Sri Lanka Newspapers Monday 30/04/2012

New MD, COO at Com Bank[b]

ri Lanka’s benchmark private bank Commercial Bank of Ceylon PLC has announced the appointments of Ravi Dias as Managing Director/Chief Executive Officer, and Jegan Durairatnam as Executive Director/Chief Operating Officer.

Ravi Dias possesses substantial professional experience in banking, out of which 17 years have been as a member of the Corporate Management. Since February 2008, he functioned as the Chief Operating Officer of the Bank and was appointed as Acting Chief Executive Officer on 27th February 2012. He holds a Degree in Law (LL.B) and is a fellow of the Chartered Institute of Bankers (London). He is also a Hubert. H. Humphrey Fellow. He was appointed to the Board of Directors of Commercial Bank of Ceylon PLC in December 2010.

He was the representative of the Sri Lanka Banks’ Association at the Ceylon Chamber of Commerce from 2008 to 2011 and since July 2011 functions as a Committee Member of the General Interest Group of the Chamber.

Jegan Durairatnam joined the Bank in 1982. His banking experience covers all aspects of International Trade, Off-shore Banking, Credit, Operations and IT. He has been in the Bank’s corporate management team for seven years. The holder of a Bachelors Degree from the University of Peradeniya, he has served Commercial Bank in several senior management positions, including Deputy General Manager, Assistant General Manager – International Division and Head of Imports.

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50755

Seylan Bank registered yet another impressive quarterly performance reporting a Net Profit-after-Tax of Rs. 406.8 million (Group Rs. 412.5 million) in Q1 of 2012, as compared with Rs. 256.3 million (Group Rs 249.0 million) last year. The performance is a 59 percent and 66 percent increase in Net Profits for the Bank & Group respectively over the corresponding period last year, the bank announced.

Compared to Q1 of 2011, Net Interest Income grew by 9 percent from

Rs. 1,878.4 million to Rs. 2,047.3 million, while Non Interest Income increased by 6 percent from Rs. 576.6 million to Rs. 612.7 million. Total overhead costs were tightly controlled at Rs. 1,699.5 million, as opposed to Rs. 1,669.9 million in Q1 last year. Profit before Tax was 60 percent above last year at Rs. 632.6 million.

In the quarter under review, strong and steady growth was evident in Total Loans & Advances and Customer deposits which grew by Rs. 8.4 billion and Rs. 4.2 billion respectively, which are growth rates of 28 percent and 14 percent (annualized) respectively. Total Assets too increased from Rs. 165.9 billion to Rs. 173.2 billion as of end March 2012.

The first quarter results have enabled Return on Assets (before tax) to improve from 0.99 percent to 1.5 percent and Return on Equity to improve from 6.72 percent to 9.24 percent since year-end.

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50754

Fitch Ratings Lanka has assigned People’s Leasing Company Plc’s (PLC, ‘A+(lka)’/Stable) proposed commercial paper (CP) issue of up to Rs. 500 million a ‘F1(lka)’ National Short-Term rating. This issue enhances the previous Rs. 1 billion issuance which was rated ‘F1(lka)’ on 23 March 2012, taking the total issuance to Rs. 1.5 billion.

"This new issue will be utilised to finance PLC’s working capital and lending. The enhanced issue will increase PLC’s CP-funded assets to about 9% based on 31 March 2012 assets, compared with 7% as at end-December 2011," the ratings agency said.

"PLC’s ratings reflect Fitch’s view that its parent, People’s Bank (PB, ‘AA(lka)’/Stable), is likely to extend support in a stressed scenario, if required. This view is underpinned by PB’s majority ownership of PLC (31 December 2011: 71.5%), common board representation, PLC group’s significant profit contribution to PB’s consolidated profile (end-September 2011: 36% of PB group profits), and the strong strategic and operational linkages between the companies.

"An ‘F1(lka)’ category short-term rating indicates the strongest capacity for timely payment of financial commitments relative to other issuers or obligations in the same country. Under Fitch’s National Rating scale, this rating is assigned to the lowest default risk relative to others in the same country. Where the liquidity profile is particularly strong, a "+" is added to the assigned rating," Fitch said.

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50756

Growth in Asia is expected to pick up this year, after slowing in the last quarter of 2011, but Asian leaders now face the difficult task of adjusting policies to support stable, non-inflationary growth, say IMF economists.

