with a new outlook and an enhanced ambience; in line with the Bank’s strategic focus to deliver a redefined banking experience to its clients. 

Investing further in its reach and expansion initiatives, the Bank extended its ATM network to 121 within the period under review. 

As a result of its intense efforts to expand the Retail lending portfolio, Union Bank marked a milestone achievement, with the Bank’s Personal Loans portfolio crossing the Rs.4Bn threshold as of 31st March 2017. 

Continuing the Bank’s focus on building Current and Savings balances for greater profitability, Union Bank launched a special Avurudu promotion named ‘Union Bank Kalin Avurudu Ganudenu’ in the month of March. Union Bank ‘Kalin Avurudu Ganudenu’, is an early-bird offer of exciting gifts for savings in a bid to encourage customers to save more during the festive season. 

Adding further value to the banking experience for Union Bank account holders, the Bank offered a range of attractive savings and discounts on the Union Bank Visa International Debit Shopping Card in time for the Avurudu season. Union Bank Debit Card offered up to 30% savings at popular shopping and retail outlets during the months of March and April 2017. 

Adding further traction to its existing corporate banking relationships, Union Bank continued to extend its full-fledged cash management solution- Union Bank Biz Direct to leading corporates in the country; becoming the only local bank to be able to provide large scale cash management and payment solutions in the most cost-effective and efficient manner. The Bank hopes to further capitalise on this unique solution, in order to deliver a differentiated banking experience to its existing and potential corporate clients. 

Strengthening the commitment towards its SME clientele, Union Bank hosted existing and potential SME banking clients of the Bank to an evening of networking and fellowship in the first quarter of 2017. The event held in Colombo, was well received by the Bank’s SME clientele. 

Union Bank continued to invest in its employee development and commenced the year 2017 with the launch of SAP Success Factors, an employee performance management system. The state-of-the-art performance management technology is a significant investment made by the Bank in the direction of strengthening the Bank’s performance culture while encouraging staff to aspire for career progression. 

In a bid to further strengthen its position as a responsible corporate citizen, within the first quarter of 2017 Union Bank revived its strategic Corporate Social Responsibility (CSR) policy with a focus on children and youth. The Bank will continue to invest in its focused CSR initiatives for the benefit of the selected segment, within the year 2017 and beyond. 

The Union Bank’s brand was also recognized once again by Brand Finance Lanka as one of the top 100 National brands in the country moving up 6 positions to the 59th position and also reflecting a further improvement in its rating to A- from its previous rating of BB. 

The Bank was once again the first in the industry to release its Annual Report for the year 2016. Union Bank’s Annual Report 2016 was presented in February 2017, under the theme ‘Towards a Bold Leap’ which signifies the Bank’s envisioned growth plan: to achieve a bold leap of success in the coming year. 

Commenting on the Bank’s performance for the first quarter of 2017, Director/Chief Executive Officer of Union Bank, Mr. Indrajit Wickramasinghe stated, “The Bank has successfully withstood a challenging first quarter. With a strong balance sheet, core income and Profit before tax growth, Union Bank will continue to invest and build on this to deliver on its focused business strategy”.

- Union bank

Sri Lanka plans sovereign bond by June; seven lead managers

ECONOMYNEXT - Sri Lanka is planning to launch a sovereign bond by June, armed for which seven lead managers including two Chinese have been appointed, Finance Minister Ravi Karunanayake said.

Citicorp, HSBC, Deutsche Bank, Standard Chartered, Morgan Stanley and two Chinese lenders have been appointed to manage the bond, he said.

Sri Lanka may go to the market by late May armed with a renewed deal with the International Monetary Fund, for which talks are in progress.

Sri Lanka has said it is hoping to raise up to $1.5 billion through the bond sale this year. Minister Karunanayake said Sri Lanka would seek longer-term funding to lengthen the maturity period.

Sri Lanka has earlier sold 5- and 10-year bonds.

A syndicated loan is also in the works, which may net about $900 million to a billion US dollars, where $450 million in core funding has already been committed.

Minister Karunanayake said with sovereign bond proceeds, a syndicated loan, of a Hambantota port deal with China Sri Lanka's foreign reserves may reach $10 billion by the end of the year.

Sri Lankan shares hit near 7-mth closing high on foreign buying

Reuters: Sri Lankan shares closed at a near seven-month high in heavy trading on Thursday as foreign buying for 25 sessions in a row took net inflows into equities to 13.1 billion rupees ($86.1 million) and boosted sentiment.

Foreign investors bought shares worth 810 million rupees on a net basis in the session, bringing the year-to-date net equity inflows to 14.7 billion rupees.

The Colombo stock index gained 0.85 percent at 6,571.65, its highest close since Oct.7.

The index has climbed 10 percent in the 20 sessions through Thursday, having risen for 17 sessions in that period.

It added 2.1 percent last week, marking its fourth week of gains.

"Foreign buying is now spreading to some other counters from John Keells. Foreigners see value in these stocks and local investors have been waiting for investor confidence," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Turnover stood at 1.84 billion rupees, more than double of this year's daily average of 894.2 million rupees.

Market heavyweight John Keells Holdings gained 1.8 percent, while top lender Commercial Bank of Ceylon rose 1.9 percent. 

($1 = 152.1000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Amrutha Gayathri)

Laugfs Wegapitiya keen to up Pan Asia Bank stake after Rs. 507 m buy of 6% stake

Business leader and Laugfs Holdings Chairman W.K.H. Wegapitiya is keen to further increase the stake in Pan Asia Bank Plc, in which he bought a 6% shareholding on Tuesday for Rs. 500 million.

Under his personal account, Wegapitiya acquired 25.36 million Pan Asia Bank shares at Rs. 20 each in a deal worth Rs, 507.2 million.

In total PABC saw 27.38 million shares traded for Rs. 547 million. The seller was longstanding shareholder and former Chairman Nimal Perera who last month broke ranks with PABC’s controlling shareholder and one time partner Nimal Perera.

“The investment in PABC is strategic and we hope to increase the stake gradually,” Wegapitiya told the Daily FT following Tuesday’s purchase which Dhammika Perera too has been supportive. As a practice, Perera offers Board seat to outside investors who take up a sizeable stake in his companies and if Laugfs goes up to the regulator-permitted 10% level, an invitation to serve on PABC Board is likely.

“Given Laugfs Holdings wide range of interests, we can add value to PABC. I see a lot of synergies going forward,” added Wegapitiya.

Laugfs has growing interests in LPG (both here and in the region), retail, industrial/manufacturing, leisure, power and energy, logistics, services, real estate and property.

