Corporate

BoC to raise Rs 3b from debentures

by Gayan KANCHANA

Sri Lanka's State-owned Bank of Ceylon (BoC), the main commercial banker to the Government, is planning to raise Rs. 3 billion in a public issue of five year unsecured, subordinated and redeemable debentures.

The issue will be increased to Rs 5 billion in the event of over subscription, a press conference in Colombo noted.

The minimum investment is Rs.10,000 or multiples thereof. It is listed in the main board of the debt securities trading system of the Colombo stock exchange.

Its tenor will be for five years and carry an interest at floating as well as at fixed rates. The floating interest rate will be six-month Treasury bill rate plus 0.75 percent per annum.

Interest will be paid and the interest rate will be reset semi-annually.

The fixed rate is 11.5 percent per annum and interest will be paid annually.

The debenture has been rated as AA (-) Ika by fitch rating agency. The trustee is Deutsche Bank.

The recently established investment banking division of BoC will act as managers to the issue.

With this issue, BoC, signals to the business world that it is capable and ready to manage and structure capital market instruments such as debentures and share IPOs. BoC's one-stop-shop integrates the role of Banker, Manager, Lawyer and Registrar. BoC Chief Financial Officer Asoka Rupasinghe said, "The objective of this issue is to provide an opportunity for the investors to yield attractive regular returns over a period of five years, to increase the bank's Tier II Capital, enhance, capital adequacy ratio and single browser limit, thereby the strengthening the liquidity position by mobilizing long term funds.""With the end of the civil conflict, BoC envisages a huge potential for business development in the whole country with special focus on the North and East.

With this in mind, the bank has revisited corporate strategy where focus will now shift to new business areas.

Hence, the timing of this debenture is appropriate, as it would generate funds for future expansion".

NSB reports remarkable Q1 results

National Savings Bank showed a remarkable first quarter performance by recording a pre-tax profit of Rs. 2.0 billion, a growth of 87% compared to the corresponding quarter of the year 2009.

Commenting on the performance, NSB's General Manager/CEO Hennayake Bandara said that the Bank's Operating Profit from Ordinary Activities Before Taxes increased to Rs. 2.7 billion recording a growth of 80% over the same period last year, while profit after tax for the period increased by 59% to Rs. 1.1 billion.

The main reasons behind the increase in after tax profit are overall increase of interest income despite declining interest income on loans and advances and decrease in interest expenses on deposits.

NSB's net interest income grew to Rs. 2.5 billion, a growth of 252% during the first quarter of 2010 compared to same period of 2009. Non interest income has declined by 13.5% to Rs. 1.7 billion from Rs. 1.9 billion in first quarter 2009. The interest expenses of the Bank decreased by 10% to Rs.8.1 billion, mainly due to re-pricing of term deposits at lower rates.

The Bank has mobilised Rs. 8.8 billion in deposits during the period while increasing total deposits to Rs. 347.8 billion.

Though the increase in deposit base is marginal, the effective cost of funds dropped as a combined result of repricing deposits at lower rates and increase in savings' deposits.

Total assets of the Bank stood at Rs. 366.1 billion at end of March 2010 against the Rs. 306.7 billion at the end of March 2009.

Bank's non interest expenses grew only by 8.4% to Rs. 1.4 billion during the first quarter compared to the same period in 2009.

Personnel costs have been well managed with a marginal increase of 0.7% to Rs. 706.0 million compared to corresponding period last year.

The premises, equipment and establishment expenses and other operating expenses have increased by 28.5% and 22.2% respectively compared to the same period last year.

The increased expenditure was mainly due to expansion of branch and ATM network.

The Bank was able to maintain its cost to income ratio at 46.1% despite the increased expenditure during the period.

The Bank's effective tax rate increased to 59.4% in first quarter 2010 compared to 53.4% for the corresponding period 2009 and this was mainly due to the increase in VAT on Financial Services.

The Bank has shown a positive disbursement in loans and advances over the last balance sheet as at 31 December 2009 by recording a moderate growth of 5.6%.

Janashakthi pays over Rs. 2.6b as claims

Janashakthi Insurance, the third largest general insurer in Sri Lanka has paid 84,553 claims amounting over Rs. 2.6 billion during 2009.

Of the 84,553 claims honoured Rs. 293,757,729 accounted for the Life Insurance category, Rs. 1,745,435,177 for the Motor and Rs. 577,208,330 for the Non-Motor categories. The Company has already paid Rs. 724,207,360 as against 22,376 claims for Q1 2010.

Janashakthi paid in excess of Rs. 14 Bn over the last five years reflecting a steady increase in claim payments.

General Manager Sales and Marketing Ravi Liyanage said that insurance was a healthy buffer against unexpected calamities. Swift claim settlements are a critical factor in the insurance business. He reiterated that the core essence of Janashakthi's insurance credo was to serve its customers in their time of need.

Janashakthi attributes its rapid processing of claims in a timely and accurate manner due to its prudent financial and risk management competencies backed by professional underwriters and risk managers who are ably supported by world renowned re-insurers such as Hannover Re, Scor, Toa Re, GIC and Best Re.

Janashakthi also recorded an impressive 46% growth in net profit after tax reaching Rs. 657 Mn during the financial year 2009, despite the financial crisis experienced both locally and globally.

KVPL makes profit

A welcome return to normal crop volumes in tea and better commodity prices have helped Kelani Valley Plantations PLC (KVPL) to post healthy profit and turnover growth in the first quarter of 2010.Income statements filed with the Colombo Stock Exchange by KVPL, the Plantation subsidiary of Dipped Products PLC report that it made a profit before tax of Rs 115 million for the three months ending 31st March 2010, as against a loss of Rs 43 million for the corresponding quarter of the previous year. Turnover nearly doubled to Rs 947 million from Rs 490 million in 2009.

Profit attributable to equity holders of the company improved from a loss of Rs 46 million a year ago to Rs 112 million for the three months reviewed.

KVPL Managing Director Kavi Seneviratne described the quarter's performance as a reflection of the company's potential under normal conditions. KVPL's subsidiaries Kelani Valley Green Tea and Kelani Valley Instant Tea also significantly improved their contributions to pre-tax profit, Seneviratne said.