At the launch in Kuala Lumpur, Malaysia, of the IMF’s regular outlook for the Asia Pacific region, the economists said that the region is expected to continue growing at around 6 percent this year, before rebounding in 2013.

"Calibrating the right amount of insurance to support stable, non-inflationary growth is the main near-term policy challenge," said Anoop Singh, head of the IMF’s Asia and Pacific Department.

"Policymakers should be ready to shift gears and renew tightening if overheating pressures become evident," he added.

Robust domestic demand

Asia has continued to enjoy robust domestic demand against the background of the fragile global recovery. This has been reflected in low unemployment and robust credit growth in the region. Inflation expectations also picked up and so far, capital inflows into emerging Asia have rebounded in 2012.

The IMF forecasts regional growth will be 6 percent this year, roughly the same level as in 2011, and about 6½ percent in 2013. But there remains considerable regional variation. While emerging Asia will remain the fastest growing region in the world, led by China and India, expanding at 6.9 percent this year, industrial Asia is projected to grow only at 2.2 percent.

A further stabilization of global economic and financial conditions over the course of 2012 would provide a boost to the whole region. But it could also revive the threat of inflation.

The report suggests that inflation will decline modestly in 2012, averaging some 3½ percent. But this partly reflects a normalizing of commodity prices, and in several cases sustained demand pressures means inflation is likely to remain above explicit or implicit target ranges.

Threats to growth

Despite brighter prospects for the region, the report warns that financial turmoil in Europe could yet escalate and spread to Asia. In particular, a sharp fall in exports to advanced economies and a reversal of foreign capital flows would severely impact activity in the region.

The report also cites higher energy prices as a risk to activity, and a source of difficult trade-offs between inflationary pressures and budgetary risks from energy and food subsidies.

So far, stronger economic and policy fundamentals have helped buffer Asian economies against adverse financial market spillovers from the euro crisis, but the IMF believes that the best way for Asia to protect itself against external shocks is by strengthening domestic sources of growth. "Economic rebalancing remains a policy priority for much of Asia," said Singh.

Further rebalancing
needed

Asia’s overall current account surplus is expected to bottom out in 2012 at about 1½ percent of regional GDP, less than a third of its pre-crisis peak level. But in China, the IMF believes the adjustment has largely been the result of very high levels of investment, a worsening of the terms of trade and a real, effective appreciation of the RMB, rather than increased consumption as a share of GDP.

"Sustainable rebalancing will depend on China’s successful transition from investment-led to consumption-led growth," says the report, which welcomed the recent decision by the People’s Bank of China to increase the RMB trading band, saying it underscored "China’s commitment to rebalance the economy and allow market forces to play a greater role in determining the level of the exchange rate."

http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=50766

* Rs. 50 per share paid in deal worth Rs. 400 m for Rs. 9.4b loss carrying and negative networth finance company giant was a hefty premium as per some analysts

* Others say given lack of liquidity, price for 13% strategic block was good; NSB eyeing future upside with likely further buying; TFC to get big boost from savings giant

Savings giant NSB’s entry in to the finance company business via the acquisition of 13% stake for Rs. 400 million in The Finance Company Plc (TFC) last week has stirred up a storm with some alleging it was an unhealthy move whilst others insisting it was a good buy.

On Friday a total of 7.982 million shares of TFC traded for Rs. 394 million, of which 7.14 million shares was done at Rs. 50 each, above Rs. 20 or 66% above the market. NSB’s broker Taprobane Securities said the savings giant bought 7.863 million shares at an average cost of Rs. 49.74 each.

TFC began trading on Friday at Rs. 30 with several more blocks done between Rs. 31 and 33 including 9,000 shares at Rs. 31.20. However, apparently setting the stage for the big deal a block of mere 100 shares was done at Rs. 43 whilst a relatively large block of 701,761 shares was executed at Rs. 45. Thereafter the crossing of 2.9 million happened at Rs. 50 each followed by another block of 4.237 million shares at the same price. In between a block of 100 shares went at Rs. 45 and an equal number of shares at Rs. 39 each. These in between deals suggest the erratic pricing. TFC last traded at Rs. 40 with a block of 115,300 shares.

Major sellers were ABC Broadcasting Corporation CEO and young business leader Rayynor Silva and shareholder cum non-executive director Dinal Wijemanne. Interestingly the latter is also the CEO of the NSB’s broking firm picked for the purchase.

