Pan Asia Bank bottom line narrows 12% during June quarter

The mid-sized bank, Pan Asia Banking Corporation PLC, has reported a decline in its profits for the April-June quarter amid higher cost of funds and poor asset quality in a higher interest rate environment. 

According to the interim financial accounts filed with the Colombo bourse, the bank, with an asset base of about Rs.130 billion, reported earnings of Rs.2.51 a share or Rs.263.5 million for the quarter under review, down 12 percent year-on-year (YoY).

The financials showed that the core-banking operations had suffered a blow from the higher interest rates as the net interest income edged down by 3.0 percent YoY.

The bank had a net interest income of Rs.1.17 billion for the period as the interest expense rose by as much as 29 percent YoY, while the interest income rose by only 17 percent YoY during the same period.

The margins came under pressure as the net interest margin fell by 14 basis points to 3.73 percent YoY. 

The most notable was the increase in bad loans as the non-performing loans ratio jumped to 6.26 percent from 4.74 percent in December 2016. The bank has been consistently bringing down its non-performing loan ratio during the last three years but the June quarter marks a reversal.

This could be attributed to the increase in sour loans amid some lackluster growth in the loans and receivables.

The loans and receivables grew by not more than Rs.1.8 billion during the six months to June 30, 2017, despite Pan Asia Bank’s competitors were seen growing their loans faster.
The bank had a gross loans and receivables book of Rs.102.9 billion by June
30, 2017.

Meanwhile, the deposits grew by Rs.6.6. billion to Rs.98.1 billion, largely from the medium-term deposits as the low-cost deposit portfolio saw its size diminishing further.

Lower current and savings accounts (CASA) appears to be also an issue for the bank in fighting the higher cost of funds, which has been pinching its margins.

The bank in March 2017 raised a little over Rs.2.0 billion via a rights issue to stay in line with the Central Bank’s interim minimum capital requirements.

With the rights issue proceeds, the bank is now well compliance with the BASEL III minimum capital rules but fresh capital would be required going forward to fund growth in the medium term.

Meanwhile, for the six months ended June 30, 2017, the bank reported earnings of Rs.2.96 a share or Rs.616.8 million, up 2.0 percent from a year earlier.

Prasanna appointed as new Chairman

Pan Asia Bank last Friday announced the appointment of G.A.R. Dimuth Prasanna as its Chairman with effect from July 30, 2017.

His appointment comes in the wake of the retirement of Eshana De Silva, who functioned in the top post less than a year.

De Silva completed his nine-year service period as a Director of Pan Asia Bank on July 29, as per the corporate governance rules of the Central Bank.

De Silva held almost seven million Pan Asia Bank shares at the time of his retirement.
Prasanna was appointed to Pan Asia Bank as a Director in May 2012 and as Deputy Chairman in September 2016, up to January 25, 2017.

He is Chairman of Grandmark (Pvt.) Ltd and is Managing Director of Wise Property Solutions (Pvt.) Ltd.

He also serves as a Director on the boards of Royal Ceramics Lanka PLC, Royal Porcelain (Pvt.) Ltd, Rocell Bathware Ltd, Country Energy (Pvt.) Ltd, La Fortresse (Pvt.) Ltd, Delmege Forsyth & Co. (Exports) (Pvt.) Ltd, Delmege Insurance Brokers (Pvt.) Ltd, Rocell Properties Ltd, Delmege Coir (Pvt.) Ltd, Delship Services (Pvt.) Ltd, Delmege Freight Services (Pvt.) Ltd, Delmege Air Services (Pvt.) Ltd, Lewis Brown Air Services (Pvt.) Ltd, Hayleys Global Beverages (Pvt.) Ltd and Lanka Tiles PLC.

He has wide experience in various businesses and business management.

Prasanna held 34,801 Pan Asia Bank shares at the time of his appointment as Chairman.

www.dailymirror.lk

Sri Lanka's Lion Brewery downgraded after taxes favour hard liquor

ECONOMYNEXT - Fitch Ratings has downgraded the rating of Lion Brewery to 'A+(lka)' from 'AA-(lka)' Sri Lanka's largest beer maker on lower sales volumes triggered by recent tax hikes, which drove up hard liquor sales by 27 percent.

The outlook is negative.

Many consumers switched to small bottles of arrack after taxes on so-called 'strong beer' was hiked by the current administration.

Among top producers include Distilleries Corporation and W M Mendis, a firm connected to Sri Lanka's Perpetual group.

Lion's net leverage worsened to 6.3x during the financial year ended-March 2017 (FY17), from 1.9x at end-FY16, as the beer volume dropped by more than 50% due to successive tax increases and a six-month halt in domestic production due to floods in 2016, Fitch said.

The rating agency said beer industry volumes contracted from 2014 to 2016, as 'excise duties per unit of alcohol of strong beer surpassed that of hard liquor due to tax increases in 2015'.

A tax on beer cans was also introduced from November 2016, prompting consumers to switch to hard liquor, the rating agency said. Strong beer made up 75 percent of Lion Beer sales.

The full report is reproduced below:

Fitch Downgrades Lion Brewery to 'A+(lka)'; Outlook Negative 

Fitch Ratings-Colombo-31 July 2017: 

Fitch Ratings has downgraded Sri Lanka's Lion Brewery (Ceylon) PLC's National Long-Term Rating to 'A+(lka)' from 'AA-(lka)'. The Outlook is Negative. The agency has also downgraded the National Long-Term Rating on Lion's outstanding senior unsecured debentures to 'A+(lka)' from 'AA-(lka)'.

The downgrade reflects Fitch's expectations that Lion's net leverage, defined as lease-adjusted debt net of cash/operating EBITDAR, is unlikely to fall below 2.0x over the next three years due to lower beer sales from the higher taxes imposed over the last 18 months. We do not expect Lion's EBITDA to recover to historical levels over the same period. The Negative Outlook reflects the potential for further downgrades should Lion's sales volume not recover enough in the next 18 months to reduce leverage to less than 3.0x.

Lion's net leverage worsened to 6.3x during the financial year ended-March 2017 (FY17), from 1.9x at end-FY16, as the beer volume dropped by more than 50% due to successive tax increases and a six-month halt in domestic production due to floods in 2016.

KEY RATING DRIVERS

Shift in Market Dynamics: Beer industry volumes saw large contraction between 2014 to 2016, while hard-liquor volume increased by almost 27%, as excise duties per unit of alcohol of strong beer surpassed that of hard liquor due to tax increases in 2015. In addition, the reinstatement of VAT on alcohol products and the introduction of taxes on beer cans with effect from November 2016 prompted consumers to substitute strong beer, which has an alcohol content of more than 8%, with the consumption of hard liquor. Strong beer accounted for more than 75% of Lion's sales volume in FY17.

Lower EBITDA Margins: Fitch expects Lion's EBITDAR margins to recover to around 24% in FY18, from 20% in FY17, after they were diluted due to a decline in the demand for beer caused by multiple tax increases and floods interrupting production in mid-2016, which led to Lion resorting to costlier imports. Fitch expects production to normalise and sales volume to improve as the company regains most of the retail shelf-space it lost last year. However, margins may remain below historical levels over the medium term because the excise duties on a unit of pure alcohol in beer surpassed that of hard liquor after the back-to-back tax increases, which could pressure beer volumes. We do not expect Lion to further increase beer prices as it may impede volume growth.

Market Leadership: Lion has a leading market position in the domestic beer industry. Its market share is supported by its entrenched brand and widespread retail coverage, with access to more than 2,250 outlets around Sri Lanka. Lion's market share is protected to some extent by extensive industry entry barriers stemming from stringent restrictions on advertising and retail licenses. 

Lion also benefits from ample production capacity, which exceeds 1.5 million hectolitres per annum, and is sufficient to meet demand over the medium term.

Volatile Regulatory Framework: Frequent tax hikes and introductions inhibit the industry's profitability. The government has consistently used excise taxes as a tool to boost revenue to bridge budget deficits; consequently, from October 2015 to November 2016 the industry - especially beer makers - was taxed from multiple fronts through higher excise duties, the introduction of beer-can taxes and reinstatement of VAT, dampening the competitiveness of beer. Fitch does not expect further drastic tax increases that could weaken demand, especially given the sector's large contribution to government's tax revenue.

DERIVATION SUMMARY

Lion's rating is supported by its leading market position in the domestic beer industry, but counterbalanced by high regulatory risks in the form of frequent tax policy revisions that have caused operating cash flow volatility. Lion's business risk profile is weaker compared with its closest rating peer, Hemas Holdings PLC (AA-(lka)/Stable). Hemas is a well-diversified conglomerate with exposure to the defensive healthcare and fast-moving consumer goods sectors. Hemas also has a conservative approach to acquisitions and expansions and has lower leverage than Lion, supporting its higher rating.

Lion is placed four notches below the Distilleries Company of Sri Lanka PLC (DIST, AAA(lka)/Rating Watch Negative) - the country's largest spirit manufacturer - reflecting DIST's stronger market position as well as its stronger margins and lower leverage than Lion. The Rating Watch Negative reflects potentially higher financial risks following a September 2016 group restructure.

