Economic Capsule - February 2013

1. ECONOMIC
CAPSULE
February 2013
< Research & Development Unit >

2. CONTENTS
FINANCIAL SECTOR NEWS  ECONOMIC & BUSINESS NEWS 
 Commercial Bank First Private Bank in Sri Lanka to Cross  Sri Lanka Ratings Affirmed At 'B+/B'; Outlook Remains Stab
Rs 10 bn. in Net Profit  Sri Lanka Enters Top Global Country Brand Index
 China Exim Bank Signs USD 200 mn Loan to put Matara-Be
 Snippets
 Global Economy
 Analysis & Forecast
 Macro Trends
 Sri Lanka Growth Forecasts (%)
< Research & Development Unit >

3. FINANCIAL SECTOR NEWS

4. Commercial Bank First Private Bank Rs 10 bn. in Net Profit
in Sri Lanka to Cross Rs 500 bn in Assets
Source: CBC Annual Report 2012
Cont..
Source: CBC Annual Report 2012

5. Commercial Bank has established yet another performance milestone, becoming the first private
bank in Sri Lanka to surpass Rs 10 bn in net profit, following a solid all-round 2012 performance
that the Bank dedicates primarily to its customers.
 Profit before tax for the 12 months ending 31st December 2012 grew 30.26% to Rs 14.311 bn.
 While, Profit after tax at Rs 10.072 bn reflected a growth of 25.15%.
 Total income for 2012 improved by 38.88% to Rs 63.167 bn, with interest Income increasing
37.72% to Rs 51.838 bn and non-interest income composed of foreign exchange & other income,
growing by 47.62% to Rs 9.729 bn.
 Total Loans and Advances of the Bank improved by 17.67% over the 12 months to Rs 338.843 bn at 31st
December 2012.
 Total Deposits stood at Rs 382.723 bn at 31st December 2012.
 Total Assets of the Bank crossed the Rs 500 bn milestone during the year to Rs 510.75 bn, reflecting a
growth of 15.79%.
 Gross non-performing loans ratio reduced marginally from 3.43% in 2011 to 3.37% in 2012, and its
net NPL ratio also improved, from 2.08% to 1.84%.
 The Bank opened 14 new delivery channels and installed 55 new ATMs in Sri Lanka during the review period to end the
year with 227 service points and a network of 555 ATMs, which is the single largest ATM network owned by a bank in Sri
Lanka.
 The Bank’s Bangladesh operations comprised of 17 service points and 14 ATMs in the year under review.
 Return on Equity improved to 20.79% while Return on Assets improved to 3.01% before tax and 2.12% after tax.

6. ECONOMIC & BUSINESS NEWS

7. Sri Lanka Ratings Affirmed At 'B+/B'; Outlook Remains Stable
Standard & Poor's Ratings Services affirmed Sri Lanka’s 'B+' long-term and
'B' short-term sovereign credit ratings on Sri Lanka. The outlook remains stable.
S&P affirmed the ratings to reflect its’ view of Sri Lanka's weak external liquidity, a moderately
high and increasing net external liability position.
Additional rating constraints include;
The country's fundamental fiscal weaknesses,
The attendant high government debt and interest burdens.
Political institutions that lack transparency and independence are a further rating weakness.
Support for the ratings comes from;
Sri Lanka's robust growth prospects and the
Government's moderate progress in addressing a number of its structural weaknesses through fiscal measures and success
in limiting inflation to single digits.
Cont..

8. Sri Lanka Ratings Affirmed At 'B+/B'; Outlook Remains Stable (cont…)
According to S&P;
"Sri Lanka's external liquidity remains weak," this is despite the government and the central bank having shifted their
monetary and exchange rate policies to control the pace of credit expansion and reduce the country's trade and current
account deficits over the past year. S&P estimate SL’s gross international reserves will stay at three months' coverage of
current account payments in 2013.
A narrow tax base, the debt burden from a long civil conflict and the reconstruction, extensive subsidies, and a bloated
public sector have contributed to a fiscal deficit of 8% of GDP on average over the past decade. The increase in government
debt often exceeded the deficit because of currency depreciation.
Although Sri Lanka's inflation edged up to 9.8% in January 2013, S&P believe it will ease slowly this year, as the rupee
stabilizes.
The country's growth prospects are favorable. S&P expect investment to climb toward 30% of GDP on continued
reconstruction and other public investments.
The stable outlook reflects that the country has strong medium-term prospects, with per capita GDP growth of more than
6%, and an improving fiscal profile.
 S&P may lower the rating if the stabilizing external liquidity situation falters, or if Sri Lanka's growth and
revenue prospects diminish markedly. Conversely,
 S&P may raise the rating if economic reforms reduce fiscal and external vulnerabilities and broaden the
still-narrow economic profile.