The NSB buy on Friday sparked lot of market talk of deals within deals given the premium paid. Contentious talk included why TFC bought NSB when there are several other fundamentally sound and attractive shares in the market. Some also questioned whether the NSB had the sanction of its Board to go for such an investment.

However though at Friday’s early trading price the crossing reflects a premium, Rayynor and Dinal indeed bought the original stake in late September at Rs. 48 per share, which in fact was 52-week highest until Friday. On that score NSB had paid only Rs. 2 extra for the buyers.

Some alleged that the duo picked up the TFC stake in September last year to give stability with an understanding among a few stakeholders. The seller of that block was Dr. T. Senthilverl, also a Director at TFC and the biggest shareholder. Prior to September 2011 sale he held a stake of slightly over 27% and reduced his holding to 18.5%.

Parties to the sale said that there weren’t large blocks and the price paid by NSB for the strategic block was attractive for the buyer. TFC sources said for NSB it was a strategic buy and “first step” towards greater synergies. They also said given the inherent potential of TFC the price paid wasn’t a premium.

Other analysts said if NSB was keen to enter the finance company business, then with an equal amount it spent on Friday it could have started a venture under the Finance Business Act. But this notion was dismissed on the basis that TFC was an existing business and a giant in the league suggesting starting from zero would cost more for NSB.

Industry experts said NSB’s Act restraints diversification as well as direct engagement with other segments of the financial services industry. In that context entry and possible consolidation of stake via TFC would enable savings giant to tap prospects in the finance company business.

Following the acquisition NSB is likely to be offered two seats on the Board whilst analysts didn’t rule out it exploring prospects to enhance the stake. For TFC backing of NSB is being viewed as the next major breakthrough for its turnaround and future growth.

A reason for allegations that the NSB paid an undue premium was due to TFC’s negative networth of Rs. 23.57 per share (or Rs. 3.8 billion) as at end 2011. The Company also has retained loss of Rs. 9.4 billion. Between March 31, 2011 and 31 December 2011, its public deposit base had shrunk by Rs. 400 million to Rs. 20.45 billion. Its assets had declined to Rs. 20.49 billion from Rs. 21.43 billion whilst liabilities amounted to Rs. 24.2 billion, down from Rs. 25.2 billion.

However TFC sources said that the negative networth was a legacy from the past when the company ran into difficulties in tandem with the Golden Key fiasco. They said that under the new management there has been a turnaround with more progress on the cards. For example last month Rs. 1 billion in deposits had come in and TFC has a good high potential real estate portfolio.

Whilst TFC’s fourth quarter results are pending, analysts could only go by published accounts, which doesn’t show any significant growth in the Company’s core business though pawning and hire purchase segments have improved.

For the nine months ended on 31 December 2011, TFC made a profit of Rs. 15.8 million, as against a loss of Rs. 1.6 billion a year earlier. Net interest income was a loss Rs. 341 million, though lower in comparison to Rs. 544 million loss but due to other income operating profit had improved considerably to Rs. 754 million as against a loss of Rs. 380 million loss in the first nine months of 2009/10 financial year. A Rs. 180 million reversal in credit losses saw TFC ending the 2010/11 9 months with a welcome profit. In the third quarter loss was Rs. 17.5 million, down from Rs. 440 million a year earlier.

Last month in a major and widely welcomed move the TFC announced the appointment of Cherille Rosa, a former Vice President Finance and Operations at Citibank’s Asia Pacific Technology and Operations Group, as an Independent Non-Executive Director.

NSB is not the only state entity which has interests in TFC. Others include EPF owning 8.4%, and People’s Bank (3.4%). BOC-linked Ceybank Unit Trust owns 5% whilst Seylan Bank also holds 7.4%.

Board of Directors of The Finance Company Plc comprises Preethi Jayawardena (Chairman), V.W. Dissanayake (Executive Director), Kamal Yatawara (CEO), T.B. Ekanayake (Executive Director), Ajith Devasurendra (Independent Non-Executive Director), Anura Fernando (Independent Non-Executive Director), R. Nadarajah (Independent Non-Executive Director), Dr. T. Senthilverl (Non-Executive Director), Dinal Wijemanne (Non-Executive Director) and C. Rosa (Independent Non-Executive Director.
http://www.ft.lk/2012/04/30/nsbs-entry-in-to-tfc-stirs-up-storm/

Reuters: The Central Bank on Friday asked the country’s corporates to raise funds through bonds, after State-owned Bank of Ceylon raised $ 500 million via a benchmark five-year paper at a lower-than-expected price with high demand.

