CORPORATE

HNB posts Rs 1,193m pre - tax profit in 1Q

Hatton National Bank PLC has posted a pre-tax profit of Rs.1,193 million for the first quarter 2010 compared to Rs. 1,175 million in the corresponding period 2009 while Group pre-tax profit for the period improved to Rs.1,219 million from Rs.1,134 million amidst re-pricing of assets and liabilities taking effect, subsequent to the sharp reduction in interest rates in the final quarter 2009.

Commenting on the Bank’s performance, HNB’s Managing Director / Chief Executive officer Rajendra Theagarajah said that the interest income dropped by 14.7% to Rs.7,546 million mainly due to fall in interest rates while advances also witnessed a marginal negative growth. Interest paid decreased by 27% to Rs.3,928 million as a result of lower deposit rates and shift in the deposit mix towards low cost deposits. In spite of the pressures on interest margin, the Bank was successful in recording a 4.6% growth in net interest income during the quarter due to the Bank’s aggressive asset liability management.

Non interest income improved by 14% on account of increase in commission income, and capital gains on sale of 20% stake held in Lanka Ventures PLC, in spite of a fall in foreign exchange income by 16.6% mainly due to static exchange rates. Non interest expenses increased by 13.1% primarily due to an increase of 23.1% in staff costs, as a result of the salary increments to all grades of staff while other operating expenses increased by only 7.2% due to effective cost management strategies.

The Bank’s effective tax rate increased to 45.3% in first quarter 2010 compared to 35% for the corresponding period 2009 resulting in a post tax profit of Rs.652.8 million in the first quarter 2010 against the post tax profit of Rs.763.1 million in 2009 representing a negative growth of 14.5%. With the demand for credit improving at a slower pace than anticipated, the gross loans contracted marginally by 1% to Rs. 174.6 billion. Nevertheless, with the economy projected to grow at 6% in the current year, the position is expected to reverse within the next few months.

The Gross Non Performing Advances Ratio (NPA) as at the end of first quarter stood at 7.4% while the Net NPA ratio was at 4.1%. The Bank maintained a provision cover of 44.5% as at end of the quarter 2010.

Amidst intense competition within the low interest rate regime the Bank managed to record a marginal growth in the deposit base and effectively bring down the cost of funds as evident by the 4.5% shift from fixed deposits towards savings deposits.

The price of the voting share of HNB improved by 10.6% during the first quarter 2010, with the price at Rs.188.25 end of the first quarter 2010 compared to Rs. 170.25 at the end of December 2009 while the non voting share recorded a gain of 33.6% to Rs.140 from Rs.104.75 at the end of 2009.

The Group post tax profit declined to Rs.655.4 million from Rs. 715.5 million in first quarter 2009 in line with the Bank. However, other Group companies namely HNB Assurance PLC, Sithma Development (Pvt) Ltd and the Joint Venture Investment Bank Acuity Partners posted positive growth over first quarter 2009.

The Bank expects to be in the forefront of the economic revival of the country and the main focus going forward would be on the North and the East provinces where HNB has been operative even during the time of war.

HNB targets to surpass 200 customer centres by the end of 2010 with six new customer centres in the North and the East during the year.

NDB Bank posts strong growth in 1Q

The NDB Group’s operating profits for the quarter ended 31 March 2010 grew significantly by 60% over the fourth quarter of 2009. The financial conglomerate’s improved performance further substantiates the stability of the NDB Group.

The net income of Rs. 1.6 b (Net interest income, fee income and equity income) of the NDB Group for the quarter compares well with Rs. 1.5 b for the fourth quarter of 2009 (an increase of 10%). The profit before tax for the quarter has remained on par with the fourth quarter of 2009. The profit before tax for the period excluding the exceptional gains on government securities increased by 6% over the corresponding period last year.

NDB Bank’s core banking revenue of Rs. 1.4 b (net interest income, fee and forex income) for the quarter compares favourably with Rs. 1.2 b for the previous quarter (an increase of 12%). The profit before tax for the quarter also increased by 28% over the previous quarter. The Bank’s lending portfolio as at 31 March 2010 increased by 5% over 31 March 2009 and by 3% over the last year end. The increase in the gross lending portfolio of 3% over the last year end compares satisfactorily with the industry growth of 4%.

As part of the post conflict development phase in the country, NDB Bank partnered ventures in the SME sector. This was reflected in the high disbursements under the SME Regional Development Projects.