Sunshine Holdings PLC (A(lka)/Stable) and Richard Pieris & Company PLC (A(lka)/Stable) are rated one notch below Lion, reflecting their significant exposure to the structurally declining agriculture segment and lower EBITDA margins. Sunshine also faces regulatory risks in its pharmaceutical distribution division, which act as a short-term rating constraint.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for Lion include:

- revenue to recover with a 1.5-fold increase over FY18 and FY19

- EBITDAR margins to normalise at 24% over the next two years, but remain lower than historical levels of the high twenties due to heavy taxation on beer inhibiting volume and profitability

- excise duty on strong and mild beer to remain unchanged during FY18 and increase by over 5% on average during in FY19 and FY20

- capex at 12% of net revenue in FY18 then remain low at 2.5% on average over FY19 and FY20, as Lion's production is only likely to ramp-up to FY16 levels of around 96 million litres in FY21 

- no dividends during FY18, then reverting to historical levels

RATING SENSITIVITIES

Developments that May, Individually or Collectively, Lead to Negative Rating Action

- If Lion is unable to lower its adjusted net debt/operating EBITDAR to 3.0x by FY19
Developments that May, Individually or Collectively, Lead to Positive Rating Action

- We may revise the Outlook to Stable if there is a meaningful improvement in sales volume that leads to adjusted net debt/operating EBITDAR falling below 3.0x on a sustained basis

LIQUIDITY

Adequate Liquidity: Lion has a comfortable liquidity position, with an unrestricted cash balance of LKR7.6 billion as of FYE17 and unutilised credit lines of LKR5.1 billion to meet LKR4.5 billion of contractual maturities falling due in the next 12 months. Lion's strong market position in the domestic beer industry and consistent access to bank funding because it is one of Sri Lanka's largest listed corporates further support liquidity.

Of total gross debt of LKR18.9 billion as at end-March 2017, 41% relates to revolving loans - including the overdraft facility- and term loan facilities account for 34%. Lion had LKR3.9 billion of debentures in issue as at FYE17 (21% of total gross debt), with maturities ranging between FY19 and FY20. Debentures with a face value of LKR799.4 million were redeemed during FY17.

Sri Lankan shares hit over 12-wk closing low led by telcos, beverages

Reuters: Sri Lankan shares fell on Monday to a more than 12-week closing low in thin trade as investors sold telecommunication and beverages stocks and as a right issue mopped up liquidity, but foreign investors were net buyers for a thirteenth straight session.

The Colombo stock index ended 0.43 percent weaker at 6,637.39, its lowest close since May 4. The bourse fell 1.63 percent during the month, but is up 6.57 percent so far this year.

Shares of large cap Ceylon Tobacco Company Plc fell 0.87 percent, while Dialog Axiata Plc lost 2.54 percent and Valibel One Plc ended 4.04 percent weaker.

Turnover stood at 508.2 million rupees ($3.31 million), well below this year's daily average of around 893 million rupees.

Private lender Sampath Bank Plc announced a rights issuance of one new share for every six existing shares.

"The market dipped a bit on telecoms. The rights issue mopped up the liquidity, but market is looking positive," said Hussain Ghani, associate director at Asia Securities.

Foreign investors net bought shares worth 121.8 million rupees on Monday, extending the year-to-date net foreign inflow to 25.8 billion rupees. 

($1 = 153.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Biju Dwarakanath)

AIA operating profit up 16 %, interim dividend up 17 %

AIA has delivered an excellent set of results in the first half of 2017 with record VONB growth of 42 per cent to US$1,753 million.

The Board has declared a 17 per cent increase in the interim dividend for 2017. This reflects AIA’s excellent financial results in the first half as well as our confidence in the outlook for the Group.

“AIA has significant competitive advantages created over our long history in Asia. We have a clear strategy that is working well and is fully aligned with the substantial opportunities presented by the extraordinary social changes and substantial economic growth taking place across the region. Our strong track record of value creation is the direct outcome of our many experienced teams working collectively to deliver our strategic priorities. We will continue to challenge ourselves and our strategy to ensure we capture the many significant opportunities that the region presents – well into the future.

“Today’s announcement is the first time I have reported our financial results since I assumed the role of Group Chief Executive at the beginning of June and I am delighted that we have delivered a very strong performance. AIA is an exceptional company with outstanding people and a unique franchise. I look to the future with great enthusiasm as we continue to realise AIA’s full potential in Asia and generate sustainable value for our customers and shareholders,” said Ng Keng Hooi, AIA’s Group Chief Executive and President.

www.dailynews.lk

Sinhaputhra records post tax profit of Rs 154 mn

Sinhaputra Finance has reported an increase of 84% in pre tax profit compared to the previous year, despite allowing for a provision of Rs. 329 mn. The effect of this provision was a reduction in capital funds which now stands at Rs 1.1 bn.

During the last 39 years, there have been no less than six economic busts, some stretching for long periods. Sinhaputhra’s responses have been modulated during these ups and downs and safeguarding depositor’s assets have always been the centre of concern during these periods.

Managing Director Ravana Wijeyeratne said, “whilst this cautious growth pattern of the company has been reflected in its mature asset quality and a realistic consideration of the nation’s debt repayment capacity, it has also allowed the company to build its human capital and core competencies in response to these real issues rather than being seduced by risky opportunities during periods of dizzying growth periods that would mask such underlying issues with glossy ratios, but may result in future problems.”

Ali Asger Shabbir buys over CFT

Dr. Ali Asger Shabbir purchased 85,557,022 ordinary shares of Ceylon and Foreign Trades PLC (CFT) at a price of Rs. 5 per share thereby increasing his stake to 61.027%.

Dr. Shabbir confirmed the purchase and mandatory offer to acquire the balance issued and fully paid voting shares of CFT in a corporate disclosure sent to the Colombo Stock Exchange yesterday. Ceylon and Foreign Trades PLC traces its history back to 1949, one year after the country gained independence from British rule, when a group of pioneering businessman banded together to form this company.

CFT is one of the oldest trading companies in Sri Lanka, which was established in 1949 and became a publicly quoted company in 1978.

CFT, an asset rich company which is mainly into real estate, at present owns a two-acre warehousing complex at Bloemandal Road, Colombo, a 96-perch plot of land in Sedawatta, a five-acre property in Grandpass which is known as the Unilever property and 22% ownership in On’ally Holdings PLC which is a public quoted company with substantial real estate interest in the country including Unity Plaza, becoming it’s second largest shareholder.

The Net Asset Value of CFT amounts to Rs. 12.54 per share as per the latest published interim accounts which is a significant discount to its market trading price.
www.dailynews.lk

Three strongest private banks make cash calls within weeks of each other

Three of the country’s strongest privately owned banks have made cash calls on their shareholders within a matter of weeks to increase their Tier l capital to comply with Basel 111 requirements.

Hard on the heels of the Commercial Bank of Ceylon PLC’s recent rights issue for both its voting and non-voting shares, Hatton National Bank floated a similar rights issue which closed last week for its voting and non-voting shares.

Now Sampath Bank PLC on Friday announced a rights issue under which slightly over 31.03 million new shares will be issued in the proportion of one new share for every six shares held at a price of Rs. 245 a share. Sampath has only voting shares with no non-voting category.

Commercial Bank priced its new shares at considerably less than the trading price of these shares at the time the rights issue was floated giving its existing shareholders a distinct price advantage and ensuring the likelihood of full subscription that was achieved.

"Some of the major shareholders of ComBank like motor vehicle importer Indra de Silva and the DFCC Bank, ComBank’s top shareholder, sold part of their holdings to raise funds to subscribe for their rights," a share analyst said.

"In the event, Silva bought a part of the DFCC holding that was put out for sale after he had sold his stake and subscribed to the rights accruing to those shares."

ComBank priced its voting shares at Rs. 113.16 and the non-voting shares at Rs. 90.80 offering one new share for every 10 held on the rights issue. The day the issue was announced the voting shares were trading above the Rs. 140 level. The issue was fully subscribed infusing Rs. 10.1 billion zero cost capital into the bank’s books.

HNB which offered both its voting and non-voting shares in the proportion one for 10, priced the voting shares at Rs. 220 and the non-voting at Rs. 190 seeking to infuse Rs. 15 billion new equity funds into its books.

"Unlike ComBank, HNB priced its rights fairly close to the trading price giving its shareholders less of an advantage," a broker said. "In fact, when the issue closed last week, the non-voting shares were trading at around the issue price."

Analysts said that ComBank shareholders who applied for additional shares over and above their rights entitlement from unsubscribed rights were satisfied to some extent indicating that some shareholders did not subscribe despite the profit that could have been made by taking and selling the shares.

Whether this would be so in the case of HNB too is being watched by the share broking and trading community. The Sampath share closed on Friday at Rs. 272.10 against the rights price of Rs. 245.

HNB has not yet made an announcement on the results of its rights issue. This is likely to be made in the near future, analysts said.

www.island.lk

Kelani Cables profits down despite historically high turnover

Kelani Cables PLC has seen a dip in net profit to Rs. 378 million in the year ended March 31, 2017 from Rs. 499 million a year earlier despite the company achieving a historically high turnover of Rs. 7.12 billion during the year against the previous year’s Rs. 6.62 billion.

Mr. Upali Madanayake, the company’s chairman, has said in its recently released annual report that they had succeeded in "sustaining commendable growth despite adverse conditions both globally and locally to ensure consistent shareholder value."

"Our sales team performed well despite tough market conditions and the growth over last year amounts to 8% year-on-year," he added.

Director/CEO Mahinda Saranapala reporting the historically high turnover said the overall performance was highly commendable considering the market conditions and severe condition in the distribution market.

Kelani Cables which was founded in 1969 to manufacture and distribute power and telecommunication cables and enameled winding wires began operations with just 12 workers. The brand is today a household name with a 500-strong workforce and a solid reputation for quality and stability, the company said in the report.

