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World Affairs








  In Brief     Supplement


Eastman Narangoda

Meets CB's capital adequacy requirements

Seylan set to expand

Seylan Bank plc has met Central Bank's (CB's) Tier 1 and Tier 2 capital adequacy requirements and expects to obtain CB approval to open more branches, its CEO Ajita Pasqual told reporters on Thursday.

The Bank in recent times had been precluded from opening more branches due to not meeting those requirements, but with a successful rights issue that raised Rs.800 million, coupled with profits made, it now meets CB requirements and is geared to obtain approval to open more branches, he said.

The Bank at present has 93 branches and 22 convenient centres.

It has some 3,800 employees. However, its recently appointed chairman Eastman Narangoda said that none of its staff would be retrenched.

Pasqual confirmed that Seylan had a run on its deposits (estimated to be to the tune of Rs.700 million) at the height of the Golden Key Credit Card company crisis, but this has now stopped with the appointment of a new Board.

CB, using the powers vested on it by the Monetary Law Act, changed the Seylan Board and appointed Narangoda, a banker to the post of chairman and made Lalith Withana, an accountant at Brandix, Nihal Jayamanne (PC) and Naomal Goonewardena, a corporate lawyer and accountant as board directors.

Subsequently R. Nadarajah, a banker (former managing director PABC Bank) and Rear Admiral (retd.,) Ananda Peiris were also appointed to the Board.

Narangoda said that at present he is the only executive director of the Bank. But steps are being taken to appoint another executive director, he said.

Meanwhile Pasqual said that most of those withdrawals were from retailers, such as pensioners. But now they are returning, he said.

He further said that the Bank's non performing loans ratio stood at 12%, higher than the industry average.

Narangoda told reporters that their top priority is to manage risk, stabilize the bank and win the confidence of depositors and customers.

He said that he would look into improving the Bank's credit quality, investments and off balance sheet items. "Taking steps to mitigate any possible operational risks, market risks and credit risks will be high on the agenda," he said.

Meanwhile Pasqual said that the Ceylinco Group and connected parties were having a 23% equity stake in the Bank. Some parties are looking at acquiring this stake, he said. In addition the Bank's four Employee Share Option Plans (ESOPs) have  some 27% equity stake in the Bank.

The Bank's Board controls the ESOPs, Pasqual said.


Govt., crowds out private sector

With banks dodging lending to the corporate and retail sectors due to rising bad loans, and therewith focusing their investment on government Treasuries, that has begun to relieve pressure on yields in secondary market trading in Treasury Bonds (T. Bonds), market sources said.

T. Bonds maturing on 1.4.12., which fetched a weighted average yield (WAY) of 20.02% at Tuesday's primary T. Bond auction saw those yields slip by 77 basis points (bp) to 19.25% for T. Bonds of a similar maturity period, ie maturing on 2012 at Friday's secondary market trading.

This was also so for T. Bonds maturing on 2010, which, only on Monday were fetching 21% in secondary market trading, but fell steeply by between 150-175 bp, to be trading at between 19«-19¬% levels by Friday.

They said that both foreign and local banks were among the investors in secondary market trading in T. Bonds.

Central Bank (CB)  statistics showed that foreign investments in T. Bonds rose from Rs. 17,572 million to Rs. 18, 400 million, a Rs. 828 million week on week (WoW) increase in the week ended Wednesday.

Due to demand, sources expected T. Bill rates to come down at Tuesday's primary auction. Last week's T. Bill auction saw the WAYs for all three tenures, 91, 182 and 364 days, slip by two bp each to 17.31%, 18.55% and 19.10%, WoW respectively.

CB T. Bill holdings in the week ended Thursday contracted by Rs. 1,747 million WoW  to Rs. 135,849 million.

Business of Photography

Tom Tidball (60), an American married to a local, launched his third local, and sixth international photo album to the Sri Lankan market recently.

Titled "People Sri Lanka" with colour portraits of Sri Lankans, including the famous and the "ordinary," those albums are priced at Rs. 3,990 each.

But his bestseller was a similar photo publication which he did, focusing on  "all aspects" of Sri Lanka in 1992.

Running into its third publication, with each publication comprising 2,000 prints; each of those books are priced at Rs. 2,900.

However Tidball also has his share of failures.

A similar photo album which he did on Sri Lanka's beaches and its underwater life during the 2003 ceasefire period, which also included shots from the East and certain parts of the North, have sold only 2,000 of those to date, after having had made 4,000 prints originally.

