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BRAC, one of the world’s largest micro financing providers, entered into a ground breaking strategic alliance with LOLC, one of the largest conglomerates whose core business is financial services, to acquire the controlling interest of Nanda Investments and Finance PLC (Nanda Investments).
This transaction will transfer 90,645,057 shares with a 56.6% stake of Nanda Investments to BRAC with LOLC taking a stake of 33.4%. LOLC is expected to make this equity investment through its fully owned subsidiary, LOLC Micro Investments Ltd.

Nanda Investments yesterday saw 91.2 million of its shares traded between a high of Rs. 9 and a low of Rs. 8.40 before closing at Rs. 8.60, up by 10 cents. The BRAC-LOLC buying was at Rs. 9 per share in a deal worth Rs. 815.8 million. Strike price is above the Net Assets Value per share of Rs. 5.29 as at 31 March 2013.

Nanda Investments is a registered finance company listed on the Colombo Stock Exchange with a lending portfolio of Rs. 290 million and a fixed deposit base of Rs. 88 million. The total assets of the company as at 31 March 2013 were Rs. 663 million.
BRAC is the largest development organisation in the world in terms of the scale and breadth of its operations and was founded 10 years ago in Bangladesh by its Chairman, Fazle Hasan Ahbed.
He is one of the ‘Global Greats’ in the social sector and for his outstanding contribution to social improvement, he has received the Ramon Magsaysay Award, the UNDP Mahbub Ul Haq Award, the inaugural Clinton Global Citizen Award and the inaugural WISE Prize for Education.

BRAC reaches out to the less privileged communities across the globe through microfinance, education, healthcare, legal services, community empowerment and more, catalysing lasting change and creating an ecosystem in which the less privileged have the chance to seize control of their own lives. Through this initiative, BRAC has reached and touched the lives of an estimated 126 million people, spanning across 11 countries in Asia and Africa and the Caribbean.

BRAC, with its 100,000 employees dedicated to spreading antipoverty in the world, focuses on social and financial empowerment of women, healthcare and education, empowering farmers though inclusive financial solutions, not only catering to financial needs, but also improving livelihood and financial literacy among the less privileged.
LOLC Group is one of the largest non-banking financial institutions in Sri Lanka formed in 1980 and pioneered leasing in the country. Within the open economy, the company revolutionised SME financing of income generating. This initiative changed millions of lives of the SME sector and many of them over the last three decades have graduated to the level of medium to large scale enterprises.
With this objective achieved, LOLC moved on with its next objective of reaching the non-bankable micro sector to facilitate financing to empower the micro sector with financial solutions that not only provided the much needed seed capital but to be a partner with interests in sustainable improvement of the livelihood of this community.

LOLC Micro Credit Ltd. (LOMC) was formed with this intention in 2009 along with FMO (The Netherlands Development Finance Company) who has a stake of 20% in the company. LOMC today is one of the largest micro financing institutions in the country, serving more than 160,000 customers and is reaching the poorest of the rural community through its 128 service outlets.
In the medium term, it is expected that BRAC and LOLC will invite Triodos Bank to invest in a stake of 10% and the new shareholder is expected to spearhead the provision of micro funding to fuel portfolio growth.

Triodos Bank is one of the world’s leading sustainable banks formed 30 years ago with the mission of making money work for positive social, environmental and cultural change and transacts only with sustainable companies. The bank has transactions with more than 355,000 customers with 6.8 billion euros under its management. The bank provides financial support for more than 6,000 sustainable enterprises in 40 countries worldwide.

Nanda Investments was founded in 1961 by Sirisena Mallawarachchi and in 1990, Anura Mallawarachchi took over the management of the company as the Chairman. Later, he stepped down and managed the company as Managing Director in line with Central Bank guidelines.
BRAC together with LOLC makes a formidable partnership in acquiring Nanda Investments which is expected to be positioned as a micro finance company to reach the rural community with whom both shareholders are familiar names for sustainable financial solutions.

BRAC will extend its current business model together with the backing of its global business operations platform while LOLC will play a key role in providing the know-how on the local micro credit business. Together with Triodos Bank, this partnership will flourish as a strong microfinance company with a sustainable business model of providing financing to less privileged rural community.