9. Sri Lanka Enters Top Global Country Brand Index
TOP 10
Sri Lanka has made it to the influential Country Brand Index for the first time in the
compilation’s eight year history, debuting at what was described as “respectable”
67th rank with great potential to move up the ladder fast.
 The Index’ compiler FutureBrand’s South East Asia CEO Sarah Reiter described Sri Lanka’s rank as
a “wonderful achievement for a debutant.” Out of 118 countries surveyed by FutureBrand,
Sri Lanka is at 67 overall and 13th among Asia Pacific nations.
 The study involves an in-depth, rigorous and robust research and assesses 27 image attributes by
3,600 international and experienced business and leisure travelers, drawn from 18 countries in five
continents.
 Sri Lanka has got off to a flying start with attributes such as stable legal environment, history,
authenticity, natural beauty and arts and culture that resonate with visitors just as much as ‘value
for money’ or accommodation.
 Sri Lanka achieved its highest rankings in natural beauty, art and culture and in the latter as well as
attractions and authenticity, Sri Lanka outranked the Philippines, Vietnam, Indonesia and
Bangladesh. Sri Lanka also outranked these countries in safety and as most likable to live in and
standard of living.

10. China Exim Bank Signs USD 200 mn Loan to put Matara-Beliatta on Track
 The Exim Bank of China has signed a Loan Agreement with the
Government of Sri Lanka indicating its agreement to provide USD 200 mn
under Preferential Buyer’s Credit facility to finance the Matara-Beliatta
Section of the Matara-Kataragama Railway Extension Project.
 This is following the Chinese Government on request from the
Government of Sri Lanka agreeing to provide a loan of USD 278.2 mn
through Export-Import (Exim) Bank of China on concessional terms to
finance Phase I of the Matara-Kataragama Railway Extension Project.
 According to the finance ministry, out of the total loan amount, USD 200
mn will be provided under Preferential Buyer’s Credit facility and the
balance USD 78.2 mn will be provided under Chinese Government
concessional loan facility.
 These loan facilities will be provided at an annual interest rate of 2%
with a repayment period of 20 years including a five-year grace period .

11. SNIPPETS… SNIPPETS… SNIPPETS…SNIPPETS… SNIPPETS… SNIPPETS… SNIPPET..
Mannar District Aquaculture Boosted by Japan
Japan will provide Rs. 8.2 mn to build a hatchery to produce fingerlings in Mannar.
Japan will give 65,735 dollars as grant aid to Sri Lanka's state-run National Aquaculture Development Authority of Sri
Lanka (NAQDA) to build a hatchery that will produce, 2 million fingerlings a year.
SL to Offer more Oil and Gas Exploration Licences
Sri Lanka is set to offer a second batch of licences to explore for oil and gas, as it looks to start production in the country and
ease its dependence on imported fuel.
According to the Government it would invite companies to bid for licences on some of the 13 blocks in the Cauvery and
Mannar Basins off the northwest coast. The step comes after Cairn India, the only firm to buy a licence in an earlier offering,
kicked off the second part of its exploration program, following the discovery of gas and condensate in the first phase.
Presently, there are over 400 IT and IT enabled
SLASSCOM-PwC Salary and Benefit Survey 2013 entities with international recognition operating in
Sri Lanka.
According to a Salary and Benefits Survey published by The Sri Lanka Association of Software and
The Sri Lankan ICT/ BPO industry is among the
Services Companies (SLASSCOM) together with PricewaterhouseCoopers (PwC) during the past top 5 export revenue earners for Sri Lanka,
three year period, both IT and ITES (Information Technology Enabled Service ) sectors have shown employing a workforce of 35,000, with exports
significant expansion in terms of headcount numbers with average annualised staff growth rates of amounting to over US$ 600 mn
21% and 14% by the IT and ITES sector respectively. Source: Road Map 2013
Cont..
The industry is targeting a USD 1 bn in revenues and 80,000 employed by 2016.