 Those had had earlier been priced at Rs. 4,300 each; but due to poor sales, Tidball was forced to reduce the price of those albums by Rs. 1,400 to Rs. 2,900 each.

He however said that his biggest success was in the USA-a poster of a Nebraskan American football team taken at sunset in 1987, that sold 10,000 prints at US$ 12 a print, with him being paid royalty for his work.

Tidball also does photography for advertising agencies here, having being employed by Minds on Tuesday to take some photos of children, for a commercial for Hatton National Bank.

But strangely, though he is married to a shareholder of Grants, an advertising agency,  he told  The Sunday Leader that Grants has not employed him for decades.

Tidball 's wife Sriyani is the eldest daughter of the late Reggie Candappa, the founder of Grants.

Tidball however is not into commercial wedding photography, in which he says that there is a lot of money in Sri Lanka. He also sells his photos online.

Credit cards for Rs. 200,000 earners

American Express (AmEx) together with SriLankan Airlines launched a credit card on Wednesday  that targeted those who earned a minimum of Rs. 200,000 and above.

Manoj Gunewardena, CEO SriLankan Airlines told reporters that the data base that they plan to tap includes 3,000 gold members under their now defunct Skywards Miles programme which was done in conjunction with Emirates Airlines, 7,000 silver members under the same project and 120,000 normal members.

Those who qualified for gold membership under the old programme were those who flew a minimum of 50,000 miles annually; silver-25,000 miles and normal or "blue," those who flew four sectors, with a return flight on SriLankan being classified as having covered two sectors.

The use of the new card entitles the customer to gain free miles when flying in the airline, with this card even being accepted by selected supermarkets like a usual credit card from which purchases could be made.

Nations Trust Bank PLC  (NTB) CEO Zulfiqar Zavahir answering reporters said that AmEx has captured 30% of the top end credit card market in Sri Lanka.

NTB is the sole issuer of AmEx credit cards in Sri Lanka.

 NTB Chairman Ajit Gunewardene speaking at its launch said that they begin the new year with optimism. He was confident that the combined strength of NTB, SriLankan and AmEx would make this card a success.

Meanwhile, Gunewardena of SriLankan in his speech said that due to the global recession, the airline industry has been transformed into a buyers'market. He said that the slackness in demand for overseas travel far outpaced the decline in oil prices. Reduction of airline capacity could also not keep pace with the reduction in demand.

Agriculture exports slump 8%

Agricultural exports earnings slumped by 8.1% in November 2008, year on year (YoY). Tea export earnings slumped 10.8% mainly due to price reductions in the international market. However, Colombo auction prices remained higher than at other auction centres despite a 10% increase in export volumes, the Central Bank in a statement said.

Rubber export earnings also dipped by 7.7% in November, YoY, due to a 16.1% reduction in prices. Minor agricultural crop exports which have been a significant contributor to export earnings in recent times, depicted a reversal of its growth trend in November 2008, sliding 22.7%, YoY. 

However Exports grew by 11.6% in November 2008, YoY, to record earnings of US$ 645 million. 

This was led by the 18.7% growth in industrial exports, particularly textiles and garments, which grew by 22.6%.  While a major portion of these textiles and garments reached the USA (41%), a significant quantum was exported to the UK (27%) and other European countries (23%).

 Within industrial exports; food, beverages and tobacco as well as the diamond and jewellery categories too performed well, compared to the corresponding period last year.  However YoY growth in many other sub-sectors, including machinery and equipment, subsided in November 2008 in view of the dampened global demand for goods and services. 

Cumulative exports proceeds in 2008 amounted to US dollars 7,456 million, upto November, reflecting a 9.7% YoY increase.

Imports which have shown significant increases in recent months declined by 3.1% in November 2008 YoY to US$ 977.7 million, of which over 50% were intermediate goods comprising textiles, petroleum products and fertilizers. Reflecting the trends in the petroleum sector, petroleum products expenditure decreased by 29.6% in November, YoY.  The substantial increase in fertilizer imports in November, amounting to US$ 72 million, is largely due to enhanced import volumes. Consumer goods increased in November 2008, led by imports of wheat, which was not imported in the corresponding month of 2007.  Imports of Investment goods subsided by 28.5% in November 2008, YoY, mainly due to the contraction in imports of machinery and equipment and building materials.  Cumulative expenditure on imports during the first eleven month period amounted to US dollars 12,960 million, which reflects a YoY increase of 27.9%.

