Commercial Bank first private bank to cross Rs. 1 trillion in assets in 2016

The Commercial Bank of Ceylon PLC continuing its good performance has reported profit before income tax (PBT) of Rs. 20.051 billion for 2016, marking the end of a spectacular year in which it made history as the first private bank in Sri Lanka to surpass a trillion rupees in assets.

In a media release, the bank said Profit before Value Added Tax (VAT) grew by 18.58 per cent to Rs. 23.755 billion. It said, that an increase in the financial VAT rate from 11 per cent to 15 per cent for four of the 12 months reviewed had resulted in the bank’s VAT expense for the full year increasing by 28.17 per cent to Rs. 3.703 billion, from Rs. 2.889 billion paid for 2015.

The 16.96 per cent growth achieved in PBT was bettered by the growth in profit after tax, which improved by 21.92 per cent to Rs. 14.513 billion during the year ending December 31, 2016, the media release added.

The bank paid Rs. 9.385 billion in taxes in respect of the year reviewed, an increase of 15.78 per cent even after discounting the Rs. 2.570 billion paid in 2015 as Super Gains Tax.

Commenting on these results, Commercial Bank Chairman Dharma Dheerasinghe, was quoted as saying: “The bank can take pride in the performance milestones reached in 2016, which reflect its ability to maintain its growth trajectory even in a rapidly changing environment. Doubling key components of our balance sheet in five years is no mean feat, and 2016 contributed significantly to this achievement.”

Managing Director/CEO Jegan Durairatnam observed that “Improvement in asset quality and a stable rating are testimony to balanced growth, while improving Return on Equity (ROE) attest to the direction of growth in our 48th year. The improvement in asset quality was key to improving profitability and reflects strong credit processes and an improved risk culture, particularly in our front lines which are responsible for accepting risk.”

Gross income of the bank improved by Rs. 15.275 billion or 19.62 per cent to Rs. 93.143 billion helped by a strong contribution from core banking activities with increased business volumes, which boosted interest income to Rs. 80.738 billion, a growth of 22.27 per cent, and Fee income increasing by 29.76 per cent to Rs. 8.143 billion principally through the growth of trade financing and card related business in the year reviewed.

Net loans and advances increased at a higher 21.24 per cent to Rs. 616.018 billion due to a reduction in impairment provisions required consequent to rigorous recovery efforts that resulted in a drop in non-performing loans (NPLs) in absolute terms, the bank said.

Deposits grew by 18.50 per cent to Rs. 739.563 billion as at December 31 2016.

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Unit Trust firms consider winding up, consolidation amidst regressive taxation

By Duruthu Edirimuni Chandrasekera

Removing tax incentives to the unit trust industry will see many asset management firms dealing mostly in unit trusts winding up or selling their firms to bigger counterparts, a top official said.

“There’s an acute disparity between the taxation say of a fixed deposit and a unit trust. This will force asset management firms to wind their unit trust businesses. We are certainly thinking about it,” Dilshan Wirasekara, CEO First Capital Holdings PLC which has an asset management business told the Business Times.

Since the inception of unit trusts in Sri Lanka, the Government has been granting some tax concessions to promote the industry. Through the 2012 Budget proposals the profits and income from redemption of units were exempted from income tax in the hands of the investors. This assisted the industry to collect funds from corporate investors who could enjoy a tax benefit of 18 per cent when investing in unit trust funds.

In the recent budget proposals, such benefits to corporate investors have been removed. This may initially result in an outflow of funds from the industry and exert pressure on the unit trust management companies, P. Asokan, Consultant SEC told the Business Times.

Removing the tax break would not be a problem as long as there is a level playing field between the tax impact to an investor investing through a unit trust fund or investing directly in a financial instrument such as treasury bills, bonds, debentures, commercial paper or bank fixed deposits is what the industry is calling for.

The basis for any investment should be the tradeoff between the risk you take and the return you get for taking the risk; and not the tax rate, said Vindya Jayasekera, Vice President NDB Wealth Management Ltd. “The budget 2017 proposes a withholding tax of 5 per cent for individuals investing in bank deposits while unit trusts would be subject to a 14 per cent withholding tax. Similar tax differentials proposed at various levels creates an unequal playing field and ultimately could lead to the deterioration of an industry that is established globally to improve investment opportunities to retail investors and enhance financial market efficiency,” she explained.

