CSE News Updates

June 28, 2013 (LBO) - Sri Lanka's mobile subscriber base has started to shrink, falling by almost a million subscribers in the first quarter of 2013, the first time since the industry began its explosive growth in 1992, data from the regulator showed.
Total mobile subscribers fell 988,337 to 19,335,733 in the March 2013 quarter from December, in an island which has a population of about 20 million people, indicating that large number were users with more than one SIM or subscriber identity module.

Sri Lanka's explosive mobile sector growth began in 1992, when Celltell, a unit of Millicom International Cellular - now Etisalat Sri Lanka - launched South Asia's first mobile service, ending a state monopoly in telecoms.

Mobile subscribers grew, despite high tariffs, with waiting lists of more than 10 years at the state run incumbent.

Competition came when Australia's Telstra launched a second service as a joint venture with state-run Sri Lanka Telecom.

Dialog came in third with digital GSM technology quickly overtaking its analogue competitors.

Fixed access users also fell 3,449,391 to 2,832,464 a trend that first began in 2008, when fixed access users peaked at 3,446,411, data released by the telecom regulatory authority showed.

Both mobile and fixed access firms have been investing in broad band data connections to boost revenues. Fourth generation fixed and mobile wireless technology is now being rolled out.

The telecom regulator said what it called fixed internet subscribers grew from 423,194 to 435,758 during the March 2013 quarter, while mobile internet subscribers grew to 1,069,482 from 942,461.

http://www.lankabusinessonline.com/news/sri-lanka-mobile-subscribers-shrink/361042096

June 29, 2013 (LBO) - Sri Lanka's Nawaloka Hospitals Plc will build a 575 million rupee hospital in Negombo, a coastal city north of the capital Colombo as part of a regional expansion, the firm said.
"Each regional hospital will provide all diagnostic facilities with 50 to 70 patient rooms for indoor patient admissions," the firm said in a stock exchange filing.

The hospital will be built through Nawaloka Medicare (Pvt) Ltd, a wholly owned unit, the company said in a stock exchange filing.

http://www.lankabusinessonline.com/news/sri-lankas-nawaloka-hospitals-plc-in-regional-chain/757982063

June 24, 2013 (LBO) - Sri Lanka Telecom said it had added doorstep bill collection service to their existing network of 3,000 payment points, made up of bank branches and supermarkets, making it easier to settle bills.
Under a deal inked with HDFC Bank, a mortgage lender, SLT will use its 300-strong mobile collections team to customer's homes and central locations allowing bills to be paid.

"This is especially useful for customers in rural areas such as Batticaloa, Vavuniya, Mannar, Hambanthota, Nuwera Eliya..," he said in a statement.

Some customers had to travel as much as 30 kilometres to pay a bill in those regions resulting in missed payments.

"This sometimes has resulted in line disconnections and inconvenience caused to customers, even though they have sufficient funds to settle payments on time," he said.

The bills will be updated through palmtop computers carried by HDFC Bank's collection team.

"Improving our technology remains a priority to capitalize on efficiency and productivity gains that can be facilitated through the creative use of IT and other technologies," Nimal Mamaduwa, chief executive of HDFC Bank was quoted as saying in the statement.

"Our palmtop operators reach deeper into rural parts of the country and the collection of telecommunication bills will be another value addition to our services."

June 24, 2013 (LBO) - Sri Lanka's exports fell 6.8 percent in April 2013 to 696.6 million US dollars with apparels falling 14.98 percent to 275 million US dollars from a year earlier, and exports in first four months down 7.8 percent, the Central Bank said.
Industrial exports were down 7.5 percent to 518 million US dollars.

Agricultural exports fell 0.9 percent to 175.6 million US dollars, but tea was up 1.2 percent to 106.4 million US dollars.

Imports rose 5.7 percent to 272.7 million US dollars with consumer goods up 12.7 percent to 272.7 million US dollars, intermediate goods up 5.5 percent to 884.4 million US dollar.

