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Sri Lankan banks lead in March quarter profits

Jun 28, 2017 09:58 AM

ECONOMYNEXT – Sri Lanka’s banking sector remained the largest contributor to earnings of firms listed on the Colombo stock exchange in the March 2017 quarter, helped by interest rates spreads, First Capital Equities said in a research report.

Earnings were up by 7.1% in the quarter to Rs 65.5 billion from a year ago and 0.2% from the previous quarter, for 278 companies analysed by the brokerage, excluding a large one-off gain made by the LOLC group.

March quarter earnings grew 16.1% from a year ago to Rs 75.9 billion, including the one-off gain from LOLC amounting to about Rs 10.4 billion.

Earnings were dominated by healthy performance in the banks sector (+21%YoY) and diversified financial sector (+194%YoY) with higher margins and one-off gains from LOLC Group, the report said.

The interest rates spreads boosted the banking and diversified financials earnings, First Capital Equities said.

The banks sector made a profit of Rs 14.36 billion, up 21% from a year ago, and the diversified financial sector Rs 17.42 billion, up 194% from the year before, primarily led by expansion in margins and one-off gains from LOLC Group.

Big banks led by Sampath, whose earnings grew 30%, Commercial Bank of Ceylon, whose profits rose 17% and HNB with a 16% YoY growth in profit, jointly represented 70% of the sector earnings.

The Food Beverages & Tobacco Sector grew 28%YoY and Capital Goods Sector 42% YoY which was positively affected by healthy consumer spending, First Capital Equities said.

“Improved consumer demand, increased volumes and commodity price volatility led to a boost in profitability in Food, Beverage & Tobacco and Staple Food Sectors by 28% year-on-year,” First Capital Equities said.

“However, the earnings growth was partially offset by Telecommunication Sector, which fell 32% YoY, mainly owing to foreign exchange losses, and Real Estate Sector which dropped 59% YoY, mainly because of RIL reported a lower profit than the previous year when earnings were boosted by a fair value adjustment.

(COLOMBO, June 28, 2017)