Unit Trusts provide investors opportunities to invest in markets like treasury bills, bonds, commercial paper etc. which most may not have access to. In spite of the benefits available to retail investors, the industry remains small and under-penetrated with assets of Rs. 100 billion (versus bank assets over Rs. 8 trillion), Ms. Jayasekera added. One reason for this, she says is that it may be because the tax rate for individual investors in unit trusts (10 per cent) was higher than the tax rate applicable to bank deposits (2.5 per cent) creating an unequal playing field between bank deposits and unit trusts for individual investors.

Mr. Wirasekara added that his firm will be focusing more on the wealth management business of their asset management firm. “We’ll be focusing on wealth management and products such as retirement planning.”

While the SEC has made representations pertaining to this, the word on the street is that these same budget proposals will remain.

However, creating a level playing field in taxation between unit trusts and bank deposits will certainly improve investor participation and in turn broadbase the asset ownership and increase efficiency of capital market, is what all industry participants say.

On the other hand the absence of this tax will persuade the unit trust management companies to focus on increasing their retail investor base and promote equity funds as these funds will continue to remain tax exempted in the hands of the investors, Mr. Asokan added.

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Pan Asia Bank posts record pre-tax profit of Rs.1.8 bln

Pan Asia Bank has closed its 2016 year recording a profit before tax of Rs 1.8 billion, up by 17 per cent over the previous year.

In a media release the bank said its post-tax profit was Rs.1.25 billion, surpassing its previous earnings record.

“This commendable performance is a result of the combination of factors from the timely re-pricing of assets and liabilities, re-calibration of assets in to more remunerative areas, better recoveries and asset quality, the relatively strong growth in loans and receivables and better management of costs in all areas of the banking business during the year,” the bank said.

Commenting on the performance, the bank’s Acting CEO, Lalith Jayakody attributed the performance to the proactive measures taken to successfully acclimatize the bank to the rising interest rate scenario from the beginning of 2016.

“Although the economic conditions were less supportive towards the banking and the financial services sector due to rising interest rates and the tightened credit conditions, we could still achieve these record numbers because we remained nimble to adjust ourselves fast to the new economic order. Our continuous efforts on upgrading the skills of our staff, improving the efficiency of our systems and processes by keeping a closer tab on our costs and investing in growth areas did yield us these record earnings,” he said.

The Return on Equity (RoE) which measures the return generated towards the shareholders, a widely used performance matrix in the banking industry stood at 19.97 per cent, above the industry average of 17.30 per cent. Pan Asia Bank remains among the few banks which have a RoE with a 20 per cent level, the release added.

Total operating expenses rose by 18.24 per cent predominantly due to increase in staff related expenses and other overhead expenses due to impact of tax hikes and inflationary pressures.

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Senthilverl sells 11% of Bogawantalawa to Metropolitan

Dr. T. Senthilverl, a major investor in companies quoted on the Colombo Stock Exchange, had last week sold a 9.3 million share block (1l.1%) in Bogawantalawa Tea Estates PLC to Metropolitan Resource Holdings PLC, the controlling shareholder of Bogawantalawa at Rs. 10 a share, the Secretaries to Bogawantalawa disclosed in a Stock Exchange filing.

Seylan Bank achieves milestone - Profit After tax exceeds Rs. 4 billion in 2016

Results at a glance

* Total assets up by 20% to Rs. 356Bn

* Net Loan book grows by 22% to Rs. 236Bn

* Customer deposits grows by 22% to Rs. 273Bn

* Profit after tax improves by 4.7% to Rs. 4,010Mn

In the backdrop of challenging external environment, Seylan Bank reported a resilient performance. The Bank recorded a Profit after tax of Rs. 4,010 Million for the year ended 31st December 2016, which is the highest profit reported since its inception.

Net interest income recorded a moderate growth of 12.03% as a result of the strong balance sheet growth. Net interest Margin contracted from 4.42% in 2015 to 4.19% in 2016 due to Cost of deposits increased at a faster rate.

Net fee and commission income witnessed a 15.04% growth from Rs. 2,697 Million to Rs. 3,103 Million during 2016, mainly attributed to core banking related business.

