European Banking Crisis & Sri Lankan Banks

lokka1 · 1 European Banking Crisis & Sri Lankan Banks Wed Oct 05, 2011 12:54 pm

lokka1

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Sri Lankan leading banking stocks are all going down despite good earnings and opening new branches in the north. I am a little curious whether the European Banking crisis is creating a contagion problem here? Does any forum member have any comments about this?
Lokka1

RIO · 2 Re: European Banking Crisis & Sri Lankan Banks Wed Oct 05, 2011 1:09 pm

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lokka1 wrote:Sri Lankan leading banking stocks are all going down despite good earnings and opening new branches in the north. I am a little curious whether the European Banking crisis is creating a contagion problem here? Does any forum member have any comments about this?
Lokka1

Dear Lokka1,

Not only Banks all financially sound & fundamentally strong counters are down or not appreciating in par with their real value....that's nothing to do with Global crisis...its due to "CSE CRAP Crisis" ( I guess this would be a perfect name to call the situation) Very Happy

and be informed here in SL you don't have to worry over Banking Crisis as out of all Commercial banks only 02 were not under control of GOSL directly or indirectly...and thats SAMP & PABC to name..then you may know all Devlopment Banks Savings Banks, Mortgage Bank & even Blood Bank are fully GOSL owned

Oh there are one more Bank on SL soil without GOSL control & its Word Bank Sl office

nuwank · 3 Re: European Banking Crisis & Sri Lankan Banks Wed Oct 05, 2011 1:55 pm

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RIO- is NTB under GOSL? Also, just curious as to why the CSE is to be blamed for Sri Lankan stocks going down. As you called it the"CSE CRAP Crisis"

The European banks are having issues only due to the fact that they hold huge amounts of Euro zone government debt. And when the govt debt market is in the process of defaulting on their obligations (Spain, Italy, Portugal etc), the commercial banks that are holding the debt will have liquidity issues. Also, when this happens, customers of these banks loose faith in these banks and start withdrawing money from them. This is turn is a vicious cycles that ultimately leads to bankruptcy. But, hopefully, before that happens, the EU central bank will intervene. The same thing happened with Northern Rock in the UK due to sub prime mortgages. But, the British govt. guaranteed the bank deposits of Northern Rock.
Sri Lankan banks have nothing to worry about anything that is happening in Europe, unless they hold EU govt debt. Which I doubt any of the commercial banks do.

dinu · 4 Re: European Banking Crisis & Sri Lankan Banks Wed Oct 05, 2011 2:24 pm

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RIO wrote:

lokka1 wrote:Sri Lankan leading banking stocks are all going down despite good earnings and opening new branches in the north. I am a little curious whether the European Banking crisis is creating a contagion problem here? Does any forum member have any comments about this?
Lokka1

Dear Lokka1,

Not only Banks all financially sound & fundamentally strong counters are down or not appreciating in par with their real value....that's nothing to do with Global crisis...its due to "CSE CRAP Crisis" ( I guess this would be a perfect name to call the situation)

and be informed here in SL you don't have to worry over Banking Crisis as out of all Commercial banks only 02 were not under control of GOSL directly or indirectly...and thats SAMP & PABC to name..then you may know all Devlopment Banks Savings Banks, Mortgage Bank & even Blood Bank are fully GOSL owned

Oh there are one more Bank on SL soil without GOSL control & its Word Bank Sl office

dinu · 5 Re: European Banking Crisis & Sri Lankan Banks Wed Oct 05, 2011 2:30 pm

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only SAMP and PABC opening branches rapidly. for me don't have a issue regarding SAMP.it's a high profitable bank.but PABC ??? as I can remember they had only 324Mn profit in last year where as NTB had 1bn and NDB had more than that.but NTB,NDB are not expanding there branch network like that.
according to my knowledge to establish a branch initial cost is more than 5Mn.
According to info I got government want to more and more job openings in the country...

lokuayya · 6 Re: European Banking Crisis & Sri Lankan Banks Wed Oct 05, 2011 2:34 pm

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When american Banks fell in last recession period Sri Lankan financial sector also suffered.Goldenkey key crisis was triggered,Seylan bank crisis ,then all the finance companies came under distress.
This is because public get panic and try to move in to government banks ,instruments etc.
If Euro banks fail ,we are not fully safe.there is a risk.So public confidence must be maintained to avoid such a panic situation.

