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Tuesday November 29th, 2022

Sri Lanka’s state-owned People’s Bank 2018 profits up 3.5-pct

ECONOMYNEXT – Profits at Sri Lanka’s state-owned People’s Bank grew 3.5 percent from a year earlier to 20 billion rupees in the year to end December 2018 with widening interest margins and trading gains offsetting higher provisioning for bad debts, recently published financial results showed.

Earnings were 19,978 rupees a share for the year. The banking group which includes listed People’s Leasing and Finance PLC is fully owned by the government of Sri Lanka.

Net interest income increased 20.9 percent from a year earlier to 75.8 billion rupees with interest income growing 15.2 percent to 200.3 billion rupees and interest income growing a slower 12 percent to 124.5 billion rupees.

The bank reported an interest margin of 4.04 percent at end December 2018, up slightly from 4 percent a year ago.

Net fee and commission income rose 35.3 percent to 7.4 billion rupees while other operating income grew 5 percent to 6.8 billion rupees.

Trading gains rose 58.7 percent to 4.5 billion rupees.

Bad loans provisioning surged 228 percent from a year earlier to 9.4 billion rupees. Gross non-performing loans increased to 2.7 percent of total lending in 2018, up from 2.03 percent a year ago.

During the year, the bank expanded its loan book by 23.8 percent to 1.4 trillion rupees while its deposit base increased a slower 14.5 percent to 1.5 trillion rupees.

Personnel expenses grew 29.5 percent to 23.9 billion rupees.

The banking group employs 11,396 people, unchanged from a year earlier.

Income tax expense grew 3.3 percent to 9.7 billion rupees.

The bank’s total assets rose 17.9 percent to 1.9 trillion rupees at end-December 2018.

Return on assets fell to 18.69 percent in 2018, down from 21.41 percent a year earlier.

The bank’s book value, or shareholder funds, gained 18 percent in the year to 123.5 billion rupees.

Tier I capital adequacy ratio was 11.91 percent, up from the previous year’s 11.49 percent and above the regulatory minimum of 8.875 percent.

Total capital ratio was 14.80 percent, up from 13.71 percent from a year ago and above the regulatory minimum of 12.875 percent.

Outstanding guarantees issued by the bank amounted to 74 billion rupees at end December 2018, down from 74.2 billion rupees a year earlier. (COLOMBO, 29 March 2018-SB)




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A new Sri Lanka monetary law may have prevented 2019 tax cuts?

ECONOMYNEXT – A new monetary law planned in 2019, if it had been enacted may have prevented the steep tax cuts made in that year which was followed by unprecedented money printing, ex-Central Bank Governor Indrajit Coomaraswamy said.

The bill for the central bank law was ready in 2019 but the then administration ran out of parliamentary time to enact it, he said.

Economists backing the new administration slashed taxes in December 2019 and placed price controls on Treasuries auctions bought new and maturing securities, claiming that there was a ‘persistent output gap’.

Coomaraswamy said he keeps wondering whether “someone sitting in the Treasury would have implemented those tax cuts” if the law had been enacted.

“We would never know,” he told an investor forum organized by CT CLSA Securities, a Colombo-based brokerage.

The new law however will sill allow open market operations under a highly discretionary ‘flexible’ inflation targeting regime.

A reserve collecting central bank which injects money to push down interest rates as domestic credit recovers triggers forex shortages.

The currency is then depreciated to cover the policy error through what is known as a ‘flexible exchange rate’ which is neither a clean float nor a hard peg.

From 2015 to 2019 two currency crises were triggered mainly through open market operations amid public opposition to direct purchases of Treasury bills, analysts have shown.

Sri Lanka’s central bank generally triggers currency crises in the second or third year of the credit cycle by purchasing maturing bills from existing holders (monetizing the gross financing requirement) as private loan demand pick up and not necessarily to monetize current year deficits, critics have pointed out.

Past deficits can be monetized as long as open market operations are permitted through outright purchases of bill in the hands of banks and other holders.

In Latin America central banks trigger currency crises mainly by their failure to roll-over sterilization securities. (Colombo/Nov29/2022)

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Sri Lanka cabinet clears CEB re-structure proposal: Minister

ECONOMYNEXT – Sri Lanka’s cabinet has cleared proposals by a committee to re-structure state-run Ceylon Electricity Board, Power and Energy Minister Kanchana Wijeskera said.

“Cabinet approval was granted today to the recommendations proposed by the committee on Restructuring CEB,” he said in a message.

“The Electricity Reforms Bill will be drafted within a month to begin the unbundling process of CEB & work on a rapid timeline to get the approval of the Parliament needed.”

Sri Lanka’s Ceylon Electricity Board finances had been hit by failure to operate cost reflective tariffs and there are capacity shortfalls due to failure to implement planned generators in time. (Colombo/Nov28/2022)

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Sri Lanka new CB law to cabinet soon as IMF prior action

ECONOMYNEXT – Sri Lanka’s new central bank law will be submitted to the cabinet as a prior action of International Monetary Fund with clauses to improve governance and legalize ‘flexible’ inflation targeting, Central Bank Governor Nandalal Weerasinghe said.

Under the new law members of the monetary board will be appointed by the country’s Constitutional Council replacing the current system of the Finance Minister making appointments.

“It will be a bipartisan approach,” Governor Weerasinghe told an investor forum organized by CT CLSA Securities, Colombo-based brokerage.

“The central bank’s ability to finance the budget deficit will be taken out. Thirdly the flexible inflation targeting regime will be recognized in the law as the framework.”

The law will also make macro-prudential surveillance formally under the bank.

There will be two governing boards, one for the management of the agency and one to conduct monetary policy.

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