Monday, March 11, 2013

Sri Lanka's larger bank improve margins with foreign borrowings: report

Mar 11, 2013 (LBO) - Sri Lanka's larger listed banks have improved margins as interest rates rose in 2012 helped by a bigger current and savings deposits base and foreign borrowings, an equities research report said.

 Net interest margins at Hatton National Bank had grown from 4.7 in December 2011 to 4.9 percent by December 2012, at Commercial Bank of Ceylon from 4.4 percent to 4.6 percent, at Sampath from 4.1 percent to 4.2 percent and NDB from 3.7 percent to 3.8 percent.

 At DFCC margins had fallen from 4.9 to 4.6 percent, at NTB from 4.5 to 4.3 percent at PABC from 5.4 to 4.6 percent and at Union Bank from 4.6 to 3.9 percent from December 2011 to 2012, a report by Capital Alliance Research said.

"Banks with higher CASA (current account savings account) ratios were able to improve NIMs (net interest margins) despite the increase in interest rates," CAL Research said.

"Larger banks accessed low cost foreign funding during 2012 which supported NIM improvement."

Sri Lanka's banking system was hit by a so-called balance of payments crisis, as the Central Bank held interest rates down in the face of already high credit growth, by sterilizing foreign exchange sales with central bank credit (printed money), worsening, credit, demand and imports.

Corrective measures were imposed in February allowing rates to go up and also raising energy prices, which reduced credit demand from state energy utilities. An 18 percent credit ceiling was imposed on banks, which could be raised to 23 percent with foreign borrowing.

Commercial Bank had increased foreign borrowings 48 percent, HNB 95 percent, Sampath 173 percent and NDB 170 percent.

At Commercial Bank foreign borrowings as a share of total funding had risen to 3.0 percent from 2.3 percent, at HNB from 2.2 to 3.6 percent, at Sampath from 3.1 to 6.7 percent and at NDB from 3.3 to 7.5 percent. At DFCC it had fallen from 2.1 to 1.4 percent.

 The report said the in December quarter, faced with the credit ceiling, most banks had concentrated on high yield clients to increase margins.

The report said Commercial, HNB and NTB had seen 18 percent loan growth, NDB and UBC 17 percent, DFCC 20 percent. Sampath had grown its loan book 24 percent with foreign borrowings and PABC had grown 24 percent with US dollar lending.

Most Sri Lankan banks were now trading at price to earnings multiples of less than 10 times profits, the report said.

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IFC & DEG to buy 10-pct each in Sri Lanka bank

Mar 09, 2013 (LBO) - The International Finance Corporation, a private sector financing arm of the World Bank and DEG, a German development financier will buy 10 percent stock each in a new Sri Lankan commercial bank.

 Cargills Agriculture and Commercial Bank is being promoted by Sri Lanka's Ceylon Theatres group.

 Sri Lanka's CT Holdings and Cargills (Ceylon) Plc said have agreed to subscribe 10 percent each in the bank subject to fulfilling "certain terms and conditions."

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Saturday, March 9, 2013

Crossings help turnover: Turnover tops a billion & indices up

The Colombo bourse yesterday closed the week on a turnover of Rs.1.21 billion, down from the previous day’s Rs.2.54 billion, with both indices up – the All Share by 11.37 points (0.20%) and S&P SL20 by 2.33 points (0.07%) with 139 gainers comfortably ahead of 74 losers while 99 counters closed flat.

Brokers said that the market gave some intra-day gains at close of trading with the All Share Price Index being over 20 points most the day.

Crossings in Ceylon Tobacco, JKH, ERI, Sampath and Royal Ceramics contributed Rs.717.5 million to turnover with Ceylon Tobacco, where over 0.4 million shares were crossed at Rs.800, contributing Rs.321.4 million to turnover.

JKH too saw over 1.2 million shares crossed in two parcels at different prices – one at Rs.233 and the other at Rs.234.50 contributing Rs.288.6 million to turnover.

Royal Ceramics yielded Rs.21.8 million with over 0.2 million shares crossed at Rs.98.10, ERI Rs.62.4 million with nearly 4.1 million shares crossed at Rs.15.30 and Sampath Rs.23.3 million with 0.1 million shares crossed at Rs.232.50.

Commercial Bank (voting) was the biggest turnover generator on the floor with nearly a million shares done between Rs.107.80 and Rs.109.40 closing 20 cents down at Rs.107.90 contributing Rs.103.5 million to turnover.

A large quantity of nearly 10.2 million Piramal Glass was transacted on the floor between institutions in deals worth Rs.61.2 million. The counter closed 20 cents down at Rs.6 trading between Rs.6 and Rs.6.10 contributing Rs.61.2 million to turnover.