It has undergone several changes in ownership since its founding by the Wijegoonewardena family. The company became a subsidiary of Australian multinational Pacific Dunlop Cables Group in 1994 and in late 1999 the majority shareholding was acquired by ACL Cables.

"These alliances have provided opportunities for expansion and knowledge sharing which have enabled the company to enhance its operations.

Kelani became a public quoted company in 1973 and its shares are quoted on the Colombo Stock Exchange. Madanayake said that the Kelani share had traded during the year under review between a high of Rs. 112.50 and a low of Rs. 101. Net assets per share were up to Rs. 159.38 from Rs. 146.47 the previous year.

Despite the drop in net profits, a dividend of Rs. 4.50 a share against the previous year’s Rs. 3 has been proposed.

The company has a stated capital of Rs. 218 million and total assets of Rs. 5.65 billion against total liabilities of Rs. 2.17 billion.

He also reported that a capacity expansion program was currently in progress and a new cable manufacturing line installed the previous year was performing well. They were also exploring the possibility of investing in new state-of-the-art machinery with high speeds to further boost productivity.

"We also hope that the current political and economic conditions will remain steady," he said, "ensuring that consistent policies are in place to spur the economy to greater performance."

Lanka Olex Cables (Private) Ltd. with 75% of the company is the controlling shareholder. All other shareholders including the Bank of Ceylon and the ETF individually own less than 5%.

The directors of the company are: Messrs. Upali Madanayake (chairman), Suren Madanayake (deputy chairman), Mrs. NC Madanayake, Dr. Bandula Perera, Dr. Ranjith Cabral and Mahinda Saranapala (CEO).

www.island.lk

Piramal Glass Sri Lanka unit June net down, floods hit sales

ECONOMYNEXT – Piramal Glass Ceylon PLC said June 2017 quarter net profit fell 3.7% to Rs105 million from a year ago with sales slumping after floods triggered by heavy rains.

Total sales of the firm, a unit of India’s Piramal Glass, fell 17% to Rs1,403 million over the same period, according to interim results filed with the stock exchange.

Earnings per share were 11 cents.

“Amidst the adverse sales impact the company showed marked improvement in its profitability indicators,” a statement said.

The Gross Profit margin during the June 2017 quarter was 25% as compared to 18% in the same quarter a year ago with operating profit up to 15% from 9% the previous year.

“The incremental operational profit margin improvement was possible due to the reduction of trading sales,” the statement said.

Piramal Glass Ceylon’s relined furnace and expanded production line is now well stabilised and the domestic market is being supplied mainly with in house manufactured bottles which has replaced imported bottles, the company said.

Last year due to capacity constraints when the furnace was shut for renovation a considerable portion of the domestic sale was done through imports.

Even though the operating profit has increased the net profit after tax was subdued and pre-tax profit was affected due to the high interest cost resulting from the long term loan of Rs 3 billion borrowed for the funding of the project, the statement said.

“The operations during the quarter were impacted by the heavy floods which occurred during the latter part of May,” it said.

“Though the company premises itself was not affected access roads went under water hampering transportation of raw material and energy and the despatch of bottles.

“Several customers’ premises and operations were also affected due to the floods.”

Domestic sales stood at Rs. 1,084 million as against Rs. 1,346 million in the previous year, reflecting a fall of 19%.

“A dip in the overall domestic market was experienced which impacted the sales in all segments,” the company said.

Export sales for the quarter were at Rs. 319 million as against Rs. 338 million the previous year.

“The major decline in the export market was from export to India due to the changes in the tax structure with the announcement of GST implementation country wide,” the statement said.

“All other geographical locations namely Australia, USA and Canada have showed positive growth figures during the period under review.”

Piramal Glass Ceylon said it remained concerned the Ceylon Petroleum Corporation has not revised the rates of furnace oil for past four years although crude oil prices, which hit US$ 120 a barrel in 2011 had fallen below US$50, a more than 50% reduction in the price.

“Yet the corresponding furnace oil prices has not been addressed accordingly,” it said. “This state of affairs is affecting our competitiveness in the international market. The company has been requesting the government to introduce a formulae pricing based on international crude oil price which will be a fair transparent pricing mechanism.”

Sri Lanka Treasuries yields fall sharply across maturities

ECONOMYNEXT – Yields on Sri Lankan Treasury Bills fell across the board at an auction Wednesday with the 03-month bill yield down 12 basis points to 9.44 percent from 9.56 percent last week, the Central Banks public debt department said.

The yield on the 06-month bill fell 30 basis points to 9.71 percent at the auction from 10.01 percent last week, it said in a statement.

The one-year bill yield fell 19 basis points to 9.99 percent from 10.18 percent last week.

The debt office said it got bids worth Rs1.4.5 billion and accepted bids worth Rs27.3 billion.

Sri Lanka’s John Keells PLC June net up 30-pct

ECONOMYNEXT – Sri Lanka’s John Keells PLC said June 2017 quarter net profit rose 30% to Rs60 million from a year ago, with its stock broking business turning profitable largely helped by finance income.

Quarterly sales of the broking unit of John Keells group rose 46% to Rs215 million over the period, according to interim results filed with the stock exchange.

Earnings per share for the June quarter were 98 cents, up from 76 cents the previous year. The share last traded at Rs60.

John Keells PLC has three operating segments, produce broking which includes tea and rubber broking, warehousing, which includes tea and rubber pre-auction produce warehousing, and stock broking.

Produce broking earned the biggest profit, of Rs70 million, in the June 2017 quarter, up from Rs54 million a year ago.

The warehousing business made a profit of Rs7 million compared with earnings of Rs5.6 million the previous year.

The share broking business of John Keells PLC made a profit of Rs7.9 million in the June 2017 quarter compared with a loss of Rs1 million the year before.

The stock broking unit earned finance income of Rs6.2 million in the quarter with Rs1.9 million profit coming from operating activities.

Sri Lanka's JKH net up 19-pct in March on finance income

ECONOMYNEXT - Sri Lanka's John Keells Holdings Plc, which has interests in logistics, leisure, property and financial services said net profits for the June 2017 quarter rose 19 percent to 2.8 billion rupees helped by finance income, amid narrowing profits from several segments.

The group reported earnings of 2.04 rupees per share.

Revenues rose 18 percent to 26 billion rupees and cost of sales rose at a faster 25 percent to 20.1 billion rupees and gross operating profits rose barely increased by 1 percent to 6.7 billion rupees.

Group finance income rose 65 percent to 3.4 billion rupees while finance cost fell to 144 million rupees from 271 million.

Profits in transport rose to 774 million rupees from 694 million in the quarter, financial services rose to 235 million rupees from 195 million, information technology rose to 51.6 million from a loss of 2.1 million a year earlier and property maintained profits with 49.3 million profit up from 48.8 million.

Profits in leisure fell to 106 million rupees from 475 million a year earlier amid a closure of some hotels, retail fell to 755 million rupees from 924 million.

There was a sharp increase in 'other' segment which usually contain items such as finance income to 1.0 billion rupees from 310 million.

Sri Lanka's TJL net down 45-pct, expects GSP+ bounce

ECONOMYNEXT - Sri Lanka based Teejay Lanka, a fabric maker said profits plunged 45 percent to 219 million rupees in the June 2017 quarter from a year earlier with cotton prices up, but its already seeing higher demand from duty free access to the European Market.

Revenues rose 13 percent to 5.4 billion rupees but expenses rose at a faster 19 percent to 4.8 billon rupees, shrinking gross margins 17 percent to 604 million rupees.

Cotton prices which rose in the last quarter of 2016 has remained high, Chairman Bill Lam told shareholders. But he expects better prices in the future.

"Other factors included competitive sales pricing which prevented us promoting any price hikes and the growth product mix," he said.

"With the expansion in India underway, overheads have also increased mainly through depreciation related costs increasing for the quarter."

Teejay Lanka has ended its tax holiday from September 2016, and group tax had increased to 72 million rupees from 44 million rupees a year earlier.

"The overall market remains competitive with the price swings and high demand for low cost products which posed challenges on selling prices and margins," Lam said.

"However, cotton price volatility is expected to ease out during the third quarter of the new financial year. Also with the GSP benefit, a potential surge in EU business is expected and is already being observed."

SEC to strengthen guidelines on top positions at local firms

By Duruthu Edirimuni Chandrasekera

In a few months’ time, those aspiring to hold high positions at all capital market institutions will have to undergo a litmus test.

This will come when the Securities and Exchange Commission (SEC) will set criteria on who can hold board positions at stockbroking houses, funds, Unit Trusts, etc while they aim to revamp and strengthen the guidelines on fitness and propriety applicable to market institutions and market intermediaries. They aim to expand this to key management personnel at these institutions as well. The fitness and propriety criteria will perform a gatekeeper’s role and this assessment is done when an application is considered for licensing or registration and also on a continuous basis which will consider the conduct of the business and its history of compliance with the applicable laws and regulations, according to SEC officials.

SEC’s 2016 annual report, released on Saturday, said that in line with the Capital Market Strategy 2020 which proposes to enhance and maintain high levels of professionalism among persons engaged in capital market activity, the qualification framework of the SEC designed for stockbroker certification, etc would undergo extensive revision, allowing for multi-tier licensing and continuous professional development for the institutions/persons.

“These new guidelines would drive a positive industry culture encouraging honesty and integrity among the regulatees of the SEC so as to better protect the investing public,” the report said. A SEC official told the Business Times that certification standards will increase with the new syllabuses for brokers. “Fit and proper criteria for directors will be set in addition to the rules now applicable for company directors,” he said.