Wegapitiya said Laugfs has of late been scouting for opportunities in the financial services sector given the synergies as well as the potential to add value. Previously it had a stake in a finance company but exited given the regulatory and operating environment then. In 2014/15 financial year, 86% stake in Laughs Capital Ltd., was sold to Citizen Development Bank and Finance for Rs. 425 million.
www.ft.lk

Seylan Bank ups 1Q pre-tax profit by 20% to Rs. 866 m

Seylan Bank made a steady start in 2017 by posting impressive results for Q1 with a Profit After Tax of Rs. 866 million in the backdrop of uncertain market conditions.

The bank increased its Net Interest Income and recorded a robust growth of 20.97% in spite of the mounting pressure on the margins due to rising cost of funds.

However Net Interest Margin contracted from 4.19% in 2016 to 3.92% in 1Q 2017 due to cost of deposits increasing at a faster rate than the re-pricing of loans.

Net fee and commission income witnessed a healthy growth of 24.94% to reach Rs. 869 million in 1Q 2017 as compared to Rs. 695 million for the comparative period. This was mainly attributed from core banking related business such as card-related income, trade finance related fee income and fees from guarantees, remittances, etc. The bank will continue to look towards enhancing its fee-based income from products such as debit and credit cards and trade-related products.

Other operating income comprising net gains from trading, gains from financial investments, gains on foreign exchange and other income reported a net gain of Rs. 299 million compared to loss of Rs. 68 million in 1Q 2016.

Impairment charges for loans and other losses for the period was a charge of Rs. 346 million as compared to a charge of Rs. 84 million in Q1 2016. Individual impairment charges of Rs. 253 million represent specific provisions made for few credit exposures. The bank has a stringent recovery process in place to minimise any significant losses that may arise from such loan facilities.

Total expenses recorded an increase of 19.03% from 2,273 million in the 1Q of the previous year to Rs. 2,705 million during the period under review. Expenses growth was witnessed by investments made in employees, technology, upgrading and refurbishment of branches etc.

Cost efficiency and productivity has taken a predominant role in the bank’s day-to-day operations. The bank continues to focus on cost initiatives coupled with implementation of lean concepts and exploring ways of inculcating a culture of working smarter across all the functions by the employees.

The bank’s loans and advances portfolio recorded a marginal growth of 2.76% to 242,531 million during the 1Q 2017 amidst rising interest rates. The growth in credit was driven primarily by term loans, overdrafts and credit cards.

The overall deposit base recorded a marginal growth of 0.24% from Rs. 273,456 million by the corresponding quarter last year to 274,120 million by 1Q 2017 and a shift from low cost CASA to term deposits was noted which is partly due to increase in interest rates.

As a result the bank’s CASA ratio (Current and Savings) stood at 31.23% and total time deposits increased from 67.48% by end of year 2016 to 68.77% as at 31 March of the total deposits base. An attractive Avurudu campaign were launched for ‘Avurudu Thanpathu’ deposits and Tikiri Account holders to grow the existing balances and acquire new customers.

As a result of the noteworthy financial performance during the first quarter, the bank’s Earnings per Share (EPS) grew by 20.2% to Rs. 2.51. The bank recorded a Return on Average Assets (ROAA) of 1.39% and Return on Equity (ROE) of 12.37%. The bank’s Net Asset Value per share as at 31 March was Rs. 79.74 (Group Rs. 83.12).

Seylan Bank remained soundly capitalised, with the key capital adequacy ratios well above the regulatory minimum requirements and recorded 10.39% as the core capital adequacy ratio and 12.63% as the total capital adequacy ratio.

The bank recognises education as one of the building blocks of the nation and considers it as a priority area for its CSR activities. Under the ‘Seylan Pahasara’ project the bank opened eight libraries during the first quarter which add up to total of 128 libraries in rural areas, especially in under privileged schools with the aim of nurturing young minds and to educate them so that they contribute to the nation’s development.

www.ft.lk

Asia Capital, Japan’s Belluna embark on USD 54Mn venture

(LBO) – Japanese firm Belluna Co. Ltd and Asia Capital PLC celebrated the groundbreaking ceremony of their joint venture on a US 54 million dollar, four-star hotel project in Colombo’s Marine Drive, Tuesday.

“Belluna Co.’s off-shore expansion focuses strongly on emerging markets and we are pleased to be a part of Sri Lanka’s development drive,’ said Hiroshi Yasuno, managing director of Belluna Co. Ltd.

“Our partnership with Asia Capital PLC at present encompasses five different projects. With Sri Lanka’s tourism and real estate sectors growing exponentially, we foresee many more such high value investments in the years ahead.”

The 300 room, four-star business hotel on Marine Drive will offer guests a choice of deluxe and superior rooms, as well as spacious suites with features such as panoramic views of the Indian Ocean and of Colombo’s city skyline.

“The prime location of the hotel is ideal for the new-age business traveller who seeks convenient access to Colombo’s Central Business District, coupled with the contemporary comforts of superior design and amenities,” Stefan Abeyesinhe, group chief executive officer/ director of Asia Capital said.

“As business and leisure converge increasing, guests will find the location of the hotel a brief stroll away from the city’s vibrant restaurants, shopping areas, sight-seeing and more.”

In addition to this 300 room hotel, Belluna Co. Ltd, Japan and Asia Capital PLC have thus far collaborated on a series of luxury development projects in Sri Lanka and beyond.

These projects includes a 50 villa ultra-luxurious resort in Galle, for which the foundation stone was laid in October 2016; the ‘447 Luna Tower’ project – a 190 unit exclusive apartment complex being built in the heart of the city at Union Place and a further multi-development project in Colombo which is in the planning stages.

Beyond the shores of Sri Lanka, Belluna Co. and Asia Capital are currently in partnership with the leading global hospitality company, Marriot International, Inc. and will open the ‘The Westin Maldives Miriandhoo Resort’, a 70-key luxury property focusing on wellness tourism in the near future.

Among those present at the event were chief guest Minister of special assignments, Dr. Sarath Amunugama, the Japanese Ambassador to Sri Lanka, Kenichi Suganuma.

Sri Lanka's Overseas Realty profits up on forex gains, fair value

ECONOMYNEXT - Sri Lanka's Overseas Realty Ceylon Plc, owners of the Echelon Towers building in the capital Colombo, said profits rose 21 percent to 881 million rupees in the March 2017 quarter from a year earlier.

The group's rental income went up 6 percent to 503 million rupees, and direct operating expenses rose 6 percent to 571 million rupees in the quarter.

Of the profits, 316 million rupees were from fair value gains. The firm also reported 315 million rupees of fair value gains last year.

Profits were boosted by a forex gain of 139 million rupees, sharply up from half a million rupees a year earlier.

The firm reported profits of 46 cents per share without fair value gains and 72 cents with fair value gains.

The stock closed at 20.30 rupees on Monday.

