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The following illustration was taken from NDB Stockbrokers analysis done on 31 March 2011 on banking cestor. since I beleive this to be a comprehensive coverage on many counters, I'd like to highlight few of their thoughts as well.
1) Theye expect the listed licensed commercial banks (LCBs) to book an average loan growth of 25% in FY11, picking up from the average lending growth of 22.52% YOY recorded in FY10Q4. They believe the positive macro economic outlook will translate to higher demand for credit aided by the low interest rates.
2) Despite a high loan growth forecast, they anticipate the gross non performing loans (NPLs) to reside around 6% in FY11 due to the improving debt servicing capacity of borrowers. Exceptionally
high NPLs are expected to decline in FY11, which will contribute to lower overall NPLs.
3) Tax benefits will be another significant change that is expected to enhance the profitability of the sector in FY11. The reduction of the Financial Services VAT (FS VAT) from 20% to 12% and the Income Tax from 35% to 28% will translate in to higher profits.
4) They recommend SAMP and NTB on the basis of low P/Es, PBV and attractive growth prospects over the next 12 months.
P/E(X) PBV(X) Profit Growth
FY10 FY11 FY10 FY11 FY10 FY11
SAMP 12.2 12.7 2.5 2.5 68.1% 17.5%
NTB 12.3 15.6 2.6 2.7 58.3% 41.2%
5) CASA (current account and savings account) needs improvement - COMB, HNB and SAMP enjoy the highest current account and savings account ratios (CASA), which have been built using the superior branch networks and the attractive product offerings.
DFCC HNB COMB NDB NTB PABC SAMP SEYB
CASA Ratio 23% 52% 55% 29% 28% 27% 48% 42%
6) In building a low cost funding base, NDB -54%, SAMP- 42% and DFCC- 42% achieved the highest savings deposit growth rates as at 31.12.10 among the listed LCBs. Despite the high growth rates among a few banks, the overall savings deposit growth of listed LCBs stood at 27%, showing signs of a depressed savings environment amid low interest rates and rising inflation towards the later part of the year.
7) Thus far, the following banks have made the following capital infusions; stated capital of NTB will increase by Rs.734Mn in FY11 with the conversion of warrants in March 2011. SEYB’s right issue of 43Mn Voting shares and 41Mn Non Voting shares is expected to increase the capital by Rs.4,691Mn in FY11(pending shareholder approval). The scrip dividend of SAMP is expected to
increase stated capital by Rs.916Mn while COMB scrip dividend is anticipated to add Rs. 755Mn.
Most banks are likely to increase Tier II capital as well by way of debenture issues.
Sri Lankan listed LCBs remained robust in terms of capital requirements where the average Tier 1 capital adequacy ratio was well above the stipulated 5%.
DFCC- 31.2% recorded the highest while SEYB- 9.56% booked the lowest Tier I ratio as at 31.12.10.
Source :- Colombo Stock Watch site, courtesy of NDB stockbrokers;
Link : http://colombostockwatch.com/wp-content/uploads/2011/04/Banking-Sector-31.03.11.pdf
For your further analysis and updates pls..
1) Theye expect the listed licensed commercial banks (LCBs) to book an average loan growth of 25% in FY11, picking up from the average lending growth of 22.52% YOY recorded in FY10Q4. They believe the positive macro economic outlook will translate to higher demand for credit aided by the low interest rates.
2) Despite a high loan growth forecast, they anticipate the gross non performing loans (NPLs) to reside around 6% in FY11 due to the improving debt servicing capacity of borrowers. Exceptionally
high NPLs are expected to decline in FY11, which will contribute to lower overall NPLs.
3) Tax benefits will be another significant change that is expected to enhance the profitability of the sector in FY11. The reduction of the Financial Services VAT (FS VAT) from 20% to 12% and the Income Tax from 35% to 28% will translate in to higher profits.
4) They recommend SAMP and NTB on the basis of low P/Es, PBV and attractive growth prospects over the next 12 months.
P/E(X) PBV(X) Profit Growth
FY10 FY11 FY10 FY11 FY10 FY11
SAMP 12.2 12.7 2.5 2.5 68.1% 17.5%
NTB 12.3 15.6 2.6 2.7 58.3% 41.2%
5) CASA (current account and savings account) needs improvement - COMB, HNB and SAMP enjoy the highest current account and savings account ratios (CASA), which have been built using the superior branch networks and the attractive product offerings.
DFCC HNB COMB NDB NTB PABC SAMP SEYB
CASA Ratio 23% 52% 55% 29% 28% 27% 48% 42%
6) In building a low cost funding base, NDB -54%, SAMP- 42% and DFCC- 42% achieved the highest savings deposit growth rates as at 31.12.10 among the listed LCBs. Despite the high growth rates among a few banks, the overall savings deposit growth of listed LCBs stood at 27%, showing signs of a depressed savings environment amid low interest rates and rising inflation towards the later part of the year.
7) Thus far, the following banks have made the following capital infusions; stated capital of NTB will increase by Rs.734Mn in FY11 with the conversion of warrants in March 2011. SEYB’s right issue of 43Mn Voting shares and 41Mn Non Voting shares is expected to increase the capital by Rs.4,691Mn in FY11(pending shareholder approval). The scrip dividend of SAMP is expected to
increase stated capital by Rs.916Mn while COMB scrip dividend is anticipated to add Rs. 755Mn.
Most banks are likely to increase Tier II capital as well by way of debenture issues.
Sri Lankan listed LCBs remained robust in terms of capital requirements where the average Tier 1 capital adequacy ratio was well above the stipulated 5%.
DFCC- 31.2% recorded the highest while SEYB- 9.56% booked the lowest Tier I ratio as at 31.12.10.
Source :- Colombo Stock Watch site, courtesy of NDB stockbrokers;
Link : http://colombostockwatch.com/wp-content/uploads/2011/04/Banking-Sector-31.03.11.pdf
For your further analysis and updates pls..