The Bank’s customer deposit portfolio also increased by 45% over that as at 31 March 2009 and was on par as compared with the portfolio as at 31 December 2009. The improved conditions in the share market during the first quarter of 2010 resulted in a shift in Bank deposits to stock market investments.

Hayleys records highest profits

Hayleys Group achieved exponential growth in all key performance indicators in 2009-10 establishing record figures for revenue, profit and investment in a remarkable year of milestones.

The blue chip conglomerate’s profit before tax more than doubled to Rs. 3,351 million in the 12 months ending 31st March 2010, while profit after tax tripled to Rs. 2,637 million.

Profit attributable to equity holders of the company grew 5.7 times (471 percent) to Rs. 1,775 million. Consolidated turnover, at Rs. 38 billion, reflected a growth of 18 percent.

‘The year also saw the single largest investment in the 132 year history of the company — the purchase of a controlling stake in Ceylon Continental Hotel, resulting in total investment in subsidiaries doubling in the year reviewed, and initiatives to rationalise the Group’s businesses and strategies yielding spectacular results,’ Hayleys PLC Chairman Mohan Pandithage said.

Strategic investments were made in the plantation sector subsequent to the balance sheet date with the acquisition of a further one third shareholding of Hayleys Plantations Limited, thereby acquiring effective control of Talawakelle Tea Estates PLC.

He said key businesses in Global Markets and Manufacturing significantly improved their performances in 2009-10, while the previously loss-making Consumer Products and Fibre sectors recorded an impressive turn around.

This result represents the combined impact of internal initiatives to re-balance our portfolio and create an internal dynamism among employees at all levels, and sector-specific efforts to make businesses exposed to the global economic downturn leaner and more competitive, Pandithage said.

The Group’s Earnings per Share increased from Rs. 4.15 a year earlier to Rs. 23.67 for the period under review, an improvement of 471 percent.

The Board of Directors of Hayleys PLC has proposed the payment of a final dividend of Rs 2/- per share making the total dividend for the year Rs.4/- per share.

Among the principal contributors to Group performance, Hand Protection accounted for Rs. 9.4 billion in turnover and Rs. 835 million in operating profit; Purification Products Rs. 5.0 billion and Rs. 697 million in turnover and operating profit respectively and Agri Inputs Rs. 4.5 billion in turnover and Rs 389 million in operating profit.

The Textiles sector represented by Hayleys MGT Knitting Mills, in which Hayleys now owns over a 60 percent stake, was accounted for as a subsidiary business from July 2009 onwards and contributed Rs. 3.8 billion to turnover and Rs. 353 million to operating profit.

The Fibre sector nearly doubled its operating profit to Rs. 125 million, and Agri Products converted a loss of Rs. 22 million in the previous year to an operating profit of Rs. 147 million. Transportation, helped by a strong fourth quarter reported an operating profit of Rs. 473 million on a turnover of Rs. 3.5 billion. Consumer Products also contributed Rs. 3.5 billion to turnover and made an operating profit of Rs. 179 million, an improvement of 153 percent over the previous year.

Only the Plantation sector posted a lower result due to a mandatory wage increase of over 40 percent in the year under review and crop losses due to bad weather.

However, this sector began turning around in the third quarter of the year and continues to do well in the current financial year, Pandithage noted.

Top corporate executives to drive SLIC Forward

A high calibre Board of Directors has been appointed to the Sri Lanka Insurance Corporation that comprises top professionals in both the State and private sector, to steer forward the State Insurance giant.

Gamini Senarath

Gamini Senarath, Chief of Staff to the President takes office as the acting Chairman of the Corporation. Senarath is a distinguished SLAS officer who has held senior public service posts such as the Deputy Controller of Immigration and Emigration and Commissioner of Motor Traffic. He has a Honours Degree from the University of Kelaniya and holds a post graduate degree in Computer Science. Mohan de Alwis has been appointed as the Managing Director/CEO of the Corporation.

He has 25 years of senior managerial experience at some of Sri Lanka’s leading corporate institutions and overseas including Coopers and Lybrand, Hayleys PLC, Star Garments Limited and Smart Shirts Ltd. de Alwis is a BCom, MBA and CMA (Australia). He is the present Vice Chairman of the Free Trade Zone Manufacturers’ Association.