Sri Lanka to sell US$3.0bn in dollar bonds

ECONOMYNEXT - Sri Lanka has raised a limit on selling dollar denominated Sri Lanka Development Bonds to 3.0 billion in 2017, the government said.

The cabinet of ministers had approved a proposal to more dollar debt, by Finance Minister Ravi Karunanayake.

The move was due to 'low liquidity' in Treasury bills and bonds, a statement said.

Dollar denominated SLDB's are sold to mainly to domestic investors who are permitted to have foreign currency accounts, including banks and exporters.

Sri Lanka Treasuries yields drop

ECONOMYNEXT - Sri Lanka's Treasuries yields dropped at Wednesday's auction with the 12-month yield falling 09 basis points to 11.02 percent, data from the debt office showed.

The 6-month yield dropped 09 basis points to 10.70 percent.

All bids for 3-month bills were rejected.

The debt office sold 14.5 billion rupees of 6-month bills and 15.0 billion in 12 month bills.

Sri Lankan shares end higher as foreign investors pick blue chips

Reuters: Sri Lankan shares closed higher on Wednesday after two straight sessions of losses as foreign investors actively bought into blue chips, with the net stock buys touching nearly 15 billion rupees so far in the year.

Foreign investors bought shares for a 24th straight session, buying a net 318.6 million rupees ($2.10 million) worth of stocks on Wednesday.

They have snapped up a net 12.4 billion rupees worth equities during the period and a net 14.9 billion rupees worth year-to-date.

The Colombo stock index ended 0.36 percent firmer at 6,516.26.

The index has climbed 9.1 percent in the 19 sessions through Wednesday, having risen for 16 sessions in that period.

It added 2.1 percent last week, marking its fourth week of gains.

"Foreigners are very active and buying aggressively, while local investors are cautiously waiting to buy," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Turnover stood at 1.44 billion rupees, higher than this year's daily average of 882 million rupees.

Market heavyweight John Keells Holdings gained 1.1 percent, while Ceylon Tobacco Company rose 0.6 percent.

($1 = 151.9000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan shares edge down on profit taking, foreign-buying caps fall

Reuters: Sri Lankan shares edged down for a second day on Tuesday as investors took profit after steady gains that lifted the index to a six-and-a-half-month high last week, although foreign buying for a twenty-third straight session capped the decline.

The Colombo stock index ended 0.2 percent weaker at 6,492.77, moving further away from its highest close since Oct. 11 hit on Friday. It has climbed 9.4 percent in the 16 sessions through Friday, having risen for 15 sessions in that period.

The index added 2.1 percent last week, marking its fourth week of gains.

"This is profit taking as the index went up by almost 500 points early this month. But foreign investors are still on the buying side," said Prashan Fernando, CEO at Acuity Stockbrokers.

Foreign investors bought 204.3 million rupees worth of equities on a net basis and have been net buyers in the last 23 sessions, acquiring equities worth a net 12.1 billion rupees ($79.74 million).

The year-to-date net foreign inflow is 14.6 billion rupees.

Turnover stood at 986.6 million rupees, higher than this year's daily average of 874.6 million rupees.

Market heavyweight John Keells Holdings lost 1.3 percent, while top private lender Commercial Bank of Ceylon fell 0.3 percent, dragging the overall index.

($1 = 151.7500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lanka's IOC unit keeps economy oiled

ECONOMYNEXT - Lanka IOC, a unit of Indian Oil Corporation is maintaining deliveries to its network of fuel stations, a top official said as pumps ran dry in distributors of state-run Ceylon Petroleum Corporation amid a strike.

Lanka IOC owns operates about a third of the retail fuel market in the country, after a monopoly of the CPC was broken in a privatization drive, vastly improving the quality of fuel and fuel stations.

A common user facility Ceylon Petroleum Storage Terminals, in which Lanka IOC, which operates in Colombo has also been hit by strike action.

An LIOC official said the firm was transporting fuel from a tank farm in Trincomalee in the north east of the country.

Unions are opposing a joint development of remaining tanks in Trincomalee port, which they say is further privatization of state assets.

A strike leader claimed that reduced fuel distribution would boost the economy.

Strike leaders who have had links to Sri Lanka Freedom Party and the Janatha Vimukthi Peramuna have opposed privatization, and have wanted them kept under the control of the elected ruling class ensuring that the SOEs like Ceylon Petroleum Corporation is overstaffed and rife in procurement corruption.

Sri Lankan shares fall from six-month high on profit taking

Reuters: Sri Lankan shares fell on profit taking on Monday after reaching a six-month closing high and gaining 9.4 percent in the previous 16 session as foreign investors bought risky assets.

The Colombo stock index ended 0.45 percent weaker at 6,505.95, from its highest close since Oct. 11 hit in the previous session. It has climbed 9.4 percent in the 16 sessions through Friday, having risen for 15 sessions in that period.

The index added 2.1 percent last week, marking its fourth week of gains.

"This is a typical settling in market. Foreign focus has slightly changed ... but foreign buying is continuing," said Hussain Gani, deputy CEO of Softlogic Stockbrokers.

Foreign investors have been net buyers in the last 22 sessions, acquiring equities worth a net 123.3 million rupees ($811,184). The year-to-date net foreign inflow is 14.4 billion rupees.

Turnover was moderate on Monday at 530.3 million rupees, less than of this year's daily average of 873.1 million rupees.

Market heavyweight John Keells Holdings lost 0.9 percent, while top private lender Commercial Bank of Ceylon fell 1.3 percent, dragging the overall index.

($1 = 152.0000 Sri Lankan rupees) 

(Reporting by Shihar Aneez, editing by Larry King)

Nestle posts record profit in 2016, pays 80-rupee dividend per share

Nestle Lanka PLC, one of the highest dividend payers quoted on the Colombo Stock Exchange has posted an all time high profit after tax of nearly Rs. 4.39 billion, up from Rs. 4.12 billion the previous year, and the directors have proposed a final dividend of Rs. 40 per share on top of the Rs. 40 interim already paid.

Analyst note that Nestle is dominantly owned by its Swiss principal, Nestle S.A. owning 90.82 percent of the Lankan unit. All other shareholders including, some foreign funds, own less than 1%. But there are over 5,300 shareholders on the register, the majority (4,848) owning up to a thousand shares each.

The Nestle share traded between Rs. 1,903.30 and Rs. 2,445 in 2016 closing at Rs. 2,001.90 on Dec. 31.

The company’s chairman, Mr. Suresh Narayanan said in the recently release annual report that "despite a very difficult year," Nestle had delivered steady results and healthy returns to its shareholders as a result of "a strategic combination of agility, consumer centricity, innovations and focus on lean value stream."

