Credit risks high in Sri Lankan banks: S&P

ECONOMYNEXT- Sri Lankan banks have high credit risks due to slow economic growth, high credit growth and lax lending standards, ratings agency Standard & Poor (S&P) said in a report.

"The Sri Lankan banking sector's resilience is weak and is affected by the country's low income levels, with an estimated per capita gross domestic product of about US$4,050 in 2018," it said.

"Credit risk is high, in our opinion, given relaxed lending and underwriting standards as well as evolving risk management practices," S&P said.

"The credit risk is accentuated by high growth in credit in the past and a recent slowdown in GDP growth."

Bad loans increased to 3.6 percent of total loans in September 2018 from 2.5 percent at the start of 2018.

Weather disruptions which affected agriculture and related industries, along with bank's aggressive growth increased bad loans, S&P said.

The ratings agency is expecting bad loans to grow and remain around 4.5-5 percent of total loans over the next 12-18 months due to slower economic growth.

S&P said local banking regulations and supervision is lower than international standards.

Disclosures by banks are low but improving, it said.

However, industry risk is stable, S&P said.

Sri Lanka Fitch rates DFCC's debt at 'AA-(lka)(EXP)'

ECONOMYNEXT - Fitch Ratings said it has assigned DFCC Bank's proposed Sri Lanka rupee-denominated senior debentures an expected National Long-Term Rating of 'AA-(lka)(EXP)'.

The notes, which will total 10 billion rupees and be listed on the Colombo Stock Exchange, will mature in five, seven and 10 years and carry fixed coupons, a statement said.

The bank plans to use the proceeds to support its loan expansion and to better manage its assets and liability mismatches.

The final rating is subject to the receipt of final documentation conforming to information already received, Fitch Ratings said.

“DFCC's National Long-Term Rating captures its developing commercial-banking franchise, relatively weak asset quality and earnings, and our expectation that DFCC would maintain higher capital buffers than similarly rated peers.”

The bank's senior debt ratings will move in tandem with its National Long-Term Rating, Fitch said.

“An inability to replenish its capital buffers to a level that is commensurate with its risk profile could pressure DFCC's National Long-Term Rating. Fitch sees limited upside for the bank's ratings due to its weak franchise.”

Sri Lanka’s 01-year Treasury yield down to 10.69-pct

ECONOMYNEXT – Sri Lanka’s one-year Treasury Bill yield edged down one basis point to 10.69 percent at Wednesday’s auction, according to data from the public debt department of the central bank.

It offered five billion rupees worth of 06-month bills but rejected bids of 6.8 billion rupees. The 03-month bills were not offered.

The public debt department accepted 21 billion rupees of 01-year bills, having offered bills worth 16 billion rupees and getting bids worth 52 billion rupees.

Sri Lanka’s Dipped Products December profits double amid capital gain

ECONOMYNEXT – Sri Lankan glove maker Dipped Products said net profit shot up 266 percent to 766 million rupees in the December 2018 quarter from a year ago, helped by gains from selling a stake in a tea extracting subsidiary.

Sales rose five percent to 22;5 billion rupees in the period, interim accounts filed with the stock exchange showed.

Quarterly earnings per share were 12.79 rupees. EPS in the nie months to December 2018 was 6.65 rupees with net profit doubling to 609 million rupees.

The stock closed unchanged at 91.10 rupees Wednesday.

The account showed a gain of 205 million rupees on the sale of a stake in a tea extraction subsidiary, Hayleys Global Beverages (Pvt) Ltd.. to Germany’s Martin Bauer Group.

Sri Lanka's Asian Hotels and Properties December quarter net down 20-pct

ECONOMYNEXT- Sri Lanka's Asian Hotels and Properties, the city hotel and property development arm of John Keells Holdings, said net profits fell 20 percent to 245 million rupees in the December 2018 quarter from a year ago.

Quarterly sales fell six percent to 2.1 billion rupees over the same period, interim accounts filed with the stock exchange showed.

The firm, which operates Cinnamon Grand Colombo and Cinnamon Lakeside Colombo and Crescat Boulevard shopping mall, reported earnings per share of 55 cents.

In the nine months to December 2018, EPS was 1.19 rupees with net profit down 47 percent to 525 million rupees and sales down 11 percent to 5.7 billion rupees.

Shares of the firm, which has been facing competition from new city hotels recently, last traded at 41 rupees.

The accounts showed profits were lower from both its hotels and property businesses in the December 2018 quarter and first nine months of the financial year.

Sri Lanka's JKH net up 7-pct in Dec quarter

ECONOMYNEXT - Sri Lanka's John Keells Holdings, which has operations in logistics, leisure, consumer goods and financial services said profits grew 7 percent from a year earlier in the December 2018 quarter to 4.8 billion rupees, helped by container operations and a forex gain.

The group reported earnings of 3.46 rupees per share. For the nine months to December JKH reported earnings of 8.71 rupees per share, on total profits of 12.0 billion rupees which were up 9 percent.

Revenues grew 17 percent to 36.5 billion rupees, cost of sales grew at a faster 20 percent to 29.1 billion rupees and gross profits grew 7 percent to 7.37 billion rupees.

Finance income grew 48 percent to 3.8 billion rupees, helped by gains in foreign currency cash holdings.

On December 25, the firm had paid out 11.1 billion rupees to shareholders in a share buyback.

Pre-tax profits at its transportation group had risen 16 percent to 1.1 billion rupees with its container terminal in Colombo port growing volumes 8 percent. SAGT had handled an all time high of 2 million containers in 2018, out of a total of 7 million at the port.

Though Lanka Marine Services, JKH's ship bunkering unit had seen volumes grow 7 percent, profits had been hit by a sharp fall in oil prices.

Sri Lanka soft drink maker sees volumes plunge 23-pct

ECONOMYNEXT - Sri Lanka's John Keells Holdings group, which makes Elephant House branded soft drinks said sales of soft drinks plunge 23 percent in the December 2018 quarter from a year earlier, following a sugar tax.

"The decline in beverage volumes is due to the implementation of the sugar tax on CSD (carbonated soft drinks) which resulted in substantial price increases across the industry," the firm told shareholders in a quarterly report.

"However, it is encouraging that the growth in monthly volumes within the quarter has been on an upward trend."

Sugar taxes are a new European interventionist fad which gives unlimited potential room for the ruling class backed by a standing army and police to impose their vicarious desires on an unarmed citizenry, as obesity rose especially among rich kids, who are not getting enough exercise.

It is not clear whether the volume decline in Sri Lanka came from declining consumption by rich kids or thin kids of poor parents. Taxes were first implemented in rich countries.

Research in Mexico, which has a bad central bank with higher levels of inflation and currency depreciation with more poor people, has suggested it works mostly on the poor.

In general taxes on foods hurt poorer segments of the population most.

The tax has also made products made from unnatural sweetners cheaper pushing poor consumers in particular into chemical sweetners with no calorific value.

In South Asia people have traditionally consumed high volume of carbohydrates such as rice in place of proteins.

In Sri Lanka protein prices are also kept up articially high levels to give profits to maize farmers and an oligopoly of collectors with political connections, keeping poultry prices high.