Royal Ceramics was up Rs.1.30 to close at Rs.100 on over 0.4 million shares done between Rs.98.20 and Rs.101 contributing Rs.43.7 million to the day’s business volumes while HNB (voting), which had seen considerable interest recently, closed Rs.4 up at Rs.156 on nearly 0.3 million shares done between Rs.152 and Rs.156 generating a turnover of Rs.39 million.

HNB (non-voting) also moved up Rs.3.70 to close at Rs.127.40 on over 0.2 million shares done between Rs.123.50 and Rs.128.50 contributing Rs.27.3 million to turnover.

Renuka Shaw Wallace was up Rs.1.70 to close at Rs.20 on nearly 1.5 million shares, JKH down Rs.1.10 on the floor to close at Rs.233 on over 0.1 million shares and Asian Hotel Properties up Rs.1.40 to close at Rs.71 on over 0.2 million shares.

Renuka Holdings closed 50 cents up at Rs.31.30 on 0.5 million shares, Nation Lanka closed 40 cents down at Rs.9.50 on over 1.4 million shares and Janashakthi closed 50 cents up at Rs.12 on nearly a million shares.

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CSE up on large caps; rupee firmer

Reuters: Shares edged up on Friday for the third session, with the index ending at a two-week high even though many cautious retail investors awaited some direction on interest rates after the Central Bank held policy rates steady, brokers said.

 The Central Bank, before the market opened, left policy rates unchanged for a third straight month, as expected, saying inflation was expected to ease and reach more favourable levels by the end of the year.

The main share index rose 0.2%, or 11.37 points, to 5,691.39, its highest since 22 February.

 The Central Bank’s decision on rates came after yields on Treasury bills reversed their falling trend on Wednesday for the first time in 13 weeks.

 The day’s stock market turnover was Rs. 1.21 billion ($ 9.51 million), compared with a daily average this year of Rs. 1.05 billion.

 Foreign investors were net buyers of Rs. 206.1 million, extending year-to-date foreign inflows to Rs. 2.73 billion.

 The rupee ended firmer at a three-week closing high of 126.50/60 to the dollar compared with Thursday’s finish of 127.05/15, due to dollar sales by banks and exporters on expected foreign inflows to the stock market, dealers said.

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Friday, March 8, 2013

Market Snap shot - 08 03 2013

                                                   (click image to enlarge)

source - CAL Research

German, Dutch funds boost Colombo stock market

■ DEG and FMO buy collective 38% stake in Asian Alliance Insurance for Rs. 1.8 b; year-to-date net foreign inflow reaches Rs. 2.4 b

German and Dutch funds yesterday boosted the Colombo stock market as well as the financial services industry when they invested Rs. 1.8 billion to acquire a strategic collective stake of 38% in Asian Alliance Insurance Plc for Rs. 1.8 billion.

The stake amounting to 14.25 million shares were sold by Softlogic Holdings Plc and Softlogic Capital Plc at Rs. 128 per share to Deutsche Investititions-Und Entwicklungsgesellschaft (DEG), and Nederlandse Financierings Maatschappij Voor Ontwikkelinhslanden NV (FMO).

 The deal was first inked and announced in December last year subject to certain conditions being duly fulfilled.

 Selling broker was NDB Stockbrokers whilst buying brokers to the deal were Acuity Stockbrokers (DEG) and John Keells Stock Brokers. (FMO)

 Analysts noted the investment and resultant confidence by the two European financing agencies augured well for the stock market as well as the overall financial services industry, including insurance.Inclusive of the mega deal, the Colombo Bourse enjoyed Rs. 2.1 billion net inflow, bringing the year-to-date figure to Rs. 2.4 billion, according to Softlogic Stockbrokers.

 NDB Stockbrokers said foreign interest was also seen in Cargills Ceylon while the market strengthened further on interest witnessed in banking sector counters such as Hatton National Bank non-voting and Commercial Bank non-voting.

 Foreign buying, as well as relatively better local investor sentiments, boosted the stock indices which had its intra-day dips too, whilst turnover amounted to Rs. 2.5 billion..

 Ceylon Tobacco Company (+19.4%), Nestle Lanka (+3.5%) and Carsons Cumberbatch (+2.3%) weighted heavily on the index performance.

 Cargills saw 1.5 million of its shares traded for Rs. 237 million with the counter transacted several above 100,000 on-board deals during the morning session. Cargills traded lower with a dip of 0.2% to end at Rs. 151.