Opens branch in Kiribathgoda with plans to open four more

Registering an annual asset growth of 30% over the past few years, AMW Capital Leasing and Finance is all set to embark on a major expansion drive, opening up five new branches in Colombo and its suburbs by end this year.
Aspiring to spread their operations in some of the major cities in the selected area, the first branch for the year was opened in Kiribathgoda last week and will soon be followed by another branch in Kalutara. Setting up operations at No. 101, Kandy Road, Kiribathgoda, the company expects to be part of, and capture the increasing consumer demand in the locale.

There has been tremendous growth in Kiribathgoda during the recent past and the momentum surely will continue, AMW Capital Leasing General Manager Pramuditha Mendis said.
“During the last few years Kiribathgoda has emerged as one of the key fast growing markets in the country. It has also been noted as a high density area. AMW Capital Leasing and Finance is geared to work with this demand and help with the economic growth, catering to the needs of our customers while expanding our network within the country.”

The core business lines of the company – finance leasing, hire purchases, auto loans, working capital loans, operating leases, micro-finance and deposits mobilisation will be available for customers in Kiribathgoda. Exploring strategic alliances, the company has extended its portfolio to service both AMW products and non-AMW products. “This we believe is one of our key strengths,” Mendis said.
As agents of a range of vehicle brands from the lower end to the highest, the strength of the company comes from its main shareholder, Associated Motorways Ltd. (AMW), the largest and the oldest automotive dealer in the country.

Through this advantageous positioning, AMW Capital Leasing and Finance is able to provide fast and efficient services to those who desire motorcycles through Yamaha, self employment by promoting Piaggio, family vehicle through Maruti – ranking at the top in the most popular vehicle in the country, and high end comfort through Suzuki, Renault, and Nissan.
“Though we are a relatively new player in the market, we have been able to gain popularity among leasing customers within this short span of time due to the perceived value they receive – from the extremely fast service, friendliness, competitive pricing and other value added services. The company benchmarks on providing financial facilities within four hours.”

He noted that AMW Capital Leasing and Finance is a one-stop-shop providing vehicle selection, insurance and financing under one roof. The company also provides the most attractive and affordable monthly rental and requires the least documents to process a transaction.
The customers who avail leasing services from the company are offered range of benefits including special discounts on AMW brands of vehicles, insurance and other services. The customers will have the option to upgrade the vehicle at any given time during the lease period.

June 24, 2013 (LBO) - Fitch Ratings said it had downgraded Sri Lanka's National Development Bank by one level to 'AA-(lka)' amid greater retail lending.
The agency also downgraded the bank's outstanding subordinated redeemable debentures to 'A+(lka)'. Both A+(lka) and AA-(lka) are in the investment grade.

Project loans have reduced as a share of total loans to 14 percent in 2012 from 58 percent in 2005.

"The downgrade reflects Fitch's expectation that NDB's risk profile will materially increase as a result of its changing business model, from being a well-capitalised, specialised project lender to a new entrant in a highly competitive domestic commercial banking sector," Fitch said in a statement.

"Its shift towards SME and retail lending will, in Fitch's opinion, materially alter the bank's risk profile, notwithstanding the diversification benefits provided by growth in these sectors."

Fitch said the bank's Tier 1 capital adequacy ratio (CAR) was strong at 18.8 percent by end 2012 up from 14.4 percent in 2011 helped by capital gains from the sale of an insurance subsidiary.

But Fitch said the ratio will reduce in the long-term in line with expected asset growth, though sufficient for the current rating.

Its regulatory non-performing loan (NPL) ratio stood at was 1.31 percent at end-2012, compared with a peer median of 3.1 percent.

The full statement is reproduced below

Fitch Downgrades Sri Lanka's NDB to 'AA-(lka)'; Outlook Stable

Fitch Ratings-Colombo-24 June 2013: Fitch Ratings has downgraded Sri Lanka-based National Development Bank PLC's (NDB) National Long-term rating to 'AA-(lka)' from 'AA(lka)'. The Outlook is Stable. The agency has also downgraded the bank's outstanding subordinated redeemable debentures to 'A+(lka)' from 'AA-(lka)'.

'AA' category National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherent differs only slightly from that of the country's highest rated issuers or obligations.

KEY RATING DRIVERS

The downgrade reflects Fitch's expectation that NDB's risk profile will materially increase as a result of its changing business model, from being a well-capitalised, specialised project lender to a new entrant in a highly competitive domestic commercial banking sector.

Project loans have reduced as share of total loans to 14% in 2012 from 58% in 2005.

Its shift towards SME and retail lending will, in Fitch's opinion, materially alter the bank's risk profile, notwithstanding the diversification benefits provided by growth in these sectors.