As an important conduit and enabler of retail investment, unit trusts are pivotal to the Capital Market Strategy 2020 and the SEC seeks to actively engage provident funds and pension funds in diversifying their portfolios and increasing asset allocation to capital market investments, the report said. “Increased participation by such long-term institutional investors can improve market stability and sustainability, as a result of their holding power and ability to act in a counter-cyclical manner.”

Traditionally having significant exposure to government securities, these funds could optimise portfolio returns and extent maturity profiles to provide better asset-liability matching through calculated investment in the market. At present, with the broad-basing of market participation in mind, minimum public holding thresholds apply to listed companies upon initial listing, and enforced thereafter on a continuous basis. The SEC would drive requisite policy formulation for the introduction of short-selling, securities borrowing and lending, and other new products in order to deepen liquidity, the report said.

Many new products
To increase portfolio choice of investors, the SEC is developing a sequencing framework for the introduction of new products ranging from Real Estate Investment Trusts (REITs) and Exchange Traded Funds (ETFs) to Financial Derivatives. “The SEC would enable the introduction of a multi-asset offering for investors by spearheading policy formulation in order to facilitate related rule-making by the Colombo Stock Exchange (CSE),” the report added.

Representations have been made to the Government by the regulator in exploring the potentiality of invigorating the capital market through the listing of State-Owned Enterprises (SOEs) with compelling investment proposition. “Entry by SOEs into the capital market engenders less dependence on state financing whilst enhancing governance standards. The CSE is encouraged to engage with private sector corporate in order to facilitate their efforts to tap the capital market to fulfill funding requirements. The implementation of new listing platforms for issuers of varied size, scale, maturity, and value-recognition needs is underway collaboratively with the CSE,” the report said noting that the Multi Currency Board would enable local and foreign issuers to explore multi currency listings, whilst small and medium enterprises (SMEs) would be provided access via the SME Board.

Interesting foreigners
Foreign investors were the net sellers in the market in 2015 with net sales of Rs. 5.3 billion. Rs 2.2 billion net foreign investment to the market can be considered as one of the highlights in 2016, the SEC report said. The Health Care Sector recorded a growth of 11.6 per cent in the year as against 9.6 per cent negative growth of the All Share Price Index (ASPI). Manufacturing and Stores and Supplies sectors grew by 6.5 per cent and 4.1 per cent respectively during the year. Services and Investment Trust sectors declined significantly by recording a negative growth of 24.8 per cent and 23.6 per cent, respectively.

The Diversified Sector accounted for Rs. 19.7 billion of the total market turnover, out of which Rs 12.5 billion came from foreign investors.

There were three new listings during the year 2016 (People’s Insurance PLC, Orient Finance PLC and Amana Takaful Life PLC) raising Rs. 1.8 billion through the Primary Market. There were 17 corporate debenture issues during the year which raised Rs. 77.9 billion and two delistings during the year.

There were 30 companies with a public holding of over 50 per cent as at 31st December 2016 and 34 companies had a public float of less than 10 per cent. 73 companies were in the category of 10 per cent to 20 per cent. These statistics reveal that still public holding is a serious impediment towards the development of the capital market in Sri Lanka especially in attracting foreign investors. Foreign institutional investors prefer to invest in stocks with a large free float, as they can purchase or sell a significant number of shares without heavily impacting the share price, the report noted.

At the end of 2016 there were 801,685 CDS accounts opened at the CDS out of which only 38,781 accounts have traded at least one transaction in 2016. There were 23,867 accounts that carried out one transaction per quarter. When the stock market was at its peak in 2010 and 2011 there were 78,517 and 117,712 active CDS accounts (minimum one transaction per year).

www.sundaytimes.lk

Standard Capital AGM runs into ‘storm’ of issues

Standard Capital Plc, whose last 2015/16 annual report showed post-tax losses nearly doubling to Rs. 64.5 million from Rs.33.3 million in the earlier year, ran into a ‘storm’ of issues from shareholders at the recently held annual general meeting.

According to shareholder A.K. Gnanakanthan, the AGM held on June 30 at the Colombo City Hotel – in the view of many shareholders – should be declared deemed null and void.

Company officials were not immediately available for comment and clarification. The company is in the business of manufacturing and selling Sulphuric Acid and Aluminium Sulphate.

In a letter to the newspaper, Mr. Gnanakathan, giving details of the meeting, said:
“Mr. K.C. Vignarajah is in the top 20 major shareholder list and largest individual shareholder in position number 5 and he was the former truly independent Director who opposed the controlling interest and their nominee directors when there were (alleged) wrongdoings in the company and in a very scrupulously manner they manipulated his exit from the board at a previous AGM after unanimously endorsing him in the Annual Report of 2014/15.

At the meeting Mr. Vignarajah read out the “Note of Protest” which enumerated many of the faults in the process prior to the AGM. The Secretaries were not able to announce the proxies received “for and against”, the resolution at the beginning of the meeting as required. The Chairman did not ask the Secretaries to announce the proxies received for or against. In fact the Secretaries stated that they were kept away from the process altogether. Most of the shareholders who were present complained that they did not receive the notice of the above meeting and the annual report.

No independent shareholders proposed or seconded the resolutions to elect the directors. Mr. Vignarajah pointed out the distorted percentages shown by including totally different categories of non-voting, redeemable shares, etc. Auditors explained that the percentages reflected only adjustments for consolidation and will not affect the voting equity.

During elections, the company staff issued and collected the ballot papers counted and did everything related to the poll. At a later stage the Auditors helped in the count of ballot papers shown to them.

The AGM was not conducted in a proper manner and the chairman didn’t release the details of the polls as demanded by all. Several shareholders including myself raised many issues of vague statements, lack of transparency and exaggerated forecasts from the board of directors without any valid explanations and plans. Considering all the above facts and the ‘no care attitude’ towards the public shareholder concerns, relying only on the strength of majority control, the public shareholders agree that the AGM was null and void.”

www.sundaytimes.lk

‘Unfair pricing’, claims Piramal over furnace oil sold by CPC

“Unfair pricing,” claimed Piramal Glass Ceylon PLC this week referring to unchanged furnace oil prices by the Ceylon Petroleum Corporation (CPC) over the past few years.

In releasing its quarterly results for April-June 2017, the company reiterated earlier concerns that furnace oil prices have remained unchanged despite crude oil pricing crumbling overseas.

“There is concern that the Ceylon Petroleum Corporation has not revised the rates of furnace oil for the past four years. Crude oil prices which hit a US$120 a barrel in 2011 is now hovering below $50 in the past four years and as at date is a more than 50 per cent reduction in the prices. However the corresponding furnace oil prices and the need for a reduction based on international prices hasn’t been properly addressed. This state of affairs is affecting our competitiveness in the international market. The company has been requesting the government to introduce a pricing formula based on international crude oil price which will be a fair transparent pricing mechanism,” the company said in a media release.

Meanwhile, its first quarter 2017-2018 earnings fell marginally with revenue recorded at Rs. 1,403 million and post-tax profit at Rs. 105 million.

Sales during the first three months (April to June) was Rs. 1,403 million, down by 17 per cent from the same period in the earlier financial year.

The company said there was a major decline in the export market as per sales to India due to the changes in the tax structure with the announcement of GST implementation country wide. However ,all other geographical locations – Australia, US and Canada showed positive growth figures during the period under review.

Increase in the operational profit margin was possible due to the reduction of trading sales. “With the new facility now well stabilised the domestic market is being supplied mainly with in house manufactured bottles which has replaced the imported bottles. Last year due to capacity constraints a considerable portion of the domestic sale was done through imports,” the company media release said.

Even though operating profit rose, post-tax profit fell, affected by the high interest cost resulting from the long term loan of Rs. 3 billion borrowed to fund expansion.

www.sundaytimes.lk

SEC reopens eight ‘pump & dump’ cases

By Duruthu Edirimuni Chandrasekera

The Securities and Exchange Commission of Sri Lanka (SEC), has dealt a tough blow against pump and dump operators of the past, reopening eight cases. The regulator, under fire for ‘not doing much’ during the past three years, is now flexing its muscle, according to the SEC Annual Report for 2016.

Amidst implementing and shoring up the capacity to implement structural changes, governance practices and many other changes, the regulator has completed three probes into market manipulations while 26 cases are in progress, it said.

Among these, eight previously concluded cases during the infamous ‘pump and dump’ era were re-opened amidst further investigations into three cases which were reopened in 2015 are being conducted. “As at end 2016 further investigations into these cases were in progress.” Certain cases were awaiting the Attorney General’s (AG) opinion, the SEC report revealed.

“We continued to upgrade our investigative skills in order to effectively detect and investigate potential securities law violations. During the year, the new investigation team was able to complete three investigation and four others are at different stages of completion,” SEC chairman Tilak Karunaratne has said in his annual statement. Being a signatory to the International Organisation of Securities Commissions (IOSCO) Multilateral Memorandum of Understanding (MMoU), the SEC successfully sought assistance from several jurisdictions to conduct investigations, he said.

The SEC in 2016 revisited a number of recently concluded investigations, and, finding them to have been summarily assessed and prematurely concluded, decided to subject them to further scrutiny, the SEC Director General Vajira Wijegunawardane has said in his statement.
“Our Investigations Division in now entrusted with a larger-than-usual caseload, the handling of which, to date, has been laudable,” he has added.

Investigations of a criminal nature are often long-drawn and time-consuming, but these investigations are being duly conducted, he has said noting that with enforcement actions in several cases are imminent over the next year. “We are well-prepared for the journey ahead and prevail upon regulatees and participants alike for their cooperation in ensuring that the capital market of Sri Lanka is at its safest-year for investors.”