Other members of the board are R. A. Jayatissa, a senior economist engaged as the Senior Economic and Policy Advisor to the Ministry of Finance and Planning, Noel Selvanayagam, President Senok Group, Piyadasa Kudabalage who is a Chartered Accountant by profession and also holds BCom, FCA, FCMA (Sri Lanka) and Dhammika Perera former Chairman of the Board Of Investment Sri Lanka.

New chairman at NSB

Pradeep Kariyawasam, has been appointed Chairman of the National Savings Bank (NSB) from May 14. He was the former chairman of Sri Lanka Insurance Corporation, subsequent to the corporation being re-vested with the Government, as per the Supreme Court order last year.

STOCK FOCUS

24TH TO 26 TH May 2010 By Elton P. Ebert

The invasion by the multi-facetted LOLC into the Confifi group,confirms the confidence the private sector has in the Tourism industry. The transaction involved around 3 million Palm Garden and 2 million Riverina Hotels shares. On Wednesday Palm Garden escalated to Rs. 327.50, but closed at Rs 318. Browns which also part of this combine, improved to Rs. 103.75 on Friday. Prior to this the Hayleys group, took control of Hotel Services, in addition to their Hunas Falls Hotels. The Banking sector and the Hotels were the main drivers to the turnover.A healthy price structure was noticed in Lankem Ceylon and Fort Land & Bldg, while Hemas Holdings also gained ground to Rs. 148.25 subsequent to its share split announcement.Autodrome also effected a significant improvement to reach Rs. 575 before tapering down to close at Rs. 534.75.

HOTELS & TRAVELS.

In addition to the extraordinary activity in the Confifi group, support was also extended to Taj Lanka and Fortress Resorts in which over 4 million shares were traded on 25th. Sigiriya Village advanced to Rs. 68.50, Tangerine Beach to Rs. 93.25 and Trans Asia to Rs. 240.

BANKS FINANCE & INSURANCE.

Commercial Bank, HNB and Janashakthi Insurance command regular demand.

LOLC closed at Rs. 265.25, NTB Rs. 37.25 and NDB Rs. 215.

Earlier in the week the BOJ kept interest rates unchanged at 0.196%.

Meanwhile the Eurozone debt crisis and the Korean problem caused a slump in global stock markets, which staged a temporary recovery on Wednesday.

On Thursday the Hangseng closed at 19288.21 and the Nikkei at 95554.74

HEAVILY TRADED

Commercial Bank - 3,870,800

Sierra Cables - 2,523,500

A summary of the more frequently traded stocks.

Company Period
24th-26st May Previous April 2010
2010 Transaction End

Amana Takaful 30.50 -30.25 30.25 27.50
Aviva NDB 210.00 -210.00 210.00 230.00
Commercial Bank 249.00 -249.25 248.50 239.50
HNB 244.75 -250.00 242.25 234.50
Sampath 281.00 -283.75 284.00 290.25
Ahot Properties 150.00 -150.00 148.00 145.75
CIC 69.75 -71.25 70.00 72.00
Overseas Reality 16.75 -16.75 16.75 17.50
PLANTATIONS
Agalawatte 33.50 -33.50 34.00 39.25
Maskeliya 29.00 -28.50 29.00 32.00

May 21, 2010 May 26, 2010
The All Share Price Index 4230.50 4250.99
The Milanka Price Index 4735.66 4761.35
Turnover last week Rs. 7463 Million
Turnover this week Rs. 5196 Million (3 days)
Market Capitalisation Rs. 1385 Bln
Price Earnings Ratio: 21

FOREIGN ACTIVITY
Purchases: Rs. 819 Million Sales: Rs. 1496 Million

ANNOUNCEMENTS DIVIDENDS
Cental Finance Rs. 1.25 per share 2nd interim payable June 11
Watawala Rs. 2.75 per share to be notified.
Ceylon Hospitals Rs. 1.50 per share interim voting and non voting payable June 16.
Nawaloka 5 cts per share interim payable June 15.
Lanka Tiles Rs. 2.50 per share 2nd interim payable June 17.
Ahot Properties Re. 1 per share final payable June 16.
Ahungalla Rs. 1.50 per share 2st and final payable June 8.
John Keells Ltd., Rs. 10 per share 1st and final payable June 17
Trans Asia Rs. 2 per share 1st and final payable June 17.
Tea Small Holders Rs. 8 per share 1st and final payable June 17.

SUBDIVISION
Hemas Holdings 5 new shares for every existing share.