Fitch believes NDB is still lagging its larger commercial banking peers, specifically in terms of its franchise in lending and deposits, and that it may face challenges in gaining critical mass across key product segments. For example, NDB has a 3% market share in deposits whereas most incumbents' market share is in the low double-digit range. NDB's current and savings accounts ratio (CASA) was 24% and loans to deposits ratio (LDR) was 111% at end-2012, while it has high deposit concentrations. Comparatively the median ratios for CASA and LDR in the 'AA(lka)' rating category, were 39% and 91% respectively.

These risks are counterbalanced by the bank's satisfactory risk management policies, its prudent approach to provisioning, as well as by its satisfactory track record as a project lender. Its historical track record as a project lender allows it to benefit from longer-term wholesale funding. Other present attributes from its current business, such as high capitalisation and a low non-performing loan (NPL) ratio, are likely to diminish as NDB increasingly shifts to SME and retail lending.

The downgrade of NDB's subordinated debentures reflects a one-notch differential that Fitch maintains from the issuer rating. This reflects the instrument's gone-concern loss absorbing feature, and its subordination to senior unsecured creditors in the event of liquidation.

Core tier 1 capital adequacy ratio (CAR) was strong at 18.8% at end-2012 (2011: 14.4%), bolstered by a one-time capital gain on the disposal of its insurance subsidiary. However, Fitch expects this ratio to reduce in the long-term in line with expected asset growth, but to remain satisfactory for the current ratings. NDB's asset quality is strong compared with its rated peers. Its regulatory non-performing loan (NPL) ratio stood at 1.31% at end-2012, compared with a peer median of 3.1%.

RATING SENSITIVITIES

A solid track record in developing and maintaining a commercial banking franchise with commensurate credit metrics would be considerations for an upgrade. The Stable Outlook, however, indicates this as a remote prospect over the next one to two years.

Sustained and substantial weakening in asset quality, stemming from aggressive loan growth, or a substantial weakening in capitalisation and provision coverage could result in a downgrade.

The subordinated debt rating is primarily sensitive to changes in NDB's National Long-term rating.

NDB was established in 1979 as a specialised bank and transformed into a licensed commercial bank in 2005. The government of Sri Lanka indirectly held over 30% of NDB's voting shares at end-March 2013, through various state-owned institutions.

More than a year after the share deal fiasco at the National Savings Bank (NSB), another ‘crisis’ surfaced at the bank.

This time it is over a US$1 billion bond issue the bank wants to float; not for its own use, but for the state.

The simple fact is that state coffers are empty and sources of funding for the Government are fast drying up. NSB Chairman Sunil Sirisena was sacked at the behest of always-in-the-news Treasury Secretary Dr. P.B. Jayasundera because the former stood his ground to carefully assess the risk element in this huge borrowing commitment. There were other issues too between Jayasundera and Sirisena, a recently retired and respected civil servant, over changes at the bank but the delay in securing the loan was the trigger to Sirisena’s departure from the bank.

While Pradeepa Kariyawasam’s exit from the NSB as chairman, after the 390 million-rupee stock market scam involving a deal between some directors and investors of The Finance Co and the NSB, was for an irregular transaction that would have severely affected the bank, Sirisena’s folly is in doing what is right and protecting the rights of shareholders (Government) and depositors in ascertaining the risks involved in securing a foreign loan.

Our report on the events at the NSB also speaks of Sirisena being reprimanded by Jayasundera for the delay in processing this loan. This is however not the first time Government officials have been lambasted for doing their job.

For the record, Kariyawasam, once a ruling party favourite, is yet to face charges of corruption with the state’s anti-bribery office pushing in all kinds of directions – earlier in favour of the former NSB chairman and now going after him following his wife’s (former Chief Justice Shirani Bandaranayake) un-ceremonial fall from grace.

Various attempts by the Treasury to raise money hasn’t worked and when the expected cash (NSB bond issue) was being delayed, ‘fury’ has taken over and succeeded over rational thought and obligation to thousands of depositors at the bank. A good man (Sirisena) who refused to quit when asked to as he had done no wrong, was then ordered to leave. His replacement, W.A. Nalani, a veteran banker, will fast-track the bond issue and a Thursday meeting with President Mahinda Rajapaksa and officials headed by Jayasundera was meant to push home the point that the loan must be expedited.