 In addition, premier blue chip John Keells Holdings witnessed significant investor play supported by a single 194,000 on-board transaction. The counter traded flat to end at Rs. 234.1.

 Retail activity largely centred on Nation Lanka Finance, PC House and Janashakthi Insurance.

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Merchant Bank’s income up by 22% in 2012

MBSL group reported an income growth of 22% to reach Rs. 3.8 billion in 2012. Assets under management of the company as at end of 2012 amounted to Rs. 12 billion and the group assets totaled to Rs. 22.5 billion representing a total asset growth of 21.7% and 17.1% respectively.

This significant achievement was possible amidst difficulties and challenges brought on by the volatile domestic and international market. As a result of the company’s comprehensive branch expansion drive in 2012, it led to an unprecedented opening-out of 16 new branches and extension offices in one day thus expanding the network to thirty. The negative performance of the stock market has also had a pessimistic impact not only the performance of the associate company- Lanka Securities Ltd., but also on the returns on investments in quoted shares. Rising interest rates further deteriorated the profitability of the company for the year 2012. MBSL Savings Bank which was acquired for resurrection also had a negative impact on the group profit due to inadequate capital.

 Although, a considerable expenditure had to be incurred on the network expansion, this will bring in better results in the years to come despite the negative impact on the profitability of the company for the year 2012. Several such new branches have been able to reach break-even point indicating the viability of the company’s vision.

The ‘Siyath Saviya’ micro financing project that was started with a small Rs 10 million base, in November 2010, is now showing strong growth and the loan portfolio has by now expanded to Rs 300 million. Within the past two years MBSL has been able to reach around 8,000 rural farmers and entrepreneurs to encourage them to forge ahead with their dreams of success. MBSL is confident that in the years to come, the micro credit programme will grow into a massive project that will improve the bottom line of the company and uplift the living standards of rural communities, while supporting the government’s drive to develop rural economies.

Merchant Bank of Sri Lanka PLC (MBSL), at present has Thirty (30) customer touch points located in the major cities in Sri Lanka namely,Colombo, Panadura, Ambalangoda, Deniyaya, Hingurakgoda, Kekirawa, Kandana, Embilipitiya, Bandarawela, Monaragala, Nittambuwa, Puttalam, Avissawella, Matugama, Mahayyawa, Ampara, Ratnapura, Kandy, Kurunegala, Galle, Maharagama, Anuradhapura, Negombo, Trincomalee, Ambalantota, Vavuniya, Batticaloa, Chilaw and Hatton. The company has a stated capital of Rs 1,607 million with its largest shareholder, the Bank of Ceylon holding a strategic stake of 72%. MBSL has entered into a strategic alliance in the year 2005 with SBI Capital Markets Limited which is the largest investment Bank in India.

The Board of Directors of MBSL comprises of a directorate who are eminent leaders in Management / Industry and other opinion makers in their own right, with affiliations to the private and public sectors. MBSL was awarded long term institutional rating of AA- and short term rating of P1 by RAM Ratings Lanka Limited.

Its subsidiary companies MCSL Financial Services Ltd, which has 13 branches island-wide including Jaffna and MBSL Insurance with 55 branches add strength and stability to the MBSL group. In addition, MBSL holds a 29% share of Lanka Securities Pvt Ltd.

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Wednesday, March 6, 2013

Bourse lures back Rs. 1 b net foreign inflow

Stock indices and local sentiments may be besieged, but the Colombo Bourse is luring back net foreign inflow.

 This week so far, the CSE has seen over Rs. 1 billion in net inflow thanks to persistent bullishness by existing and new funds on select blue chips.

On Monday there was a net inflow of Rs. 858 million followed by Rs. 282 million yesterday, bringing the year-to-date figure back to positive territory of Rs. 0.4 billion in net inflow. A few weeks back there was an outflow of over Rs. 1 billion.

 Softlogic Stockbrokers said the Colombo Bourse is currently witnessing a phase of stagnation as a result of macroeconomic uncertainty and negative investor sentiment clouding the direction of indices.
“It is notable that recent trend etched around prominence in banking and finance sector and a few selected large caps in specific dominating the market. The YTD net foreign outflow reversing justifies the confidence foreigners have placed on the Colombo Bourse, thereby picking on the attractively-priced companies with expected sustainable earnings growth potential. Local players in contrast are still bewildered by the downtrend with the echoing herd instinct. We reiterate pragmatic investors to step in at this point, thus not missing out the possibility of healthy returns stemming from a recovery,” Softlogic added.

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Colombo Dockyard profits up 28%

Colombo Dockyard Plc, a unit of Japan’s Onomichi Dockyard Co. Ltd, said profits grew 28 percent to 1.9 billion rupees helped by new buildings, amid tough conditions for ship repairs.