The SEC aims to install a technologically advanced system for market surveillance and regulatory reporting to ensure that transactions are carried out in compliance with the rules governing capital market activity, the report alluded noting that such a system would enable the regulator to detect and deter potential market abuse and enhance its ability to pre-empt the occurrence of disruptions in the market as a result of irregular trading activity.

Not only direct participants, but others in the periphery will also be scrutinised by SEC in the future. “It is also proposed to cast duties on supplementary service providers including those hitherto unregulated by the SEC. This is to ensure that such persons remain accountable for the scope and quality of work performed in relation to the capital market. The SEC also hopes to extend its regulatory reach to encompass other hitherto-unregulated entities and instruments,” the report said.

During the past year the regulator handled 52 complaints, conducted 93 On-site inspections, 2,347 off-site reviews, provided 13 analytical trading reports to law enforcement agencies, sought clarifications / cautioned 36 brokers / traders and 23 investors through market monitoring and compiled 7- surveillance referrals, the report added.

www.sundaytimes.lk

Sri Lankan shares end steady; foreign buying seen

Reuters: Sri Lankan shares ended little changed in thin trade on Friday, as gains in financials and telecom shares were offset by losses in beverage stocks, even as foreign investors continued to be net buyers.

The Colombo stock index ended almost unchanged at 6,666.05. On Tuesday, the index recorded its lowest close since June 13.

Shares of large cap Ceylon Tobacco Company Plc fell 0.1 percent, while Hatton National Bank Plc rose 1.4 percent.

Turnover stood at 625.8 million rupees ($4.07 million), around two-thirds this year's daily average of around 896 million rupees.

"The market is looking for positives and the negativity is fading away," said Reshan Kurukulasuriya, chief operating officer of Richard Pieris Securities (Pvt) Ltd.

Foreign investors bought net bought shares worth 402.6 million rupees on Friday, extending the year-to-date net foreign inflow to 25.7 billion rupees.

Stockbrokers said market sentiment has improved after the government approved a key port deal.

Sri Lanka will finally sign a $1.1 billion deal on Saturday to lease the southern Hambantota port to China, after several months of delay caused by local protests and claims by opposing politicians that this would threaten national security. 

($1 = 153.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan shares end steady, hover near 6-wk closing low

Reuters: Sri Lankan shares ended steady in thin trade on Thursday as gains in financials were offset by losses in industrial shares, with foreign investors continuing to be net buyers.

The Colombo stock index ended almost unchanged at 6,669.05. On Tuesday, the index recorded its lowest close since June 13.

Shares of diversified conglomerate Hemas Holdings Plc fell 1.0 percent, while Hatton National Bank Plc rose 0.13 percent.

Turnover stood at a one-week high of 780.9 million rupees, but less than this year's daily average of around 898 million rupees.

"The foreign buying is still there and we see local retail and institutional investors are settling for price," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Foreign investors bought shares worth a net 203.5 million rupees ($1.32 million) on Thursday, extending the year-to-date net foreign inflow to 25.4 billion rupees.

Stockbrokers said market sentiment has improved after the government approved a key port deal.

Sri Lanka's cabinet cleared a revised agreement for leasing its Chinese-built southern port of Hambantota on Tuesday, after terms of the first pact sparked widespread public anger in the island nation.

Colombo's overall macro-footing will improve upon the conclusion of the port deal, said Shailesh Kumar, Eurasia's senior analyst for Asia in a report. 

($1 = 153.6500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan shares recover from 6-wk closing low on bargain hunting

Reuters: Sri Lankan shares edged higher on Wednesday, ending a seven-session losing streak as investors bought battered down shares a day after the cabinet granted approval for a Chinese-built port lease deal.

The Colombo stock index rose 0.1 percent to 6,669.05, recoding its first gain in eight sessions. On Tuesday, the index had recorded its lowest close since June 13.

Turnover was at a near two-month low of 319 million rupees, around a third of this year's daily average of around 898.9 million rupees.

Sri Lanka's cabinet cleared a revised agreement for leasing its Chinese-built southern port of Hambantota on Tuesday which will bring in around 1 billion dollar inflow, after terms of the first pact sparked widespread public anger in the island nation.

"Bargain hunting in blue chips drove the market as people saw prices are attractive after two weeks of slump," said Reshan Kurukulasuriya, chief operating officer, Richard Pieris Securities (Pvt) Ltd.

Analysts said positive sentiment is returning to the market after the cabinet granted approval for the port deal and exchange control bill presented to parliament.

Foreign investors bought shares worth a net 38.8 million Sri Lankan rupees ($252,686) on Wednesday, extending the year-to-date net foreign inflow to 25.1 billion rupees.

Shares of conglomerate John Keells Holdings Plc rose 0.8 percent while DFCC Bank Plc ended 1.2 percent firmer and Commercial Leasing and Finance Plc rose 3.45 percent. 

($1 = 153.5500 Sri Lankan rupees) 

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

Chevron Sri Lanka unit June net down 34-pct to Rs526mn

ECONOMYNEXT – Chevron Lubricants Lanka’s net profit in the June 2017 quarter fell 34% to Rs526 million from a year ago as floods triggered by heavy rains dampened demand for lubricants.

Sales fell 19% to Rs.2.28 billion during the quarter while earnings per share (EPS) were Rs2.19, according to interim results filed with the Colombo stock exchange.

Chevron Lubricants Lanka’s share last traded at Rs160. EPS for the six months to 30 June 2017 were down 25% to Rs5.62 with sales down nine percent from the year before.

Bigger storage facilities at the new plant of Chevron Lubricants Lanka had helped the firm improve profit margins in 2016, its chairman Farrukh Saeed said in its annual report.

Stockbrokers Bartleet Religare Securities attributed the June 2017 quarter fall in profit of Chevron Lubricants Lanka to floods which had reduced demand for lubricants.

“Reduced top line contribution from the indirect channel following the torrential rains trickled down to the bottom line,” it said in a note on the June quarter results.

Chevron Lubricants Lanka’s June quarter EPS of Rs 2.19 were below its forecast of Rs2.99.

“The variance was due to revenue decline though the lower cost of goods sold could not match the revenue shortfall,” it said.

Lower sales were mainly due to the loss of revenue from the indirect channel which could be mainly attributed to the impact from floods that hindered the demand for lubricants, Bartleet Religare Securities said.

Ceylon Guardian realizes capital gains in face of tax uncertainty

Not best of times to sell but uncertainty on capital market taxes forced our hand, says chairperson

Ceylon Guardian Investment Trust PLC, the country’s wealthiest quoted investment trust, had encashed some unrealized capital gains in its portfolio last year, selling down at a disadvantageous time over concerns on new taxes, the company’s recently released annual report said.

Saying they were carrying "significant" capital gains in their portfolio as a result of a strategy of value driven long term investing, "in order to protect shareholder returns we realized profit on investments that had significant gains over the years," it said.

As a result they had divested "significant positions" in John Keells Holdings, Commercial Bank, Sampath Bank and Tokyo Cement "to secure gains to shareholders under the present tax regime."

"This divestment was prompted by an anticipated tax on share trading as a business," the report said. "It is of significant concern that tax issues have caused us to sell at an unsuitable time. Nevertheless, as a cautionary measure, we decided to realize the higher accumulated gains."

Guardian which is the holding company of the investment business of the Carson Cumberbatch Group held an investment portfolio worth approximately Rs. 18.7 billion as at Mar. 31, 2017. The holding included stakes in some of the country’s best blue chips.

The year under review saw the Group posting an attributable profit of over a billion rupees, double that of the previous year largely on account of capital gains.

Mrs. Rose Cooray, the company’s chairperson, said in the report that the group had performed exceptionally well in a turbulent environment with its discretionary portfolio significantly outperforming the All Share Price Index of the Colombo Stock Exchange during a three-year period by posting a compounded annual growth rate of 4.37%.

"The discretionary portfolio provided a 9.10% annual return for the financial year in a flat market environment," she noted.

On realizing capital gains on some blue chips in the portfolio, Cooray said: "Though it was not the best of times to sell out, lack of confidence in the direction of capital market taxes forced us to realize gains at a sub-optimal point of time to protect shareholder returns."

Guardian’s top five holdings at the end of the year under review comprised HNB, Sampath, Cargills, Commercial Bank and Dialog with a market value opf Rs. 5.25 billion comprising over 40% of its discretionary portfolio.

Carsons which is the controlling shareholder of Guardian holds 67.15% of the company with the second biggest shareholder, Thurston Investments Ltd. owning 3.74% and the EPF 3.58%. The ETF too has 0.59% with some foreign funds and high net worth investors being among the top 20 shareholders with individual stakes of below 2%.

The directors have proposed a dividend of Rs. 4 per share for the year under review, up from Rs. 3 a year earlier. The Guardian share closed at Rs. 90.10 on Mar. 31, 2017, down from Rs. 119.70 a year earlier, trading between a high of Rs. 175 and a low of Rs. 89 during the year under review.

The directors of the company are Mrs. Rose Cooray (chairperson), Messrs. DCR Gunawardena, VM Fernando, K. Selvanathan, CW Knight, TCM Chia and Mrs. WYR Fernando who succeeded Mr. I. Paulraj who resigned on 15.8.16.

www.island.lk

"Government too burnt by its alcohol policy folly" - Lion Brewery CEO

The taxes on beer is killing demand and since the 70% tax increase in October and November of 2015 beer industry volumes have decreased 40%, Mr. Suresh. K. Shah, the CEO of Lion Brewery (Ceylon) PLC has said in the company’s annual report.