Petroleum imports fell 5.2 percent to 343.4 million US dollars and textile and apparel fell 15.4 percent to 154.1 million US dollars.

Investment goods were up 1.2 percent to 363.4 million US dollars.

Machinery and equipment were barely up 1.1 percent to 186.5 million US dollars, transport equipment were down 27.0 percent to 60.3 million US dollars and building materials were up 26.8 percent to 116.3 million US dollars.

The trade deficit expanded 19.2 percent to 825.4 million US dollars.

In the first four months exports rose 7.8 percent to 3,059.8 million US dollars, imports fell 11.3 percent to 6,025.4 million US dollars and the trade deficit was down 14.6 percent to 2,965.6 million US dollars.

A trade deficit is caused when domestic economic agents outside merchandise exports, including remittances, tourism receipts, borrowings and foreign direct investments.

The Central Bank said worker remittances (exports of labour) were 2.1 billion dollars and earnings from tourism receipts were 407 million dollars.

The central bank said there were 612 million US dollars flowing into Treasuries markets (exports of debt) and 546 million US dollars in other loans.

June 24, 2013 (LBO) - Sri Lanka had sold 90 million US dollars of 3-year bonds at premium of 400 basis points above the London Interbank offered Rate and 164 million US dollars of 5-year bonds at 415 basis points above Libor, the state debt office said.
The debt office, which is unit of the Central Bank said 50 million US dollars of 3-year bonds and 25 million in 5-year bonds paying a 6-month coupon above Libor was offered but orders were much larger.

The Central Bank had accepted all bids. The Libor rate Monday was 0.4138 percent, the Central Bank said.

The so-called dollar denominated Sri Lanka Development Bonds are popular among domestic banks and other investors who are allowed to have foreign currency assets.

In March 2013 Sri Lanka also sold 3-year bonds at 400 basis points.

Corrected/headline total US$254mn

June 24, 2013 (LBO) - Sri Lanka's stocks closed down at 0.10 percent on Monday continuing its downward trend from the previous week with investors taking profit and losses in the heavy index stocks, brokers said.

The benchmark Colombo All Share Index closed 05.89 points lower at 6,149.38 and the S&P SL 20 Index closed 5.73 points higher at 3,472.30 up 0.17 percent.

Turnover was 200 million rupees down from 564 million on Friday.

Foreigners brought 77 million rupees worth shares while selling 30 million rupees in a day that 58 stocks advanced and 117 stocks declined.

Carsons Cumberbatch contributed most to the index closing at 446.80 rupees up 11.10, Nestle Lanka gained 19.80 rupees to close at 1338.80 rupees and George Steuart Finance closed at 599.00 rupees up 38.90 rupees.

Negative contributors included John Keells Holding losing 1.10 rupees to close at 264.00 rupees, Ceylon Tobacco Company closed at 1000.00 rupees down by 4.90 rupees Sri Lanka Telecom lost 50 cents to close at 40.00 rupees.

Pan Asia closed at 19.30 rupees down 30 cents. Union Bank of Colombo closed at 17.80 rupees down 20 cents. Sampath Bank closed at 202.50 rupees down up 40 cents and Commercial Bank of Ceylon gained 60 cents to close at 115.90.

Distilleries Company crossed closed at 192.80 rupees down 1.50 rupees and The Lions Brewery closed at 392.30 rupees up by 6.70 rupees.

June 24, 2013 (LBO) - Sri Lanka's foreign reserves rose 168 million US dollars to 6,858 million US dollars in April 2013 from 6,689.50 million US dollars in March, Central Bank data showed.
The central bank said gross official reserves were equal to 4.4 months of imports.

In April a state-run bank raised money abroad and the Central Bank which saw its Treasury bill stock also spike, started to cut it with outright sales in the second half of the month. Selling down the domestic asset portfolio of the bank, allows foreign reserves to rise.

Official foreign reserves in Sri Lanka are made up of the Central Bank's monetary reserves as well as fiscal reserves.

Reserves can also change due to valuation effects including cross currency movements or the price of gold.

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.