Noting that the company had been here for over 110 years, and has been rated the top Food and Beverage Company in LMD’s Most Respected Entities for 2016, he promised that they would leverage their global expertise and local know-how to innovate and renovate their products.

The company pumped over six billion rupees into the rural economy during the year under review paying Rs. 3.8 billion to 21,000 local dairy farmers for their milk and Rs. 2.3 billion to nearly 6,000 coconut growers for fresh coconuts.

Nestle has been exporting coconut milk powder processed at it Kurunegala factory since 1986. The product manufactured from 80 million fresh high quality coconuts annually is now exported to over 50 countries globally making Nestle Lanka one of the largest coconut milk powder exporters in the world.

The company’s Managing Director Shivani Hegde said that despite challenges including volatile market conditions and significant uncertainties they were able to grow their business and market share across most categories.

She said that they have invested Rs. 500 million in a new state-of- the-art ultra heat treated milk plant at their factory and continues to invest in dairy farmers and coconut growers in the rural economy.

The Nestle product portfolio includes Nestomalt, Milo, Nespray, Maggi, Nescafe, Milkmaid, a range of breakfast cereals and many more.

The directors of the company are Messrs. Suresh Narayanan, Ms. Shivani Hegde, Jagdish Kumar Singla, Shobinder Duggal, Mahen Dayananda and Ranjan Seevaratnam.

Sri Lankan shares hit 6-mth closing high on foreign buying in Keells

Reuters: Sri Lankan shares gained on Friday to hit a more than six-month closing high on foreign buying in market heavyweight John Keells Holdings, helping boost the overall sentiment.

Foreign investors net bought equities worth 1.35 billion rupees ($8.88 million) on Friday, extending the week's net foreign buying to 6.56 billion rupees.

Foreign investors have been net buyers for the last 21 sessions, acquiring equities worth a net 11.77 billion, taking the year-to-date net foreign inflow into equities to 14.27 billion rupees.

The Colombo stock index ended 0.5 percent firmer at 6,535.54, its highest close since Oct. 11. It has climbed 9.4 percent in the 16 sessions through Friday, having risen for 15 sessions in that period.

The index added 2.1 percent on the week, marking its fourth week of gains.

"Foreign investors see extremely attractive valuation in the blue chips and growing earnings. They also see some political stability and stabilisation of the economy," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"But local investors are still waiting for some kind of strong direction by the government. The bullish run will prevail in the near future with local investors also starting to buy into equities."

Stockbrokers also said the market was also encouraged by comments made by President Maithripala Sirisena on making the government effective, as reported in the local media.

Turnover stood at 3.27 billion rupees ($21.51 million), more than three times of this year's daily average of 877.8 million rupees.

John Keells Holdings, which accounted for 81 percent of the day's turnover, jumped 2.2 percent, while top lender Commercial bank of Ceylon rose 1.7 percent.

($1 = 152.0000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares hit more than 6-mth closing high

Reuters - Sri Lankan shares hit a more than six-month closing high on Thursday as retail investors too joined a market rally led by heavy foreign buying over the last 20 sessions.

Foreign investors net bought 697.5 million rupees worth equities on Thursday, after buying a net 4.32 billion rupees ($28.42 million) worth of shares on Wednesday, the highest since May 9, 2014, exchange data showed.

Foreign investors have bought equities worth a net 10.42 billion in 20 straight sessions, taking the year-to-date net foreign inflow into equities to 12.9 billion rupees.

On Thursday, the Colombo stock index ended 0.9 percent firmer at 6,505.28, its highest close since Oct. 12.

The index has climbed 8.9 percent in the 15 sessions up to Thursday, having risen for 14 outs of 15 sessions so far.

"Foreigners are buying in large quantities and we saw some retail investors also buying stocks in a gradual manner," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

"The bullish run will prevail if the central bank can maintain the interest rate at the current level."

The central bank last month raised the key policy rates by 25 basis points.

Turnover stood at 1.44 billion rupees ($9.48 million), more than this year's daily average of 863.7 million rupees.

Large cap Nestle Lanka PLC jumped 3.8 percent, while top mobile phone operator Dialog Axiata closed 3.5 percent firmer.

($1 = 151.9500 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lanka's Dialog Telecom, customers pay Rs317bn to state

ECONOMYNEXT - Sri Lanka's Dialog Telecom paid income taxes and levies of 31.7 billion rupees to the state, on net revenues of 86.7 billion rupees, data published by the firm said.

The firm itself paid 10.7 billion rupees in fees and levies to the government Dialog Chief Hans Wijayasuriya told shareholders in the annual report.

Dialog pays income taxes at a 2 percent of revenue under a long term deal with the Board of Investment concession, which can be a high rate of taxation in a low margin business or a low rate in a high margin business.

Telecom firms also pay frequency fees to the Telecom regulator.

The group reported 1.5 billion rupees of corporate tax and pre-tax profits of 10.5 billion rupees, up from 6.7 billion rupees a year earlier. The core telecom firm reported pre-tax profits of 11.9 billion rupees.

Turnover taxes of 21 billion rupees on revenues of 86.7 billion rupees indicates that telecom users pay around 24 percent in turnover taxes in a country with maximum 15 percent value added tax rate.

Sri Lanka's current administration ratecheted up taxes on telecom firms in what was called 'revenge taxes' undermining the country's standing as a safe destination for investment.

Sri Lanka's telecom sector became a tax cash cow for the government following de-regulation and privatization of the sector under then Telecom Minister Mangala Samaraweera.

Samaraweera broke a state monopoly in fixed services and licenses more mobile players. Telecom privatization ended 10-year waiting lists, as well as low call connection rates in a congested network.

Prices initially spiked amid tariff rebalancing involving slashing of global termination fees, and fell amid increased competition later.

Indra Silva sells 3.5% COMBank stake for Rs. 4.3 b; foreigners buy

* Foreign net inflow tops Rs. 12 b year-to-date with Rs. 10 b coming in the past 19 market days

High networth investor and Indra Traders Chairman Indra Silva yesterday sold 3.5% stake in Commercial Bank, the largest non-state entity, for Rs. 4.3 billion, with several institutional foreign investors collecting quantities.

Deals on 29.7 million shares of COMBank worth Rs. 4.3 billion were done at the Colombo stock market yesterday, boosting its turnover to Rs. 5.17 billion, the highest since 8 December and more than three times this year’s daily average of Rs. 863.7 million.

Net foreign buying yesterday was the highest since 9 May 2014, and boosted the year-to-date inflow to Rs. 12.22 billion. Of that nearly Rs. 10 billion had come within the past 19 consecutive market days. COMBank shares closed at Rs. 139.70, up Rs. 4.40 or 3.25%.