In the December quarter the group reported earnings of 434 million rupees, up 7.9 percent from a year earlier. The group reported earnings 6.11 rupees per share for the quarter and 27.81 rupees for the year.

Revenues rose 28 percent to 16.3 billion rupees and cost of sales also rose 28 percent to 13.4 billion rupees allowing gross profit to rise 30 percent to 2.9 billion rupees.

Revenues from ship building rose 43 percent to 11.0 billion rupees in the year.

The group said its focus and a reputation for building high quality support ships for the oil industry had brought benefits.

"Our focus on shipbuilding for the Offshore Supporting Vessels (OSV) market segment has also held us in good stead in that the strategic diversification decisions taken many years ago have seen us charter into niche areas, " Chairman Akihiko Nakauchi told shareholders in the annual report.

"The ship repair area of our business, meanwhile, did have to contend with survival strategy, where ship owners minimised spending and delayed repairs until statutory regulations dictate that repairs be completed."

In 2012, an anchor handling tug supply vessel and two multi-purpose platform supply vessels had been delivered.

Managing director Mangala Yapa said the order book was full and capacity fully utilized until the end of 2013.

Four platform supply vessels are to be completed in 2013, and another in 2014. Colombo Dockyard was also building two 400 passenger cum 250 tonne cargo vessels to be used by Lakshadweep administration in India.

Ship repair revenue rose 4.8 percent to 4.6 billion rupees, but the firm said there was less business from long-time India based customers, and overall market conditions were weak with prices slashed at Chinese yards. (LBO)

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NDB Capital Holdings records best ever year

NDB Capital Holdings PLC and its subsidiaries (NCAP Group) closed 2012 achieving by far the best year in its nearly thirty years of existence. "Owing to the capital gain of approximately Rs. 5.8 billion realized in December via the divestiture of its direct and indirect holdings in Aviva NDB Insurance PLC, the NCAP Group recorded a profit of almost Rs. 6.6 billion at group level," the company said in a statement.

"At the company level, the net profitability was almost Rs. 7.2 billion. The Company now plans to handsomely reward its shareholders in light of this colossal gain subject to requisite regulatory and legal clearances.

"The Company was re-launched during the year as a full service investment bank with NDB Stockbrokers (NDBS), NDB Investment Bank (NDBIB) and NDB Wealth Management (NWM) becoming fully owned subsidiaries of NCAP. This resulted in lower investible funds during the year though NCAP managed to perform exceptionally well in comparison to 2011. The revenue of NCAP adjusted for the abovementioned capital gain more than doubled to Rs.556 million in 2012 compared to Rs.271 million in 2011.

"This was translated to increased adjusted profitability in 2012 amounting to Rs.488 million, approximately 2.5 fold increase over the previous year. The revenue adjusted for the capital gain at Group level too increased by 2.6 times to Rs.792 million in 2012 compared to the prior year.

The adjusted group profitability followed suit by almost doubling in value to Rs.770 million compared to Rs.397 million in the previous year.

"The growth in profitability through efficient asset allocation was reflected in the Company and Group ROE (adjusted for the abovementioned capital gain) which increased from 4.4% and 7.0% respectively in the prior year to 10.3% and 13.5% respectively in 2012.

"The superior performance in terms of financials came despite adverse stock market conditions and credit ceiling imposed on the banking sector. The Group’s fee-based investment banking arm, NDBIB which was recognized as the Best Investment Bank in Sri Lanka by the Euromoney magazine in its Awards of Excellence 2012, carried out the two largest IPOs during 2012 out of the very few carried out during the year and also managed to raise over Rs.16 billion in the form of IPOs, private placements, securitizations, debentures, loans and commercial papers to leading corporates and multi-nationals in the country.

"With the expectation of the stock market bouncing back in 2013, NDBStockbrokers held its first ever overseas investor forum in Malaysia titled "Invest Sri Lanka" and was well received by Malaysian institutional investors. Also duringthe year, NDBS opened two dedicated service centres in Gampaha and Galle, further strengthening its distribution network.

"2012 was a historical year for the wealth management industry with NDB Wealth Management being the only private sector fund manager to cross Rs. 50 billion in assets under management. This was partly supported by the firm’s launching of two new funds, the "Eagle Money Fund" and the "Eagle Money Plus Fund", striving to meet short term savings and liquidity management needs of the Corporate and Retail clients.FurtherNWM managed to obtain a AAA rating from ICRA Lanka Limited for its "Eagle Gilt Edged Fund", another first in the country’s unit trust industry.