Other operating income comprising of net gains from trading, gains on financial instruments, gains on foreign exchange and other income decreased by 13.05% from Rs. 1,624 Million reported in 2015 to Rs.1,412 Million during 2016 mainly as a result of mark- to-market losses on Government Securities, due to the upward movement in interest rates.

Total Expenses recorded an increase of 12.76% from Rs. 8,625 million to Rs. 9,725 million. Expenses growth was witnessed by a higher proportion of investments being made towards branch upgrading and refurbishments, continuous development in human resources and technology which resulted in the underlying expenses increasing rapidly over the previous period. Bank continues to focus on Cost Management through strategic cost management initiatives and through the implementation of lean concepts.

The Bank reported a significant net credit growth of 22.22%, with net advances growing from Rs. 193,104 Million to Rs. 236,020 Million during 2016. The Gross NPA ratio has also improved to 4.47% in 2016 compared to 4.68% in 2015.

CASA growth slowed down with a notable shift from low cost to fixed deposits seen across the industry mainly due to increasing interest rates. As a result Bank’s CASA ratio (current & savings accounts) stood at 32.5% and total Time Deposits increased from 63.71% by end of year 2015 to 67.5% as at 31st December 2016 of the total deposit base. The overall deposit base recorded a growth of 21.79% from Rs. 224,525 Million by end of 2015 to Rs. 273,456 Million by 31st December 2016.

Consequently, the Bank’s Earnings per Share (EPS) grew from Rs 11.11 to Rs. 11.63. The Bank recorded a Return (profit before tax) on Asset (ROA) of 1.76% and Return on Equity (ROE) of 15.18%. The Bank’s Net Asset Value per share as at 31st December 2016 was Rs. 80.51 (Group Rs 84.13).

By end 2016 the Bank network comprised of 166 Banking Centres, 100 Student Savings Centres and 202 ATMs. Bank will continue to grow the Branch network to reach a larger spectrum of customers and widen the Bank’s geographical presence mainly to strengthen their on-going support for the growth and development of Small and Medium Scale (SMEs) Enterprises in the country. Further the Bank also re-located and refurbished 14 branches during the period to provide enhanced services to its customers.

The Bank remains well capitalised with a strong core capital adequacy ratio of 10.74% and total capital adequacy ratio of 13.18% as at 31st December 2016. In October 2016, Fitch reviewed the Bank’s rating and reaffirmed the Bank’s rating at ‘A-lka’ with a ‘stable’ outlook in January 2017.

Having successfully completed its 2012-2016 strategic plan and achieving significant strides in terms of SME coverage, retail growth, branch expansion and process improvement the Bank embarked upon developing its new 2017-2020 strategic plan in consultation with the Boston Consulting Group. The new plan will focus on an ambitious growth strategy built on the pillars of excellent customer service, product innovation and value addition aided by digital transformation.

As a responsible corporate citizen, the Bank continued focusing on education which has been the choice and centre of attention of its CSR activities. During the year 40 school libraries were opened taking the overall number of libraries opened under the project to 120 under "Seylan Pehesara" Project.

Media Contact

Tilan Wijeyesekera DGM (Marketing) Seylan Bank – 077 2268 600

Adahas PR : Kumar de Silva 0777 379 973.Tharindra Abeysekera 0777 560 611

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AIA Delivers Another Excellent Set of Results

VONB up 28per cent on constant exchangerates

Operating profit up 15 per cent — Final dividend up 25 per cent

The Board of Directors of AIA Group Limited ("AIA"; or the "Company"; stock code: 1299) is pleased to announce that AIA has delivered excellent results for the year ended 30 November 2016. Highlights are shown on a constant exchange rate basis:

Excellent growth in value of new business (VONB)