Prior to yesterday, Silva was the largest individual shareholder and second largest of COMBank with a 9.91% stake.

Analysts believe Silva sold partly to book profit as well as reinvest in the 1 for 10 Rights Issue of COMBank at Rs. 113.60 each (Voting share).

The XR date of COMBank shares is 22 May with the last date for acceptance and payments being 12 June. Silva will need only Rs. 940 million to fully subscribe for his quota of Rights. Overall positive sentiments yesterday boosted the All Share Index by 1%, helping to close at a level, the highest since 21 October. The market has risen in 13 sessions out of 14. The index has climbed 7.9% in the 14 sessions up to Wednesday.

“Renewed foreign buying interest is coming in. But still we do not see local investors except for a few retail investors,” Acuity Stockbrokers CEO Prashan Fernando was quoted as saying by Reuters.

NDB Equities said both ASPI and S&P SL20 closed in green due to price gains in counters such as John Keells Holdings, Commercial Bank and Sampath Bank.

It said crossings were witnessed in Commercial Bank, John Keells Holdings and Sanasa Development Bank, accounting for 84.5% of turnover.

Mixed interest was observed in Tokyo Cement Company nonvoting and Sampath Bank while retail interest was noted in Teejay Lanka.

Meanwhile, foreigners remained active, closing as net buyers mainly due to foreign purchases in Commercial Bank. Total foreign purchases accounted for 90.9% of turnover.

The Banks, Finance and Insurance sector was the top contributor to the market turnover (due to Commercial Bank and Sampath Bank) whilst the sector index gained 1.48%. The share price of Sampath Bank increased by Rs. 9.60 (3.69%) to close at Rs. 269.90. The Telecommunications sector was the second highest contributor to the market turnover (due to Dialog Axiata) whilst the sector index increased by 1.33%. The share price of Dialog Axiata gained Rs. 0.10 (0.87%) to close at Rs. 11.60.

John Keells Holdings and Tokyo Cement Company nonvoting were also included amongst the top turnover contributors. The share price of John Keells Holdings moved up by Rs. 3.00 (1.98%) to close at Rs. 154.70. The share price of Tokyo Cement Company nonvoting recorded a gain of Rs. 0.90 (1.53%) to close at Rs. 59.90.

SC Securities said Vallibel One gained by 7.56% to Rs. 18.50 and LOLC by 4% to Rs. 76.80. “Out of the 222 counters traded, 27 companies declined while 145 companies closed higher,” it added.

Continuing its trailblazing performance, Commercial Bank in 2016 reported profit before income tax of Rs. 20.051 billion, marking the end of a spectacular year in which it made history as the first private bank in Sri Lanka to surpass a trillion rupees in assets. Loan book and deposits both grew by more than Rs. 100 billion in 2016.

Commercial Bank will be raising Rs. 10 billion via its Rights Issue to boost its Tier 1 Capital and facilitate future business growth of the bank.
www.ft.lk

Sri Lanka foreign reserves fall to 7-year low in March

Click here to read the Full Report                                                                                                                                                     (LBO) – Sri Lanka’s external reserves have fallen to a 6.9 year low after country’s reserves dropped almost 9 percent to 5.12 billion US dollars in March 2017, a research note showed. Central Bank has purchased 192.23 million dollars of foreign exchange from commercial banks at market rates in March while selling just 13 million dollars in the month.
Foreign currency reserves dipped 11 percent to 4.16 billion US dollars and reserves in Gold were 0.89 billion US dollars.

Central Bank’s Treasury bill holdings were up from 211.32 billion rupees in February to 233.32 billion rupees in March.

First Capital said in a research note that the sudden increase in the market liquidity towards the latter part of the month and renewed foreign and local buying interest resulted in yields dipping by 10-25bps specifically in the 2 year to 15 year bonds.

“Amidst the increasing activity, some selling pressure was observed during the last week of the month creating an overall net foreign outflow of 0.42 billion rupees in March 2017.”

“In spite of mid-long tenure yields dipping, a jump in the short tenure was observed.”

During the year up to 12 April 2017, Sri Lanka rupee has depreciated against the US dollar by 1.2 percent.

First Capital Holdings further highlighted that the money market continued to stay in deficit due to heavy foreign debt repayments.

Sri Lankan shares up 1 pct as foreign buying hits near 3-yr high

Reuters: Sri Lankan shares rose more than one percent to end at a six-month high on Wednesday as foreign investors increased the pace of stock purchases, with the net single-day inflow hitting its highest in nearly three years.

Foreign investors net bought shares worth 4.32 billion rupees ($28.42 million), led by buying in top lender Commercial bank of Ceylon on Wednesday, the highest since May 9, 2014, exchange data showed.

Commercial bank of Ceylon jumped 3.2 percent and accounted for about 84 percent of the day's turnover.

Overseas investors have bought equities worth a net 9.72 billion in 19 straight sessions, taking the year-to-date net foreign inflow into equities to 12.22 billion rupees.

The Colombo stock index ended 1.01 percent firmer at 6,446.80, its highest close since Oct. 21. The market his risen in 13 sessions out of 14.

The index has climbed 7.9 percent in the 14 sessions up to Wednesday.

"Renewed foreign buying interest is coming in. But still, we do not see local investors, except for a few retail investors," said Prashan Fernando, CEO at Acuity Stockbrokers.

Sri Lanka is in the process of raising up to $1.5 billion through sovereign bonds in the near future.

Turnover stood at 5.17 billion rupees ($34.01 million), the highest since Dec. 8 and more than three times this year's daily average of 863.7 million rupees.

Conglomerate John Keells Holdings Plc rose 1.1 percent, while private listed lender Sampath bank posted 3.7 percent growth on the day.

($1 = 152.0000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Vyas Mohan)

Sri Lanka Resus Energy buys firm with hydropower plant license

ECONOMYNEXT – Resus Energy, a Sri Lankan renewable energy company that owns and operates hydro power plants, said it bought a firm with approval for a small hydro power plant in Kegalle district for 20.3 million rupees.

A stock exchange filing said Resus Energy, formerly Hemas Power, had bought 45,005 voting shares, being the total issued capital of JB Power (Pvt) Ltd.

JB Power has approvals to develop a 700 kilowatt hydropower plant in the Kegalle district.

Resus Energy operates three hydropower plants with a capacity of 7MW.

Sri Lankan brewer invests in restaurants subsidiary

ECONOMYNEXT - Ceylon Beverage Holdings Ltd., a Sri Lankan brewer, said it invested more money in Pubs ‘N Places (Private) Ltd. (PNP), a fully owned subsidiary that owns and franchises out restaurants.

A stock exchange filing said Ceylon Beverage Holdings subscribed to 26 million shares in Pubs ‘N Places (Private) Ltd. at 10 rupees each, worth 261.9 million rupees, by capitalising part of the current account it has with its parent to infuse further share capital into PNP.