"In the meanwhile arrack – the tax on which was increased by a relatively modest 25% - has seen 12% growth in volumes," he said. "At first glance this might seem a reduction in overall consumption. However arrack has approximately four times the pure alcohol content of beer. Thus while literage may have declined, the pure alcohol intake in the country has increased."

Shah has argued that it is well-accepted fact both in Sri Lanka and abroad that mild alcohols are less harmful than spirits. Thus globally, on average, spirits are taxed twice as much as beer from the perspective of the pure alcohol content in each beverage.

"In Sri Lanka, the reverse is true and beer is taxed 1.5 times more than spirits. Viewed in this context, the tax changes made in October and November 2015 are not rational and cannot be justified. It then begs the question, why?" he said.

Shah says that if the intention of the steep tax increase on beer was to reduce consumption of legally made alcobevs (alcoholic beverages) it has not worked because arrack volumes have grown to compensate.

"Had the intention been to reduce consumption, the tax on arrack – a product far more harmful than beer – should also have been increased by or about 70%. Yet this was not the case.

"Had the intention been to increase revenue to government, that too has been a failure. In Sept. 2015 – the month before the tax increase - the beer industry paid excise taxes of Rs. 2,161 million. In the first quarter of 2017, average monthly revenue from the beer industry is down to Rs. 1,156 million."

He has calculated that if loss in government revenue is annualized, the loss per year would be Rs. 12 billion and said "thus the government too has been burnt by its alcohol policy folly."

Shah has described the ‘beer can tax’ introduced in November 2016 as a "world first." This imposes a tax of Rs. 10 and Rs. 15 for cans below and above 350 ml. He has asked why only beer cans. If the intention was to protect the environment, why not tax similar packaging of other products including beverages.

"All these taxes on the beer industry have sent a strong message to consumers: ‘If you must drink,drink hard alcohol.’ A government policy of promoting hard over soft alcohol is surprising to say the least but consumers facing a challenging economic environment and rising cost of living responded as expected. Beer sales fell and arrack volumes grew," Shah said.

He says that alcohol consumption in Sri Lanka is driven first by illicit alcohol, then by hard alcohol and finally by toddy. Of these, illicit alcohol and toddy are outright dangerous since they are produced under questionable conditions using even more questionable ingredients.

"Legally produced hard alcohol is less harmful than illicit (alcohol) and toddy but certainly more injurious than the much milder beer and wine," Shah has said.

They had brought these points to the attention of appropriate policymakers a number of times and they have not refuted this point of view. But "for reasons best known to them, they have persisted with an alcohol policy that drives consumption of harmful products while marginalizing revenue to government."

www.island.lk

Vallibel Finance assets reach Rs. 30 bn, pre-tax profit passes Rs. 1.39 bn

Vallibel Finance PLC reported its strongest performance ever on the back of a yet another resoundingly impressive financial year with key indicators for the year 2016/2017.

Gross profits rose by a momentous 45.30%, crossing the 1 billion threshold reaching Rs. 1.3 billion as against the previous year’s figure of Rs. 911 million. The announcement comes in the wake of two global awards for the company from the Banking & Finance Review, capping an extraordinary year of highs.

Income, despite challenging times across markets, grew impressively, reaching Rs.5 billion. The increase in gross income marked a 47.5% increase over the previous year’s figure of 3.46 billion, further consolidating the company’s ability to steer through stormy waters.

“A truly triumphant year, indeed for Vallibel Finance to record its best ever performance and to walk away with two prestigious global awards are laurels that make the entire Group proud of its name-bearer.” says Dhammika Perera, Executive Director and Founder Chairman of Vallibel.

Rising public confidence in Vallibel Finance was once again illustrated by deposits which amassed to Rs. 17.8 billion from the previous year’s Rs. 14 billion, a significant rise of 20.67% considering a highly competitive outlook in deposits mobilization. “The public has once again showed its unbridled confidence in us as our annual report shows a year of unparalleled highs in the history of the company in which Vallibel Finance was also bestowed with international recognition, says Jayantha Rangamuwa, Managing Director of Vallibel Finance.

Crossing yet another milestone was the company’s asset base which leapfrogged to Rs. 30.7 billion from Rs. 22.8 billion in the previous financial year. The 34.8% growth in this key indicator mutes testimony to a new-age financial tradition in the making.

www.dailynews.lk

Fitch affirms ratings of 10 Lankan finance companies

Fitch has affirmed ratings of 10 Sri Lankan finance companies. They are, People’s Leasing & Finance, Central Finance Company, Melsta Regal Finance Ltd, HNB Grameen Finance Limited, LB Finance PLC, Siyapatha Finance, Senkadagala Finance, AMW Capital Leasing and Finance, Singer Finance and Mercantile Investments and Finance. In addition, Fitch assigned Siyapatha’s proposed subordinated debentures an expected rating of ‘BBB+(lka)(EXP)’.

The rating actions follow Fitch’s periodic review of the large and mid-sized finance companies in Sri Lanka.

Fitch expects capitalization in the sector to come under pressure as a result of asset quality pressures stemming from a challenging operating environment and unfavorable weather conditions and declining profitability due to higher funding and credit costs.

Fitch sees that the shift in the business mix of the entities considered in this peer review has become more apparent given the slowdown in the vehicle financing segment following the increase in import tariffs, imposition of lower allowable loan-to-value ratios coupled with a high interest rate environment.

www.dailynews.lk

Car registrations decline

Car registration has declined in June compared to May. However brand new motor cars registration has shown a marginal increase by 6% from 982 in May to1,044 in June. However the small car segment share dropped slightly from 94% to 92.6%.

Financing share for Large cars declined from 37.5% to 26.8%, medium car financing share increased from 25.7% to 30.5%. Small car financing share increased from 58% to 61%. Overall financing share for brand new cars increased from 56% to 59%.

Pre-owned motor cars declined MoM by 4% but increased YoY by 38%. Suzuki performed slightly better owning to the Wagon-R. Medium car segment share for Pre-owned cars declined from 55% in May to 49% in June. Overall financing share for pre-owned cars increased from 49.3% to 53.6%.

Overall premium motor cars observed significant growth from last month, further it has also reached its highest in the year so far.

Brand new premium cars were led by Mercedez Benz(E-Class) and the Audi ( A-6). Used premium cars were led by BMW 5-series and Mercedez Benz E-class.

Electric cars also got a slight relief from its downward trajectory, increasing from 9 in May to 13 in June. SUV’s continued its momentum increasing from 472 in May to 492 in June. Brand new SUV’s were up by 30% MoM while pre-owned SUV’s declined by 3%. No significant changes in Hybrid category. Toyota’s witnessed a decline especially the Axio (from 539 to 493 in June).

Van registrations declined in June, with both Midsize vans’ and mini vans declining. Financing share increased marginally from 69.6% to 71.1%.

3-wheelers continued its upward trajectory, increasing by 12.5% MoM. Financing share increased from 59.7% in May to 63.4% in June. 2-wheelers declined in June by 11.6% MoM. Scooters also observed a decline from 17,783 in May to 14,846 in June.

Financing share for 2-wheelers remained at 71%. No major changes for Pickup registrations from last month.

Meanwhile the registratrion of mini trucks has increased by 12% MoM. Brand new Mini trucks totaled 230 in June in comparison to 197 in May.

Mahindra observed a growth in market share from 16.8% to 20.9%.

www.dailynews.lk

Amana Bank doubles capital, Rights Issue oversubscribed

Amãna Bank was infused with over Rs. 4.75 billion to its capital base, when its shareholders expressed confidence in the Bank resulting in its recent rights issue being oversubscribed.

In doubling its capital, the Bank issued 1,250,695,567 ordinary voting shares in the ratio of one new share for every share held at an issue price of Rs. 3.80 per share. With the fresh capital input, the Bank has comfortably met the statutory capital requirement of Rs. 10 billion, well ahead of the January 2018 timeline. Subscribing to the Rights Issue, IB Growth Fund (IBGF) together with their ultimate parent company Islamic Development Bank (IDB), have increased their shareholding to 29.9% of the Bank, showing strong confidence on the Banks future and the country’s economic progress and future prospects, despite Sri Lanka being a non-member country of the IDB. Commenting on the successful rights issue campaign, the Bank’s Chairman Osman Kassim said “The oversubscription of the Bank’s Rights Issue signifies the confidence our shareholders have in Amãna Bank’s journey and we are really honoured and grateful to have their support and commitment. This capital infusion will take the Bank to greater heights”

Chief Executive Officer Mohamed Azmeer said, “I am very optimistic of our future and look forward to the excitement and challenge as we enter our next phase of growth.”

www.dailynews.lk

NDB records highest ever Profit After Tax of Rs 2.3 bn

National Development Bank PLC (NDB) concluded the first half of the financial year with a record Profit After Tax (PAT) of Rs 2.3 billion (81% growth YOY).

This is the highest recorded PAT for the Bank in its history for the first half of a financial year, which was supported by commendable growth in core banking operations and dividend contributions from Group companies.

The reported growth levels for the Bank’s Profit Before Tax (PBT) of Rs 3,814 million was 70% over the comparative period of H1 2016. It is noteworthy to mention that the PBT and PAT of the Bank, excluding the Group dividends grew impressively by 56% and 63% respectively, which is a clear reflection of the strong performance of the core banking operations.