Bank of Ceylon’s bond, Sri Lanka’s largest so far, was priced at a yield of 6.875 per cent, the tight end of the 6.875-7 per cent guidance, and was oversubscribed by 7.7 times with total orders received amounting to $ 3.86 billion.

“I think more Sri Lankan corporates should go for this kind of bond issue,” Central Bank Governor Ajith Nivard Cabraal told Reuters. “This is far better price. It took five years to see the fruition of the benchmark we set in 2007.”

The price is better than Sri Lanka’s debut sovereign $ 500 million, five-year sovereign bond which was sold at 8.25 per cent in 2007 and below a 7.4 per cent yield, the price it got for a similar 2009 sovereign paper.
Although Sri Lankan corporates substantial funding, they are reluctant to go for bond issues as their requirements are much lower than a benchmark size.

“This shows there is a huge demand for Sri Lankan paper and other corporates should take this advantage,” Cabraal said.

Sri Lanka is likely to refloat its debut sovereign bond later this year.

However, Cabraal said the Central Bank had not yet decided the timing for the bond refloat.
Sri Lanka raised $ 3 billion for infrastructure projects via four sovereign bonds since 2007 and two $ 1 billion, 10-year bonds sold in 2010 and 2011.
http://www.ft.lk/2012/04/30/cb-chief-urges-more-corporates-to-go-for-bonds-after-bocs-mega-success/

The main Opposition deleted yesterday raised alarm bells over National Savings Bank’s (NSB) investment in to The Finance Company Plc (TFC) expressing serious concerns over a range of issues.

In a statement deleted’s MP and its Chief Spokesman on economic matters, Dr. Harsha De Silva said, “We note with serious concern the purchase of close to 8 million shares of TFC by the NSB at 65 per cent above its current market price. What logic was employed to pay Rs 49.75 for shares of this high risk and loss making financial institution when it was last traded at the Colombo Stock Exchange for only Rs. 30.00 is more than a puzzle.”

“Perhaps one could argue that it is the business of the board and management of any institution to pay whatever price it feels is right for anything they purchase. But NSB is not, by any stretch of the imagination, just another institution. It is absolutely the only bank whose deposits are fully guaranteed by the Government of Sri Lanka as expressed explicitly in the statute governing the Bank: NSB Act No.30 of 1971,” the MP said.

“This necessarily means that NSB must maintain a risk-averse investment profile and transactions like the one just concluded are not what it should be engaging in,” he added.

Dr. De Silva said that TFC had an accumulated loss of over Rs. 9,000 million as at end December 2011 and even if it has made a moderate profit for the financial year ending March 2012, which is not yet public knowledge, a premium of 65 per cent is by any standard extremely high.

“Therefore, in the interest of the depositor base of NSB as well as the public at large, it becomes imperative that authorities provide satisfactory answers to the questions on this transaction,” Dr. De Silva said in his statement.

It alleged that the husband of the Chief Justice of Sri Lanka, Pradeep Kariyawasam, who continues to enjoy the power and position as chairman of the NSB among several other plum postings offered by the Rajapaksa Government in a glaring example of conflict of interest.

“Hennayake Bandara, its General Manager, must justify to the public under what circumstance almost Rs. 400 million of depositor money guaranteed by the Government was spent on this high risk transaction and why they paid 65 per cent more than the current market price,” deleted MP said.

He said that that the Central Bank of Sri Lanka controlled Employees Provident Fund owns a considerable share of the post-Kotalawela The Finance Company and counts several high profile investors in the calibre of Rayynor Silva, brother of deleted Silva, MP, as its largest shareholders. “A number of colourful
personalities including Anura Fernando whose name has been linked to the now abandoned Central Bank investigation on the Goldquest pyramid scam and a former director of Capital Reach Leasing a company in which Ajith Nivard Cabraal had a significant interest also sit on its board,” alleged the statement by deleted MP.

“In a country where its citizen’s are denied the right to information and where governance principles are jack booted with impunity by people of power it becomes critically important that we as the main opposition not only raise these issues in public interest but media and civil society pressure the authorities for satisfactory answers not only to protect democracy but also economic freedom and the wealth of the people,” the statement added.
http://www.ft.lk/2012/04/30/deleted-raises-alarm-over-nsb-investment-in-the-finance/