Ceylon Beverage Holdings is part of the Carson group that has a controlling stake in Lion Brewery (Ceylon) PLC, another Carson group firm.

Forex, regulatory controls delay overseas Sri Lankan hydropower investment

ECONOMYNEXT – An investment by a Sri Lankan firm to buy a minihydro power plant in Uganda has been delayed by foreign exchange controls and approval by the overseas electricity regulator.

Sri Lanka’s Vidullanka Plc said in a stock exchange filing that there is a delay in getting approval from the Exchange Control Department of Sri Lanka’s Central Bank and the Electricity Regulatory Authority of Uganda.

Vidullanka planned to issue new shares to Timex Garments (Pvt) Ltd. in a private placement to partly fund the acquisition of the Timex Bukinda Hydro (U) Ltd.

Timex Bukinda Hydro has got all approvals except a power purchase agreement for the 6.5MW Bukinda small hydro power plant.

But Vidullanka Plc said the proceedings of the proposed private placement of shares to Timex Garments to buy Timex Bukinda Hydro (Uganda) Ltd. will be delayed since regulatory approvals were pending.

Retail investors get full allotment in Sri Lanka’s RIL Property IPO

ECONOMYNEXT – Sri Lankan retail investors who applied for up to 12,500 or 100,000 rupees worth of shares in the share issue by RIL Property Limited (RIL) have been given full allotments, a stock exchange filing said.

It said 692 retail investors had applied for a total of 1.6 million shares in the initial public offer of RIL Property, the owner and operator of commercial office space in the Sri Lankan capital Colombo.

RIL Property offered 120 million ordinary voting shares in the IPO to raise 960 million rupees, with the issue being oversubscribed on opening day itself.

NDB Capital Holdings Limited (NCAP), the cornerstone investor in the IPO, which had committed to subscribe for up to 25 million shares worth 200 million rupees, had been allotted a minimum of 15 million shares.

Applications for up to 15 million shares, for which there were 114, will also be given 100 percent of the shares applied for, the statement said.

There were two applications for over 15 million shares who would be given the minimum 15 million shares plus 23 percent of the shares applied for above the minimum.

Tougher Sri Lanka stock exchange rules on qualified audit opinions

ECONOMYNEXT – Among proposed changes to the Sri Lankan stock exchange’s listing rules are tougher disclosure requirements on qualified audit opinions in company financial statements.

The proposed changes, on which public comments are invited, cover modified audit opinion and emphasis of matter on going concern, according to the Colombo Stock Exchange.

At present CSE listing rules do not contain any rules on action to be taken by the CSE in the event the audit opinion in the annual report is found to be a “modified audit opinion” or contains an “emphasis of matter on going concern”.

A modified audit opinion in the annual report would be a non-compliance with Rule 7.5 (a) of the CSE Listing Rules.

The CSE proposes a new rule on the Independent Auditor’s Report on the audited financial statements of listed firms which contains a qualified audit opinion.

Under the new rule, the listed firm must give to the CSE for public release an ‘impact report’ containing a detailed description on the impact of the audit qualification to the financial statements.

The impact report shall at a minimum contain cumulative impact on profit or loss, net assets, total assets, turnover/total income, earnings per share and any other financial item(s) which may be impacted due to qualified audit opinion, the CSE said.

Where the listed firm is a parent entity, the audit opinion must cover the financial statements of the group.

Listed companies will also be required make an announcement to the market via the CSE on the qualified audit opinion, stating remedial action adopted or proposed to resolve the matters set out in the qualified opinion.

Sri Lanka 03-month Treasury Bill yield at 9.73-pct

ECONOMYNEXT – Yields on Sri Lankan Treasury Bills edged up at Wednesday’s auction with the 03-month bill yield up one basis point to 9.73%, the public debt department of the Central Bank said.

The 06-month bill yield rose 02 basis points to 10.79% and the 01-year bill yield went up 02 basis points to 11.11%, a statement said.

The public debt department got bids worth Rs73 billion and accepted bids worth Rs21 billion.

Sri Lankan shares rise on foreign buying; blue chips gain

Reuters: Sri Lankan shares rose on Tuesday as foreign investors bought blue chips, with the market seeing overseas fund inflows for 18 consecutive sessions.

Foreign investors net bought shares worth 172.8 million rupees on Tuesday. They have bought equities worth a net 5.4 billion rupees ($35.57 million) in 18 straight sessions, taking the year-to-date net foreign inflow into equities to 7.9 billion rupees.

The Colombo stock index ended 0.5 percent firmer at 6,382.37 after falling on Monday for the first time in 12 sessions on profit taking.

The index had climbed 7.2 percent over 11 sessions up to Wednesday. The market was closed for Sri Lanka's traditional new year holidays on Thursday and Friday.

"Foreign buying is very strong at the moment which is a very good sign. Foreigners are bullish," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"We expect short-term profit taking, but the market will gain after some strong inflows from sovereign bond (as it will lend support to the rupee)."

Sri Lankan authorities are in the process of raising up to $1.5 billion through sovereign bonds in the near future.

Turnover stood at 836.1 million rupees, more than this year's daily average of 775.6 million rupees.

Shares in top mobile phone operator Dialog Axiata gained 2.7 percent, while conglomerate John Keells Holdings Plc rose 1.1 percent.

($1 = 151.8000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan shares snap 11-session winning streak on profit-taking

Reuters: Sri Lankan shares fell on Monday from a five-month closing high to snap an 11-session winning streak as investors took profits in blue chips that had gained in a rally driven by foreign-buying.

The Colombo stock index ended down 0.8 percent at 6,351.26, slipping from its highest close since Nov. 15 hit in the previous session.

The index had climbed 7.2 percent over 11 gaining sessions up to Wednesday. The market was closed for Sri Lanka's traditional new year holidays on Thursday and Friday.

"It is a healthy profit-taking after the recent gains," said Hussain Gani, deputy CEO at Softlogic Stockbrokers. "We expect the market to stabilise at these level with foreign interest in select counters."

The market has seen fund inflows for 17 straight sessions through Monday, with foreign investors buying a net 5.23 billion rupees ($34.5 million) worth of equities in the period.

They net-bought shares worth 7.1 million rupees on Monday, raising the year-to-date net foreign inflow into equities to 7.71 billion rupees.

Turnover was dull on the first day of trading after the long holiday, and stood at 365.1 million rupees, less than half of this year's daily average of 774.8 million rupees.

Shares of Ceylon Tobacco Company plc lost 4.8 percent, while conglomerate John Keells Holdings Plc fell 1.3 percent. 