As a result, the trade deficit contracted for the first time in 2008, by 22.9% to US$ 332.6 million in November 2008. The cumulative deficit in the trade balance expanded to US$ 5,504 million during the first eleven months of the year, compared to a deficit of US$ 3,338 million for the corresponding period previous year. 

Private remittances which increased during the period January-November 2008 to US$ 2,682 million helped contain the current account deficit.  Consequently gross official reserves with and without Asian Clearing Union funds recorded US$ 2,608 million and US$ 2,030 million respectively by end November 2008, which were sufficient to finance around 2.2 and 1.7 months of imports respectively.

Beauty & Brains

Nilusha Fonseka (21), the only World Prize winner in the May 2008 CIMA exam, won the world prize for Management Accounting Decision Management.

Fonseka is also reading for her Bio Science degree at Sri Jayewardenepura University.

Perera riddle

Hayleys plc on Thursday informed the resignation of P.S.P.S. Perera from its Board to the Colombo Stock Exchange.

Our sister paper, The Morning Leader, in its last week's issue reported that there was a seeming controversy arising as to whether Perera had resigned or not from the Hayleys Board.

Business magnate Dhammika Perera who has a Board seat in the company with a 21% stake in it, is clamouring for another Board seat, informed sources said.


Environment Resources Investment plc recently informed the Colombo Stock Exchange that it has divested its holdings in Walker & Greig (Pvt.) Ltd., together with its assets and liabilities and business dealings to Brown & Co., plc.

Management changes

DFCC Bank plc and Hatton National Bank plc (HNB) which control Acuity Partners (pvt.) Ltd., an investment bank, has informed the Colombo Stock Exchange that they will appoint Ray Abeywardena as its CEO/Director effective from next month.

Abeywardena was formerly CEO NDB Stock Brokers.

In addition, Deva Ellapola, former head of HNB Stock Brokers will be appointed as head of stock broking operations, while Amal Fernando will be operated as Fixed Income Operations Head from January 15.

Acuity deals in corporate finance, stock broking and primary dealer business. The company which operates from T.B. Jayah Mawatha, Colombo, will operate from Dharmapala Mawatha, Colombo by the month end (January 2009).

Jayantha Perera will relinquish his position as Acuity Partners Managing Director and return to his substantive role as HNB Senior Deputy General Manager, while being a non-executive director at Acuity.

Likewise G. Ramanan will assume a role of non-executive director and revert to his substantive role of HNB Assistant General Manager.

It also said that DFCC and HNB corporate finance teams with oversight provided by DFCC Vice President and Acuity non-executive director Tyrone de Silva will lend their services to Acuity.

Tapping diaspora

Central Bank has appointed Bank of Ceylon, Commercial Bank of Ceylon PLC, National Savings Bank, NatWealth Securities Ltd., People's Bank and Sampath Bank to canvass for investment among the Sri Lankan diaspora in Treasury Bills (T. Bills) and T. Bonds.

The targeted areas are Middle East (Dubai, Abu Dhabi, Kuwait, Jordan, Lebanon, Qatar, Bahrain, Saudi Arabia and Oman), Europe (Italy, France, Switzerland, Germany, Netherlands and UK), North America (USA and Canada) and  Asia  (South Korea, Malaysia, Singapore, Japan, India and Bangladesh).  In addition, the programme will cover Australia and New Zealand.

Investments in T. bills or T. bonds could be channelled through any one of the banks using the T. bill/bond Investment External Rupee Account-D (TIERA-D) to be opened by the investor for that purpose.  Remittances into and out of TIERA-D accounts will be free from exchange controls.


Asanka Ranathunga (36) recently won the Fonterra 2008 CEO Award for turning out machinery for fruit-layered yoghurt manufacture, which otherwise would have had cost the local company NZ$ 10,800 to import same.

He is an employee of Fonterra Lanka.

Divesting assets

The private sector business leaders in Sri Lanka has an opportunity to expand their businesses to the Maldives, as Maldivian President Mohamed Nasheed said that his government has decided to divest all their government businesses.

Some of those government business concerns are electricity power supply, highways, ports and the airport. He said this while addressing Sri Lankan business leaders in Colombo recently.

"Promoting India"

Tourism Minister Milinda Moragoda will deliver a keynote speech at the Gujarat Tourism Convention to be held in Ahamedabad from January 11-13.

Rs.three mn., in prizes

Ratthi gave away prizes worth Rs. three million to 90 lucky winners in a promotion that ended last month.

The winner of the grand prize, Ms. Sonali Silva from Jaela  received gifts worth up to Rs. 300,000. 