RIO · 7 Re: European Banking Crisis & Sri Lankan Banks Wed Oct 05, 2011 2:38 pm

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nuwank wrote:RIO- is NTB under GOSL? Also, just curious as to why the CSE is to be blamed for Sri Lankan stocks going down. As you called it the"CSE CRAP Crisis"

NTB top 20 as at 30th June

Bank of Ceylon - No2 A/C 1,546,100 - 0.67%
Employees Trust Fund Board 1,366,900 - 0.59%
Sri Lanka Insurance Corporation Ltd-Life Fund 1,122,100 - 0.49%
&
John Keells Holdings PLC. 46,121,536 - 20.00%

JKH Top 20 as at 30th June
Employees Provident Fund 64,925,930 - 7.1%
Sri Lanka Insurance Corporation Ltd-Life Fund 14,288,150 - 1.7%

After 30th June EPF & ETF purchased some JKH shares (we have to wait till 31st sept Q report to verify)

Next:
I called "CSE CRAP Crisis" coz if you take a closer view on CSE you will get to know why the real valued stocks are not moving up...It's due to fake rallies made by few manipulators & mainly due to some foolish People (I don't want to call them as Investors) paying high value for crap stock....! Very Happy

Hash-gin · 8 Re: European Banking Crisis & Sri Lankan Banks Thu Oct 06, 2011 2:05 pm

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lokuayya wrote:When american Banks fell in last recession period Sri Lankan financial sector also suffered.Goldenkey key crisis was triggered,Seylan bank crisis ,then all the finance companies came under distress.
This is because public get panic and try to move in to government banks ,instruments etc.
If Euro banks fail ,we are not fully safe.there is a risk.So public confidence must be maintained to avoid such a panic situation.

There was fundamentally very little corelation to the mentioned events rather than the specific timing.
GK, SEYB crisis was triggered by the Ceylinco crash which was a time-bomb waiting to happen of an over-leveraged group that kept pilfering foregin exchange remiitances via its Western Union ( or similarchain) and paying clients in local borrwed currencies (which was obtain thorugh exhorbitantly high rates).

Finance companies were long opverdue for an overhaul in terms of cpaital adequacy.

Due to the fairly insular and local nature of the local banks the main concern is that overseas borrowing of FCY (namely USD) becomes increasing more expensive due to country risk and limited avaialibilty and appeitite in the market during such situations globally.
During the past crisis this triggered FCY borrorwing rates of AAA, AA rated local corporates to increase to close to LIBOR + 5 margins with some of the foregin banks ( which was considered cheap) and certain top rated local banks were charginign close to flat rates of 8-9%.

The real threat is on our export generating industries, Apparels, tradition exports, Rubber related exports ( Tyres etc), services where local cost of doing business rises and this in turn increases overall landed prices of the said products.

In this situation local banks which are well diversified locally have minimum risk as they are heavilty weighted on their Domestic LKR book as opposed to thier FCBU book which is fairly spread out due to the nature of the said clients in the FCBU book being multi banked.

The only internal banking crisis that will trigger is if there are banks under captilaised or their assets/ deposit ration is over a general norm within the industry. Another early indicator is when banks start paying above market ( significantly above govt TRY/ Repo ) rates for deposits e.g. Pramuka and even Gold Key.

In a nutshell the global crisis should be watched through the eyes of our corporates. This will be the first port of call.

This is more of an economic crisis than a financial linsittutions crisis. But remember overall returns of financial institutions globally are bound to fall, conversely with the levlel of economic actitivty in Sri Lanka top rated banks are bound to perform better than their peeers locally and globally.

Hope this helps in some form !!