($1 = 151.8000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lanka stock exchange invites public comments on new rules

ECONOMYNEXT – Sri Lanka’s stock exchange has called for public comments on changes to its listing rules aimed at strengthening the enforcement action applicable for non-compliance.

The Colombo Stock Exchange said several continuous listing requirements are being revised.

These cover corporate governance, timelines for submission of interim financial statements and annual reports, submission of audited financial statements containing modified audit opinions and emphasis of matters of ongoing concern, related party transactions, and minimum public holding requirements.

“By further strengthening the enforcement action relating to Listing Rules, the CSE intends to establish a framework to monitor compliance by Listed Companies with the CSE Listing Rules, and to enhance the quality and timeliness of disclosure of information,” it said.

The CSE invited the views of the public and the stakeholders of the CSE, including listed companies, on the proposed amendments to the listing rules by 28th April 2017.

Sri Lankan shares post biggest single-day gain in over two years on foreign buying

Reuters: Sri Lankan shares extended gains for an eleventh straight session, posting their biggest single-day gain in more than two years, as foreign investors aggressively bought blue chip stocks.

The Colombo stock index ended 1.55 percent firmer at 6,402.99, its highest close since Nov. 15, 2016. The index recorded its biggest percentage gain since Feb. 6, 2015.

The index has gained 1.75 percent during the week, posting its third weekly gain in eight. It has climbed 7.16 percent in the last 11 sessions through Wednesday.

The market has seen fund inflows for 16 straight sessions through Wednesday, with foreign investors buying a net 5.22 billion rupees ($34.31 million) worth of equities in the same period.

They net bought shares worth 319 million rupees on Wednesday, raising the year-to-date net foreign inflow into equities to 7.71 billion rupees.

"Continuous foreign buying in John Keells Holdings and Ceylon Tobacco Company helped the gain," said Atchuthan Srirangan, a senior research analyst with First Capital Holdings PLC.

Shares of Ceylon Tobacco Company plc jumped 9.8 percent, while Ceylon Cold Stores Plc gained 2.87 percent and biggest listed Lender Commercial Bank of Ceylon Plc rose 2.66 percent and conglomerate John Keells Holdings Plc rose 1.33 percent.

Turnover stood at 2.37 billion rupees, the highest since Feb. 28 and well above this year's daily average of 780.7 million rupees.

Sri Lanka will celebrate its traditional new year this week and the markets will be closed on Thursday and Friday. 

($1 = 152.1300 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan shares gain for 10th straight session as foreign buying continues

Sri Lankan shares rose for the tenth straight session on Tuesday to close at their highest in nearly four months, helped by positive sentiment over continued foreign buying in blue chip stocks.

The market has seen fund inflows for 15 straight sessions through Tuesday, with foreign investors buying net 4.9 billion worth of equities in the same period.

They net bought shares worth 49 million rupees ($323,163) on Tuesday, raising the year-to-date net foreign inflow into equities to 7.39 billion rupees.

The Colombo stock index ended 0.2 percent firmer at 6,305.54, its highest close since Dec. 9. The index rose 3.8 percent last week, posting its second weekly gain in seven.

The index has climbed 5.53 percent in the last ten sessions through Tuesday.

"It was a dull day as most of the investors are on holiday ahead of the new year," said Atchuthan Srirangan, a senior research analyst with First Capital Holdings PLC.

"Foreign investors are active and the market is up."

Sri Lanka will celebrate its traditional new year this week and the markets will be closed on Thursday and Friday.

However, turnover stood at 281.6 million rupees, its lowest since March 21 and well below this year's daily average of 757.3 million rupees.

Shares of conglomerate John Keells Holdings Plc rose 1 percent, while Lanka ORIX leasing Company Plc rose 1.16 percent. 

($1 = 151.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez)

Foreign buying boosts Bourse

• Net foreign buying for past 10 weeks propels pre-Avurudu rally 
• Both indices up year-to-date for first time; net foreign inflow tops Rs. 7 b

After many months of pessimism, the Colombo stock market has shown signs of positivism spurred by heavy foreign buying boosting overall sentiment.

As of Friday, both price indices were up year-to-date - the All Share Index by 1.04% and the more active S&P SL Index by 2.5% after being negative during most of the first quarter. More importantly, foreign buying has accelerated, thereby swinging interest back into the market and boosting sentiment as confirmed by a near 4% gain in ASI last week and over 5% during the past nine market days.

Foreign buying spree which kicked off in late February brought in a net inflow of Rs. 5 billion in March. As of Friday net foreign buying was Rs. 7.35 billion year-to-date. The market has seen net foreign buying for the past ten consecutive weeks and during the past 14 market days the value was Rs. 4.85 billion. The inflows are significant given the fact that for the entirety of 2016 the inflow amounted to only Rs. 400 million whilst in 2015 there was a Rs. 5.4 billion outflow.

Most analysts welcomed the newfound resurgence in the market as “long overdue” given the attractive valuations. However, it is foreigners who are capitalising on the bargains, especially fundamentally sound blue chips and second tier stocks.

Brokers expect locals who have cashed in from foreign interest to return to the buying side, a move, which if it takes place after the Sinhala Tamil New Year holidays, will help sustain the rally. The Price Earnings Ratio of the market is around 12 times with some fundamentally strong stocks much lower reinforcing the attractiveness of equities.

Last month Asia Securities told the Sri Lanka Investment Summit in Hong Kong that when the three largest stocks, which account for 18% of market cap, are excluded the PER is more attractive at nine times.

It also said that valuations at the CSE are close to post-war bottoms while when net foreign buying is positive, the market moves up with a 12-month lag.

Capital markets in general are however hoping for a more convincing return of local investors, who have been shunning the Bourse for seemingly better returns outside. This is despite several leading broking firms’ chosen or recommended portfolio of stocks having provided much better returns than some fixed income options last year.

“Foreigners see value in some select blue chips now. Now we see there is a demand for stocks mainly because foreign investors are buying them gradually,” Acuity Stockbrokers CEO Prashan Fernando was quoted as saying by Reuters last week.

“Foreign buying and foreign interest in blue chips are pushing the market up and we hope the trend will continue,” said First Capital Equities Ltd. senior research analyst Atchuthan Srirangan.

“Though retail investors are still on the sidelines, the good thing is foreigners and high net worth investors are grabbing the opportunity and buying,” Yohan Samarakkody, head of research at SC Securities, was quoted as saying by Reuters earlier in the week.

“The underlying fundamentals have not changed as yet. The economic outlook is gloomy with high interest rates. But all that negativity has factored in. With the market reaching an oversold level, it became attractive to investors who have the holding capacity and they are capitalising on that situation,” Samarakkody added.
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BPPL Holdings Records Net Profit Of Rs 393 Million

BPPL Holdings announced its interim unaudited financial results for the eleven month period April 2016 to February 2017.