The Balance Sheet grew by 9% in 6 months and stood at Rs 365 billion. This was supported by the growth in loans and advances to customers which grew by 11%, (by Rs 24.8 billion) and deposits by a notable 17%, (by Rs 35.5 billion), furthering the growth momentum achieved in the first quarter of the year.

The Director, CEO of NDB, Dimantha Seneviratne, sharing his views on the performance of the 1st half, mentioned that the Bank has been able to well maintain the sound growth coming from all the sectors diversifying the core banking income base.

Net interest income (NII) recorded a 17% growth over the corresponding period to Rs 4,746 million. This growth is satisfactory in an environment where the loan book has grown by 11% where further volatility and downward trend in interest rates are noted.

Net fee and commission income grew by 6% in H1 2017 over H1 2016 up to Rs 1,141 million. The Bank envisages stronger growth in net fee and commission income in to the future. Improving the net interest income to net fee and commission ratio up 30:70 ratio is one of the key strategic priorities of the Bank.

Net gains from trading of Rs 533 million grew by 17% in H1 2017 over the comparative period. Other operating income was Rs 1,197 million and included dividend earned from the NDB Group companies.

The total impairment charges for H1 2017 was Rs 581 million, a reduction of 30% compared to H1 2016. The sound credit review and monitoring processes have resulted in reduced impairment charges which are also reflected in an improved Non-Performing Loan ratio (NPL) for H1 2017.

Total operating expenses were kept under close watch with only a 5% increase over the prior period. Managing growth in operating costs, amidst accelerated business growth and inflation is one of the key challenges managed well via structured and focused cost management initiatives, as opposed to cost cuts.

The Bank made encouraging strides in the Balance Sheet (growth of 9%) during the first half of 2017 to reach Rs 365 billion with a quantum growth of Rs 30 billion. Asset growth was supported by the growth in loans to customers by an 11% growth, to close at Rs 252 billion, (by Rs 24.8 billion). its grew by an impressive 17%, (by Rs 35.5 billion).
www.dailynews.lk

Sri Lankan shares hit 6-week closing low

Reuters: Sri Lankan shares closed marginally weaker for a seventh straight session on Tuesday, but analysts expect sentiment to turn positive following cabinet approval for a Chinese-built port.

The Colombo stock index fell 0.03 percent to 6,662.34, marking its lowest close since June 13, and its tenth fall in 11 sessions.

Sri Lanka's cabinet cleared a revised agreement for its Chinese-built southern port of Hambantota on Tuesday which will bring in around 1 billion dollar investment, after terms of the first pact sparked widespread public anger in the island nation.

"With the cabinet approval granted for the port deal and exchange control bill presented to parliament today, we might see some positive sentiment returning to the market," said Dimantha Mathew, head of research, First Capital Holdings

Sri Lanka parliament on Tuesday debated a new exchange control bill.

Foreign investors bought shares worth a net 47.2 million rupees ($307,592.05) on Tuesday, extending the year-to-date net foreign inflow to 25 billion rupees.

Turnover was 359.8 million rupees, well below this year's daily average of around 903 million rupees.

Shares of Ceylon Tobacco Company Plc fell 0.9 percent. 

($1 = 153.4500 Sri Lankan rupees) 

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

Sri Lankan shares post near 6-week closing low

Reuters: Sri Lankan shares fell for the sixth straight session on Monday to post a near six-week closing low, but brokers said the slide is slowing down.

The Colombo stock index fell just 0.08 percent to 6,664.12, but it marked the lowest close since June 13, and its ninth fall in 10 sessions.

"The market came down over the last few days due to profit taking, but it looks like the profit taking has come to an end and the market is consolidating at these levels," said Dimantha Mathew, head of research, First Capital Holdings.

Foreign investors bought shares worth a net 195.5 million rupees ($1.27 million) on Monday, extending the year-to-date net foreign inflow to 25 billion rupees.

Turnover was 502.6 million rupees, less than this year's daily average of around 907 million rupees.

Shares of Hemas Holdings Plc fell 1.8 percent while Ceylon Cold Stores Plc closed 1.14 percent weaker. 

($1=153.45 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; editing by Neil Fullick)

Sri Lankan shares post over 1-month closing low; blue chips lead

Reuters: Sri Lankan shares fell for an eighth session in nine in thin trade on Friday and posted a more than one-month closing low, with blue chips leading the losers.

The Colombo stock index ended 0.22 percent lower at 6,669.51, its lowest close since June 14, and its fifth straight session of falls.

"The market is bit slowing down and the local interest in the market was short lived," said Dimantha Mathew, head of research, First Capital Holdings.

"The market needs local investors to sustain the positive momentum. Foreign investors continue to buy."

Foreign investors bought shares worth net 6 million rupees ($39,062.50) on Friday, extending the year-to-date net foreign inflow to 24.8 billion rupees worth of equities.

Turnover was 516.8 million rupees, less than this year's daily average of around 914 million rupees.

Shares of market heavyweight John Keells Holdings closed 1 percent weaker and private lender Hatton National Bank fell 1.5 percent. 

($1 = 153.6000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan shares fall for seventh session in eight; foreigners buy

Reuters: Sri Lankan shares fell for a seventh session in eight on Thursday and posted their lowest close in a month with blue chips leading the losers.

However, foreign investors bought into risky assets, limiting the downside.

The Colombo stock index ended 0.16 percent lower at 6,684.47, its lowest close since June 19, and its fourth straight session of falls.

"Turnover was healthy and we still see foreign interest in equities. We see the support level at 6,650," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Foreign investors bought shares worth net 346.3 million rupees ($2.25 million) on Wednesday, extending the year-to-date net foreign inflow to 24.8 billion rupees worth of equities.

Turnover was 1 billion rupees, higher than this year's daily average of 914.1 million rupees.

Shares of Ceylon Tobacco Company fell 1.6 percent, while market heavyweight John Keells Holdings closed 0.6 percent weaker.

($1 = 153.6000 Sri Lankan rupees)

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan shares fall to 1-mth low; Chevron Lubricants leads

Reuters: Sri Lankan shares fell on Wednesday to a one-month closing low, marking their sixth losing session in seven, led by the decline in Chevron Lubricants Lanka after it reported a drop in the June-quarter earnings.

Chevron Lubricants stock lost 6.3 percent on Wednesday after the company reported a 34 percent fall in its second-quarter profit.

The Colombo stock index ended 0.59 percent lower at 6,695.23, its lowest since June 16, marking a third straight losing session.

"There was selling pressure after the Chevron Lubricants' earnings. Some other blue chips also were under selling pressure," said Dimantha Mathew, head of research, First Capital Holdings.

However, foreign investors continued to buy stocks. They were net buyers of shares worth 113.5 million rupees ($738,932)on Tuesday, extending the year-to-date net foreign inflow to 24.4 billion rupees worth of equities.

Turnover was 781.6 million rupees, less than this year's daily average of 912.8 million rupees.

Shares of conglomerate Hemas Holdings fell 3.6 percent, while telecom company Dialog Axiata fell 1.7 percent. 

($1 = 153.6000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares fall for fifth session in six

Reuters: Sri Lankan shares closed lower on Tuesday, marking their fifth session of decline in six, although foreign investors continued to buy stocks.

Domestic investors were concerned about a possible increase in interest rate, analysts said, after the International Monetary Fund said further monetary policy tightening in Sri Lanka was desirable until there were clear signs that inflationary pressures were subsiding.

Foreign investors were net buyers of shares worth 658.9 million rupees ($4.3 million) on Monday, extending the year-to-date net foreign inflow to 24.3 billion rupees worth of equities.

The Colombo stock index ended 0.09 percent lower at 6,735.04, marking a second straight losing session.

"The turnover was good and there was a huge interest in select shares," said Prashan Fernando, CEO at Acuity Stockbrokers.

Turnover was 1.25 billion rupees, more than this year's daily average of 913.4 million rupees.

Shares of large cap Ceylinco Insurance fell 7.35 percent, while Ceylon Tobacco Company edged down 0.8 percent.

($1 = 153.7500 Sri Lankan rupees)

( Reporting by Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares fall on profit-taking in blue chips

REUTERS: - Sri Lankan shares fell on Monday, after posting their highest close in more than 18 months in the previous session, as investors booked profits in blue chips.

However, foreign players bought stocks on expectations of strong corporate earnings, limiting the downside.

The Colombo stock index dropped 0.37 percent to 6,741.07, its fourth session of decline in five.

"There was some profit-taking. But the turnover level was good and foreign investors were still on the buying side," said Hussain Gani, deputy CEO, Softlogic Stockbrokers.

The market could see a rising trend if yields on fixed-income securities fall as expected by the central bank, said analysts.

The central bank expects a further fall in T-bill yields due to less pressure from government borrowing and a proposed new auction system, Deputy Governor Nandalal Weerasinghe said in an interview with Reuters last week.

Foreign investors were net buyers of shares worth 155 million rupees ($1.01 million) on Monday, extending the year-to-date net foreign inflow to 23.6 billion rupees worth of equities this year.

Turnover was 736.4 million rupees, less than this year's daily average of 911 million rupees.

New foreign investors have been buying Sri Lankan shares since the Pakistani bourse was upgraded as an emerging market from a frontier one, said analysts.

Brokers said domestic investors have been waiting for clarity on the proposed inland revenue legislation, which some companies expect would result in higher costs of production.

The IMF, which has long urged Sri Lanka to boost tax revenue through modernisation and simplification of its fiscal system, has urged the government to submit to parliament a new Inland Revenue Act.

Shares of private lender Hatton National Bank fell 1.9 percent, while Commercial bank of Ceylon Plc, the country's biggest listed lender, ended 0.4 percent lower. 