Fonterra Brands Lanka, the holder of the Ratthi brand is this multinational company's largest consumer operation outside of Australia and New Zealand and is Sri Lanka's largest FMCG company with 49% of the market, generating sales of NZ$255 million annually. Its Anchor brand has 55% market share in its category.


Recently leaders of the Software and BPO industry came together to form the unified national IT/BPO industry association-Sri Lanka Association for Software and Services Companies (SLASSCOM)-to lead the advancement of the IT/BPO industry in Sri Lanka.

"Sri Lanka has the potential to significantly expand its information technology enabled services capability, the formation of SLASSCOM represents a great opportunity to bring the focus and direction required to realize this potential," said Chris Rogers, Managing Director HSBC Global Services Centre, the largest BPO operation in Sri Lanka.

Stock market announcements

Ceylon Tea Services has declared a Rs. 25 interim dividend. Excluding dividend (XD) date: January 15, 2009 and payment date: January 27.

Union Chemicals Lanka plc has declared a first interim dividend of Rs. 5 a share. XD date: January 12, 2009 and payment date: January 16, 2009.

Environmental Resources Investment plc has declared a rights issue in the proportion of 1:1 at an issue price of Rs. 20 a share subject to approval.

Lufthansa buys Austrian

Lufthansa will acquire a 41.6% stake in Austrian from state holding company OIAG subject to EC approval. Under the agreement, the Austrian government would assume up to euro 500 million of the carrier's debt.

Air France-KLM, which had bid for Austrian lodged a complaint with the EC saying the transaction does not follow instructions imposed on it during the bidding process.

Separately Virgin Atlantic and Lufthansa held talks about bmi; Lufthansa is increasing its 30% stake in bmi to 80%. Also, Lufthansa reportedly resumed talks on acquiring a stake in SAS which is 50% owned by the governments of Sweden, Norway and Denmark. (Washington Aviation Summary)

In Brief

WB calls for investigation

World Bank (WB) urged the Government to hold full and transparent investigations of incidents of violence against media.

Free and independent media is fundamental to the sustainable economic development of Sri Lanka, the WB in a statement said.

The WB expressed grave concern about the growing incidents of violent attacks on the media in Sri Lanka, including the brutal killings of several journalists. 

Violence against media has a profoundly negative impact on the ability of the media to fulfil its core watchdog function and to carry out its role as a medium of accountability and a reflection of "citizen voice," the statement further said.

Condemnation won't do

Mere words of assurance of investigations would not be sufficient to restore public confidence, Ceylon Chamber of Commerce (CCC) referring to the assassination of The Sunday Leader Editor Lasantha Wickrematunge said.

Condemning the attack, the CCC said that the international standing of our nation is at stake due to the continuous manifestation of impunity. It reiterated the need for speedy action by the authorities to bring the perpetrators before the law to be appropriately dealt with, to help ensure the country's economic and social stability and to safeguard its credibility.

The statement said that they see the killing as yet another instance of the resurgence of attacks on media freedom and an alarming erosion in law and order.

"It is shocking that the attack was carried out in broad daylight in a populated area  in  the  outskirts  of Colombo," CCC said.

War wins insufficient

The bourse returned its lowest turnover for the year so far, a sum of Rs.18.5 million, as the country situation and the global economic downturn continued to impact on the local stock exchange at last Friday's  trading, market sources said.

The benchmark ASPI fell 10.15 points and the more sensitive MPI by 13.13 points over Thursday's close. "It may however be temporarily revived for a couple of days if there is a major military victory, but then fallback to its status quo of a continuing bear run afterwards, they said.

Such gains will not be sustainable, the sources said.

They further said that though investors were angry over the killing of The Sunday Leader editor Lasantha Wickrematunge and the earlier attack on Maharaja TV, those could not be construed as having an impact on the bourse.

However, the business pages of last week's The Morning Leader issue quoting senior banker Rienzie T. Wijetilleke said that lawlessness negatively impacts business confidence in the country.

Bad loans create surplus

With rising bad loans being a detriment to corporate lending, the overnight call money market, the market with which commercial banks trade with each other returned a Rs. 6,331 billion net surplus at Friday's trading.

Overnight call rates averaged around 13.63%, according to the CentralBank.

Shift in focus

State run Bank of Ceylon continued to defend the rupee vis-…-vis the US dollar at the Rs. 113/85 levels despite sluggish demand, with the other state owned commercial bank, People's Bank, being among the buyers at Friday's trading, market sources said.

"Investor demand is now focused on government Treasuries rather than in dollars," they said. (See connected story found elsewhere on this page)

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