Consolidated revenue for the period was Rs 2.2 billion, up 19% over the corresponding period in the previous year. Revenue continued to grow as the company pursued its dual objectives of penetrating the household market segment both through direct sales to retailers and own branded goods sales in Sri Lanka and Indonesia.Direct sales accounted for 11% of total sales for the period, up 30% year-on-year. Own branded goods also grew by 55%, again over the corresponding period in the previous year.

Gross profit was up by a faster 30% year-on-year to Rs 881 million due to margin expansion amid revenue growth. Gross profit margins, which improved from 37% to 40% during the eleven month period ended February 2017, continued to benefit from higher productivity, lower costs as a result of improved raw material sourcing and Sri Lankan Rupee depreciation against the US Dollar.

Improved productivity and stringent cost controls also led to a 47% increase in operating profit to Rs472 million compared to the same period in the previous year. Moreover, margins continued to expand to 21% at a Profit-Before-Tax level due to lower interest expenses asaccumulated profits were used for debt retirement. Profit-Before-Tax was Rs453 million for the period whilst Profit-After-Tax attributable to the company’s shareholders was Rs393 million, an increase of 48% year-on-year.Non-annualized EPS for the period amounted to Rs1.28 (based on number of shares as at 28th February 2017).

Meanwhile, BPPL Holdings moved ahead with its plans for extruding synthetic yarn by placing orders with machinery suppliers following successful trials conducted with its own hot washed recycled PET flakes and discussions with leading textile producers. The construction of a new factory in the Horana BOI Industrial Zone also commenced in January 2017. This yarn production facility, which involves an investment of Rs 675 million, is set to comeon-stream in the January to March quarter of 2018 and contribute to revenue from April 2018.

The company is also on track to commence power generation from its own 347KW solar and 200KW biomass based power plants later this month.

BPPL offered 30,685,000 ordinary shares priced at Rs12 per share to the public via an Initial Public Offeringrecently, which was fully subscribed on the first day.

Sri Lanka forex reserves drop 10-pct to US$5.1bn in March

ECONOMYNEXT - Sri Lanka's forex reserves dropped 514 million US dollars to 5,119 million US dollars in March from a month earlier, central bank data showed.

Sri Lanka's forex reserves usually drop when the central bank prints to finance the government and defends the exchange rate when the newly minted cash drives up credit and ends up in the forex markets as imports.

Sri Lanka usually ends up printing money to sterilize interventions and maintain a policy rate incompatible with credit demand and inflation or exchange rate target.

Sri Lanka's forex reserves can drop when government loans are repaid with forex reserves, reserve assets falls on revaluation and repayments are made to the International Monetary Fund, for loan taken in 2009.

However it March it is not clear whether there were any IMF repayments.

Sri Lanka missed an IMF reserve collection target for December and a repaid tens of billions of rupees of a maturing bond with printed money in a self-destructive move, in a bout of fiscal dominance of monetary policy.

The central bank scrambled to undo the damage over the next five weeks.

Analysts have warned that the IMF program is lacks domestic asset ceiling which would have prevented the central bank from printing money and also protected it from fiscal dominance.

Sri Lanka poultry firm ups export of parent stock chicks

ECONOMYNEXT - Sri Lanka's Three Acre Farms Ltd, a unit of Singapore controlled Ceylon Grain Elevators group said it had upped exports of parent day old chicks to South Asian countries and were looking to expand the business.

In 2016, rupee export revenues from parent broiler chicks rose 83 percent to 85.6 million rupees.

"The Management team has identified opportunities in regional export markets as potentially lucrative areas capable of generating substantial improvements to the Group’s top and bottom line performance," the firm told shareholders.

"During the year in review, TAF successfully secured new orders for exports of Broiler Parent Stock DOCs to countries in the South Asian region and the Group is actively seeking out further opportunities to expand its presence in regional export markets over the coming years."

"While the company has previously engaged in limited export business, during the course of 2016, TAF was able to secure relatively small but consistent orders which were expanded upon to great effect, and now holds the potential to further enhance revenue streams for the Company in the coming financial year."

Sri Lanka cannot build a business exporting poultry (chicken meat) due to economic nationalism involving trying to build an autarky in Maize with high farmgate prices and restrictions of imports through import duties.

Within Sri Lanka Three Acre Farms claims a 20 percent share in broiler day old chick market and 3 to 38 percent share in layer chick market.

TAFL also has commercial farms producing adult broilers for meat processing.

Sri Lanka in March lifted price controls on chicken.

Sri Lanka’s biggest bank reports 43% growth in net 2016 profit

Bank of Ceylon (BoC) has reported a record-breaking pre-tax profit of Rs.31.2 billion for the year ending December 31, 2016, while post-tax profit stood at Rs.24.8 billion. The profit for 2016 at Sri Lanka’s biggest bank is a sharp 43 per cent rise from 2015.

Total operating expenses increased by 7 per cent in line with the business expansion. However depicting the BoC’s effective cost benefit management,cost to income ratio came down to 43 per cent from 45 per cent compared to the previous year, the premier bank said in a media release on Monday.

Net operating income for the period reflected an improvement of 16 per cent mainly backed by the increase of 17 per cent in net interest income and 59 per cent increase in other operating income.

Reduction of 26 per cent in total impairment charges through a reversal in provision following improved Non Performing Loans (NPLs) has also complemented the increase in net operating income. In 2016 many policy rates were changed affecting the market interest rate to move upward. In January

2016 Statutory Reserve Ratio (SRR) was increased by 150 bps to 7.5 per cent and Standing Lending Facility Ratio (SLFR) and Standing Deposit Facility Ratio (SDFR) also increased during the year up to 8.5 per cent and 7.0 per cent.

“Whilst, the increasing trend in market interest rates has resulted in an increase in both interest income and expenses, the BoC has managed to maintain its interest margin at the previous year level of 3.3 per cent through its effective management of cost of funding. Interest income earned through investment activities particularly in Sri Lanka Development Bonds and Treasury Bonds also contributed towards the growth in the net interest income,” the release added.

“Despite the decline in net fee and commission income by 8 per cent compared to the previous year in the light of subdued performance experienced across the export industry, 59 per cent impressive growth in other operating income showcased the BoC’s ability of making its targets a reality through various avenues among challenges. This operating income includes Rs.3.1 billion capital gain from disposal of investment too,” it added.

The bank reported Rs.1 trillion in loans and advances base, with total assets reaching Rs.1.7 trillion as of end 2016 .

The deposit base accounted for 80 per cent of the BoC’s liabilities as at end 2016 and grew by 16 percent to Rs.1.3 trillion from end December 2015.

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