The Chairman, Mr. Ashok Pathirage commenting on the performance said "NCAP’s performance was truly admirable even if you disregard the mammoth capital gain which it realized during the year".

"NCAP, is steadily executing its business plan which is already being reflected in its financials and the shareholders stand to realize a large gain in the near future". He further added.

Furthermore, fulfilling a long felt need in the country’s debt markets, NCAP launched a family of bond indices for government securities in partnership with CRISIL Limited, India. This initiative was well received by industry participants as it marked an historical occasion in the development of government securities market.

Mr. VajiraKulatilaka, CEO said, "Our leadership position in the market has been reiterated by the achievements made throughout the year by the Group companies. All our companies have performed extraordinarilywell despite both the money market and the capital market being not very conducive for investment banking. Our unwavering commitment towards developing the Sri Lankan capital markets is clearly visible in our accomplishments".

NCAP is a 99.66% owned subsidiary of NDB.
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Saturday, March 2, 2013

Bourse closes week looking up - HNB dominates trading

The Colombo bourse closed the week looking up on a turnover of Rs.673.9 million, down from the previous day’s Rs.1.43 billion, with both indices up – the All Share by 16.79 points (0.30%) and S&P SL20 by 12.46 points (0.39%) with 125 gainers outpacing 82 losers while 104 counters closed flat.

Half the day’s turnover came off trades in HNB where two crossings of nearly 2.1 million shares at a price of Rs.149 generated Rs.310.6 million and floor trades of over 0.3 million shares contributed a further Rs.50.9 million.

Other crossings were Chevron where nearly 0.2 million shares were transacted at Rs.217.50 generating a turnover of Rs.38.4 million and Sampath where 0.1 million shares were crossed at Rs.235 contributing Rs.23.million to turnover.

HNB closed Rs.1.30 up on the floor at Rs.149 with over 0.3 million shares traded between Rs.147 and Rs.150 while Sampath closed a rupee up at Rs.235 on over 0.1 million shares done between Rs.232 and Rs.235.50 contributing Rs.31.5 million to turnover.

Royal Ceramics closed Rs.2 up at Rs.99 on 0.3 million shares while Ceylon Tobacco, which fell sharply on Thursday, regained some lost momentum closing Rs.32.50 up at Rs.755 on 20,799 shares traded between Rs.730 and Rs.770.

Among other most traded counters were Piramal Glass closing flat at Rs.6.20 on nearly 2 million shares, nearly 0.1 million HNB (non-voting) up Rs.3 to close at Rs.121 and 0.1 million Commercial Bank (voting) closing flat at Rs.109.

Lanka Walltiles announced an interim dividend Re.1 per share for 2012/13 XD from March 12 and with payment on March 21.

The Singer group announced dividends with Singer Sri Lanka to pay a final dividend of Rs.6 per share for 2012 XD from March 11 and payment on March 20, Regnis a final dividend of Rs.2.50 per share (all dates same for the group)and Singer Industries a final dividend of Rs.1.50 per share.

Seylan Developments announced a first and final dividend 25 cents a share for 2012 with dates to be notified while Nestle announced an interim dividend of Rs.30 per share for 2012 XD from March 11 and payment on March 20.

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Bourse rebounds

Reuters: Sri Lankan stocks edged up on Friday from a two-month low, led by large caps in thin trading volume, but stockbrokers said investor sentiment was hit by political and economic worries. The main share index rose 0.3%, or 16.79 points, to 5,652.69, from its lowest since 28 December.

“Local retailers are worried about what could happen to Sri Lanka in Geneva UNHRC sessions, while foreigners are concerned about the economy,” a stockbroker said on condition of anonymity.

 Sri Lanka is facing a United States-sponsored resolution in the United Nations Human Rights Council (UNHRC) sessions over human rights concerns in the final stages of its 2009 defeat of Tamil Tiger separatists.

Stockbrokers said local investors fear that resolution could result in sanctions that could hit the economy. The market has fallen 3.14% in thin volume since the IMF on 13 February said Sri Lanka was facing slow growth, high inflation and lower tax revenue risks.

 Cigarette manufacturer Ceylon Tobacco Co. rose 5.08% to Rs. 759.20. The day’s turnover of Rs. 673.92 million ($ 5.28 million), was well below this year’s daily average of Rs. 1.05 billion.

 Foreign investors sold a net Rs. 324.35 million worth of shares, extending the net foreign outflow so far this year to Rs. 539.16 million. The rupee ended steady at 127.40/50 to the dollar after a state bank, through which the Central Bank directs the market, sold dollars at a flat rate of 127.50, dealers said.
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