($1 = 153.7000 Sri Lankan rupees) 

(Reporting by Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan shares hit 18-month closing high on foreign buying

Reuters: Sri Lankan shares posted their highest close in more than 18 months on Friday led by foreign buying in blue chips on expectations of strong corporate earnings, while improved local buying also helped boost sentiment.

The Colombo stock index snapped three sessions of declines to end 0.41 percent higher at 6,766.14, its highest close since Jan. 8, 2016.

"Foreign investors have been buying because they expect improvement in earnings in the future," said Hussain Gani, deputy CEO, Softlogic Stockbrokers.

"They see value in our markets with lower PE ratio. Unless there is volatility in the exchange rate and interest rate, the market should gain with continuous foreign buying."

The market could see a rising trend if yields on fixed-income securities fall as expected by the central bank, said analysts.

The central bank expects a further fall in T-bill yields due to less pressure from government borrowing and a proposed new auction system, Deputy Governor Nandalal Weerasinghe said in an interview with Reuters on Wednesday.

Foreign investors were net buyers of shares worth 478.1 million rupees, extending the year-to-date net foreign inflow to 23.4 billion rupees worth of equities this year.

The day's turnover was 1.63 billion rupees, higher than this year's daily average of 912.1 million rupees.

New foreign investors have been buying Sri Lankan shares since the Pakistani bourse was upgraded as an emerging market from a frontier one, said analysts.

Brokers said domestic investors have been waiting for clarity on the proposed inland revenue legislation, which some companies expect would result in higher costs of production.

The IMF, which has long urged Sri Lanka to boost tax revenue through modernisation and simplification of its fiscal system, has urged the government to submit to parliament a new Inland Revenue Act.

Shares of conglomerate John Keells Holdings Plc closed 0.2 percent higher, while Commercial bank of Ceylon Plc , the country's biggest listed lender, ended 0.3 percent higher.

($1 = 153.7000 Sri Lankan rupees)

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

Sri Lankan shares post near 1-week closing low

Reuters: Sri Lankan shares posted their lowest close in nearly one week in low trading on Thursday as local investors booked profits while foreign players bought into risky assets, limiting the decline.

The Colombo stock index ended 0.11 percent weaker at 6,738.42, declining for the third straight session.

"Local retail profit-taking brought the market down," said Hussain Gani, deputy CEO of Softlogic Stockbrokers.

The market could see a rising trend if yields on fixed-income securities fall as expected by the central bank, said analysts.

The central bank expects a further fall in T-bill yields due to less pressure from government borrowing and a proposed new auction system, Deputy Governor Nandalal Weerasinghe said on Wednesday.

Foreign investors were net buyers of shares worth 166.3 million rupees ($1.08 million), extending the year-to-date net foreign inflow to 23 billion rupees worth of equities this year.

The day's turnover was 489.4 million rupees, compared with this year's daily average of 906.6 million rupees.

New foreign investors have been buying Sri Lankan shares since the Pakistani bourse was upgraded as an emerging market from a frontier one, said analysts.

Brokers said domestic investors have been waiting for clarity on the proposed inland revenue legislation, which some companies expect would result in higher costs of production.

The IMF, which has long urged Sri Lanka to boost tax revenue through modernisation and simplification of its fiscal system, has urged the government to submit to parliament a new Inland Revenue Act.

Shares of conglomerate John Keells Holdings Plc closed 0.1 percent lower, Trans Asia Hotels Plc fell 5.5 percent and Commercial bank of Ceylon Plc, the country's biggest listed lender, ended 0.3 percent weaker. 

($1 = 153.7000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan shares ends steady in moderate trade; foreigners sell

Reuters: Sri Lankan stocks ended steady on Wednesday as gains in consumer staple shares were offset by industrial stocks led by John Keells Holdings Plc, while concern over a proposed tax bill weighed on overall sentiment.

The Colombo stock index ended 0.03 percent weaker at 6,748.15, slipping from its highest close since Jan. 7, 2016, in the previous session.

"There was some trade by institutional investors. Other than that, the day was quiet," said Prashan Fernando, CEO at Acuity Stockbrokers.

However, Fernando said the market could see a rising trend if yields in fixed-asset income falls, as the central bank expected on Wednesday.

The monetary authority expects a further fall in T-bill yields due to less pressure from government borrowing and a proposed new auction system, the bank's deputy governor, Nandalal Weerasinghe, said.

The bourse saw net foreign outflows for the first time in 13 sessions, with net selling of 27.9 million rupees ($181,700) worth of shares. But foreign investors have been net buyers of 22.8 billion rupees worth of equities this year.

The day's turnover was 557.9 million rupees, off this year's daily average of 909.9 million rupees.

Analysts said new foreign investors have been buying Sri Lankan shares since the Pakistani bourse was upgraded to emerging market status from frontier market.

In May, index provider MSCI announced changes to its indexes as a result of its semi-annual market reclassification, including reclassifying Pakistan, and the addition of 57 securities and removal of 28 securities from its All-Country World Index.

Brokers said domestic investors had been waiting for some clarity on proposed inland revenue legislation, which some companies expect would result in higher costs of production.

The IMF, which has long urged Sri Lanka to boost tax revenue through modernisation and simplification of its fiscal system, has urged the government to submit to parliament a new Inland Revenue Act.

Shares of conglomerate John Keells Holdings Plc closed 0.6 percent lower, gains were led by Bukit Darah Plc which rose 4.3 percent. 

($1 = 153.5500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Robert Birsel)

Web of deals between Perpetual Treasuries, EPF, Sri Lanka Insurance, NSB revealed

ECONOMYNEXT - Sri Lanka's Employment Provident Fund, a state insurer and a savings bank, bought bonds originally held by Perpetual Treasuries at pre-arranged rates from PABC Bank, a commercial bank, a commission inquiring into a securities scam was told.

Richard Benedict Dias, head of PABC Bank's Treasury, said billions of rupees of bonds were bought from Perpetual Treasuries, a firm connected to ex-Central Bank Governor Arjuna Mahendran's son-in-law Arjun Aloysius, and re-sold to the Employment Provident Fund.

The bonds were bought by Saman Kumara, an official at the EPF, which is managed by the Central Bank, he said.

Dias said trades were also made with National Savings Bank and Sri Lanka Insurance Corporation, responding to questions by Commissioner Prasanna Jayawardene whether similar deals were made with other state entities.

The commission is inquiring into alleged rigged auctions of government bonds during 2015 and 2016, where billions of rupees of bonds were bought by Perpetual Treasuries at high yields (low prices) and dumped mostly on the EPF at low yields (high prices), as well as on other entities.

Dias was examined by Perpetual Treasuries' lawyer Nihal Fernando on Tuesday, following evidence given earlier, where he had indicated that Perpetual's Aloysius had attempted to influence his testimony, pleading with him to come to his house.

Pre-arranged deals
Dias said he could not comment on the rates at which the deals were done on the instructions of Perpetual and did not examine the market to compare before carrying them out.

If SLIC bought the bonds, the onus was on the institution to do so, he said.

"We were told that SLIC had agreed to the rate," he said.

Dias said he could not recall whether any deals made with the NSB was made on the own initiative of PABC, outside of instructions received.

Deputy Solicitor General Milinda Gunatilleke played a taped conversation at the dealing room of PABC where dealers were talking about the apparent staged trades with EPF's Saman Kumara, shortly before calling to close a deal to sell bonds to the retirement fund.

Gunatilleke said the tapes showed that deals with EPF were not bona fide.

Commissioner Jayawardene said the commission will make up its mind whether the deals were done to mask the information that the original seller to EPF was Perpetual Treasuries.

PABC itself did not like to trade on its own account for long term bonds and preferred to deal in securities under five years, Dias said.

It bought bonds mostly to fulfil statutory and client requirements, Dias said. Some bonds it bought at auctions were sold back-to-back to Perpetual even before the settlement date, he said.

Perera Factor
PABC has started to do deals for Perpetual Treasuries at pre-arranged rates, following instructions from then PABC chairman Nimal Perera. PABC had also made a small margin on the deals.

Nimal Perera also had a portfolio and bought bonds through the PABC, Dias said. Nimal Perera later left the bank, after falling out with major shareholder Dhammika Perera.

Dias said he feared that he would lose his job for carrying out instructions of Nimal Perera after two other officials in another section of the bank who had provided loans and margin facilities were sacked. He understood that they had also given the facilities under instructions from Perera, he said. As a result, he feared that he may also lose his job, he said, though he was 'absolutely' sure that he had not done anything against the rules.

PABC's board had previously questioned him and he had explained but following media reports about PABC's involvement in bond deals. But he had fresh concerns.

He said he had heard from the Chief Executive's secretary that the CEO was concerned about the issue. Dias said he was aware that the bank was concerned over its reputation following an electronic media report.

Subsequently major shareholder Dhammika Perera had called him after meeting the CEO.

He was asked in Sinhalese whether any laws had been broken.

He had told Perera that he was sure that non had been broken, and that he had not even accepted a 'cup of tea' from these people (may golla), and only small profits were made from the deals.

Subsequently Aloysius had called him to ask why he said only small profits were made. Dias said he assumed a conversation had taken place between Perera and Aloysius.

Commissioner Jayawardene questioned who the 'maygolla' referred to in the conversation with Dhammika Perera, whether it was the nexus between Perpetual and the EPF.

Counsel for Aloysius questioned whether it was the practice of the bank CEO to brief all shareholders about the status of the bank. Dias said he was aware that Perera was briefed from time to time.