The NSB is the country’s premier savings institution and considered the safest investment for thousands of middle and lower middle income Sri Lankan depositors. It’s not an investment bank, not has it done any (sizable) foreign trades or investments. Its mandate provides for 60 per cent of the investments to be made in treasury bills and government bonds, which are low return instruments but also at minimal risk. The bank has traditionally been averse to risk and in recent times the debate has been growing as to whether the investments should be spread far and wide into higher return instruments at a higher risk, the route used by all commercial banks. In some cases, the NSB has been dumping 90 per cent of its money into bills and bonds, playing safe in the process. That’s why depositors were horrified, when the share market scandal exploded last year, leading to a run on the bank.

With the $1billion bond issue accounting for 1/5th of the bank’s assets, have the authorities considered the foreign exchange risk involved if and when the rupee depreciates in the future? With the money bringing in no return, the risk is greater and someone has to bear the loss – the Government or the bank. If the bank bears the loss, it would be playing around with depositor funds in an unproductive, no return investment.

A few weeks back, the viability of the loan was raised at a parliamentary meeting by opposition parliamentarians. In response, harried NSB officials said the loan was approved by the Cabinet and the NSB was borrowing on behalf of the Government. Such concern in opposition quarters may have prompted Sirisena to re-examine the loan issues.

The supply and demand scenario in financial resources is a nightmare for Jayasundera and his staff. The cash flow is just one-way: money going out, nothing coming in. Treasury efforts to secure a $1billion loan for budget support from the International Monetary Fund (IMF) failed while a request to the World Bank for a $750 million facility is in the pipeline.

The longer the delay, the higher the cost becomes of funding infrastructure development and other projects. Immediate and urgent requirements are ‘borrowed’ from other ministry budgets (health and education for instance) and paid back.Ironically Jayasundera, at a public meeting on Friday to release the Finance Ministry’s 2012 annual report, urged state officers to be more efficient, a contradiction when considering the decision to sack Sirisena.

The proverbial story of the three monkeys “hear no evil, see no evil, speak no evil” aptly fits the state of play in Sri Lanka today where transparency has hit the lowest depths and the few, remaining, honest officials are being eased out.

UB Finance Company Limited (UBF), a subsidiary of Union Bank of Colombo PLC backed by its US based strategic investment partner, Show Cap II, opened branches in Kurunegala and Galle recently.

Chairman, Union Bank of Colombo PLC Alexis Lovell, Chief Executive Officer, Ransith Karunaratne, members of the Board of Directors, senior management, clients of UBF and otherw were present.

Chairman, UBF, Lovell said, "We are excited to be a part of cities with high business potential such as Kurunegala and Galle. The setting up of our full-service branches represents a long-term commitment to individuals, families and businesses of the two cities."

"Being one of the first financial institutes to be backed by a commercial bank in the private sector, our customers enjoy one of the best interest rates in the market secured by the strength of a bank," said the Chief Manager, Fixed Deposits, Jude Muthugala.

"We have identified our clients and are equipped to provide them financial solutions to accommodate their specific needs. We will be strengthening our network by adding two more branches this quarter," he said.

Both events were preceded by street promotions announcing UBFs financial solutions such as leasing, higher purchase, loans, fixed deposits, savings, real estate and factoring.

Melsta Regal Finance Ltd, which recently forayed into the financial services industry in Sri Lanka has introduced a new service to entrepreneurs.

The working capital solution '360 degree trade finance solution' comprises a wide range of financial facilities ranging from opening of Letters of Credit, import loan and revolving short term loans, warehousing and logistical services, debt factoring, debt collection and sales ledger administration services. "The product would be an impetus to growth for a wide range of businesses ranging from SME's to large corporates," a spokesman for the company said.

Chairman, Melsta Regal Finance Ltd and Melsta Corp Ltd, Amitha Gooneratne said, "Sri Lanka is at a important juncture of economic development with plans to reach important milestones of being a $ 100 billion economy and reach a per capita income level of $ 4,000. The financial services sector should support the economic development by introducing superior financial services to support the SME sector." "The company has launched an integrated working capital solution under one roof.

This is an innovative working capital solution, which would encompass a supply chain and financing solution within one entity. This service harnesses the strategic competencies of the Group, which has diversified interests in insurance, logistics, call centre operations and telecommunications."

Director and CEO of the Company, Nishaman Karunapala said, "Through this innovative solution we hope to revitalise the SME sector by offering working capital services and logistical support and introduce financial convenience through value added services to assist the economic development of the country."