* 28 per cent growth in VONB to US$2,750 million

* 31 per cent increase in annualised new premiums (ANP) to US$5,123 million

* VONB margin of 52.8 per cent

Strong operating profit generation

* IFRS operating profit after tax (OPAT) up 15 per cent to US$3,981 million

* IFRS operating earnings per share up 15 per cent to 33.25 US cents

* Embedded value (EV) operating profit up 19 per cent to US$5,887 million

* Operating return on EV (ROEV) increased to 15.4 per cent

Robust cash flow and resilient capital position

* Underlying free surplus generation of US$4,024 million, up 11 per cent

* Free surplus of US$9.8 billion

* EV Equity of US$43.7 billion; EV of US$42.1 billion, up 12 per cent

* Net remittances of US$2.0 billion

* Solvency ratio for our principal operating company, AIA Co., of 404 per cent on the HKICO basis

Significant increase in recommended final dividend

* 25per cent increase in final dividend to 63.75 Hong Kong cents per share

* Total dividend of 85.65 Hong Kong cents per share, an increase of 23 per cent

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

"AIA has delivered an excellent set of results in 2016. We have achieved record new business profits, significant earnings growth, strong free surplus generation and a step up in shareholder dividends. Today’s headline figures, with VONB up by 28 per cent, and our consistent track record of year-on-year profitable growth are the direct result of the strong fundamental growth drivers in the Asia-Pacific region, our highly-diversified and resilient business model and our commitment to building a high-quality, sustainable business for the long term.

"The Board has recommended a further step up of 25 per cent in the 2016 final dividend from our higher base in 2015 to 63.75 Hong Kong cents per share. This dividend uplift reflects our excellent financial performance and our confidence in the future outlook for the Group.

"AIA has been in Asia for close to a century. The powerful structural economic, social and demographic changes taking place across the region present an unparalleled opportunity for the Asian life insurance industry and one which AIA, with our distribution reach, trusted brand, financial strength and people capabilities, is in an advantaged position to capture.

"We have made an excellent start to 2017 with strong value of new business growth in the first two months of our financial year. We have clear strategic priorities in place and are committed to building on our strong competitive advantages by helping our customers meet their long-term financial needs through our products and services. This provides us with a strong foundation to deliver profitable growth and long-term value for our shareholders, as we help our customers live longer, healthier, better lives and plan for a brighter future."

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Hotel Nippon opens to public after Rs400mn refurbishment

(LBO) – Sri Lanka’s Hotel Nippon has reopened for tourists looking for a more sophisticated level of accommodation with a 400 million rupee renovation and refurbishment.

“The hotel aims to cater to a completely new demographic and is equipped and designed to receive guests with various needs,” the hotel said releasing a statement.

“It aims at medical tourists, budget travelers looking for a more sophisticated level of accommodation, the business tourist who wants to be close to the Central Business district.”

The building was first built as Manning Mansions, apartments for the British during their rule, and was later converted to Hotel Polski briefly and then Hotel Nippon.

It is currently owned by 4 brothers: V.K. Chandrasena, V.K. Vasan, Dr. V.K. Valsan and the late V.K. Prasannan, all sons of the late Vethody Kumaran.

They have maintained some key elements of the building’s history, like the 130-year-old Burma teak staircases that runs through two areas of the building, and the 130-year-old antique Seth Thomas grandfather clock.

The iron beams that run through the skeletal structure of the building are all still in place since the time Nippon was first built as Manning Mansions, and have embossed seals on them that state their factory of origin.
They are from England during the mid 19th century.(LBO) – Sri Lanka’s Hotel Nippon has reopened for tourists looking for a more sophisticated level of accommodation with a 400 million rupee renovation and refurbishment.

“The hotel aims to cater to a completely new demographic and is equipped and designed to receive guests with various needs,” the hotel said releasing a statement.

“It aims at medical tourists, budget travelers looking for a more sophisticated level of accommodation, the business tourist who wants to be close to the Central Business district.”

The building was first built as Manning Mansions, apartments for the British during their rule, and was later converted to Hotel Polski briefly and then Hotel Nippon.

It is currently owned by 4 brothers: V.K. Chandrasena, V.K. Vasan, Dr. V.K. Valsan and the late V.K. Prasannan, all sons of the late Vethody Kumaran.

They have maintained some key elements of the building’s history, like the 130-year-old Burma teak staircases that runs through two areas of the building, and the 130-year-old antique Seth Thomas grandfather clock.

The iron beams that run through the skeletal structure of the building are all still in place since the time Nippon was first built as Manning Mansions, and have embossed seals on them that state their factory of origin.
They are from England during the mid 19th century.