12. SNIPPETS… SNIPPETS… SNIPPETS…SNIPPETS… SNIPPETS… SNIPPETS… SNIPPET..
Jetwing to Open First No-Frills Hotel in April
Jetwing Hotels, is coming up with a no-frills hotel in Negombo on the lines of the budget air travel concept.
The hotel named ‘Hotel J’ will open in April 2013 on the Negombo beach and is what is called a ‘a select service hotel’.
The customer will get a room with a 5-star bed and shower/toilet, Internet and a safe and clean environment at a price ranging from USD35 -70
per night. Guests pay for everything else that they require including food.
According to Jetwing Hotels Chairman Mr. Hiran Cooray, “you pay for everything else separately,” adding that the concept popular in the West
is fast catching up in locations like Phuket and Bali.
JKH’s Union Place Apartment Complex Ready by End 2014
John Keells Holdings (JKH) is to complete its 36 story, Union Place apartment complex by end 2014.
“We plan to complete construction of ’320’ as it will be called, by 2014. It will have 470 apartments,” according
to Mr. Ajit Gunewardene, Deputy Chairman, JKH.
Liberty Plaza to be Transformed into Premier Retail Destination
The Land and Development Company unveiled the new project proposals for the revamping of Liberty Plaza and the launch of the new food
court . The project will be launched to coincide with the forthcoming Sinhala and Tamil New Year.

13. Global Economy

14. 1
FORBES’ - World's Billionaires 2013
Forbes's 2013 list of the world's richest people includes 1,426 billionaires, a record number, with a total net worth of
2
USD 5.4 trillion, up from USD 4.6 trillion in the previous ranking.
3 Net Worth
Rank (USD Bn)
Name Source Age Citizenship
4 2013 2012 2013
5
—1 Carlos Slim Helu & family 69.0 73.0 Telecom 73 Mexico
—2 Bill Gates 61.0 67.0 Microsoft 57 United States
6
3 Amancio Ortega 37.5 57.0 Zara 76 Spain
4 Warren Buffett 44.0 53.5 Berkshire Hathaway 82 United States
7
5 Larry Ellison 36.0 43.0 Oracle 68 United States
6 Charles Koch 25.0 34.0 Diversified 77 United States
8
6 David Koch 25.0 34.0 Diversified 72 United States
8 Li Ka-shing 25.5 31.0 Diversified 84 Hong Kong
9
9 Liliane Bettencourt & family 24.0 30.0 L’Oreal 90 France
10 Bernard Arnault 41.0 29.0 LVMH 64 France Cont..
10

15. Moody's Downgrades UK's Government Bond Rating
Moody's Investors Service downgraded the domestic- and foreign-currency government bond ratings of the United Kingdom by one notch to Aa1 from Aaa.
The outlook on the ratings is now stable.
The key interrelated drivers for the action are:
The continuing weakness in the UK's medium-term growth outlook, with a period of sluggish growth which Moody's now expects will extend into the
second half of the decade;
The challenges that subdued medium-term growth prospects pose to the government's fiscal consolidation programme, which will now extend well into
the next parliament;
And, as a consequence of the UK's high and rising debt burden, a deterioration in the shock-absorption capacity of the government's balance sheet,
which is unlikely to reverse before 2016.
India’s Budget 2013 Disappoints, Confuses Foreign Investors
 India's budget disappointed foreign investors by failing to deliver a much anticipated cut in withholding taxes for debt investments and creating
confusion with a proposal that appeared to target tax treaties.
 Several measures for foreign investors were unveiled for the 2013/14 fiscal year starting in April, including simplifying a cumbersome registration
process and allowing investments in corporate bonds and government securities to be used as collateral to meet margin requirements. However,
the measures on their own were seen as unlikely to significantly boost foreign inflows at a time when India needs capital flows to plug a current
account deficit that hit a record high in the quarter ended in September.
HSBC Posts Falling 2012 Profits
 HSBC stated that its net profits sank 16.5 % to USD 14.03 bn in 2012, due to US money-laundering fines, mis-selling scandals, rising taxation and a
huge accounting charge. Pre-tax profits slid 6 % to USD 20.65 bn, while revenues dipped 1 % to USD 82.55 bn. .
Standard Chartered States 2012 Net Profit Flat
Cont..
 Standard Chartered stated its net profit was flat in 2012, even after the British lender was hit by huge fines for
violating US sanctions on Iran and other countries. Net profit came in at USD 4.79 bn, compared to USD 4.75 bn in
2011. Pre-tax profit rose 1 % to USD 6.9 bn.

16. China Puts Focus on Consumers to Drive Growth
 China put its fast-growing consumer class at centre-stage as outgoing Premier Wen Jiabao set out a reform plan to spread
the fruits of economic growth more evenly in the country of 1.3 bn.
 Wen made consumers the cornerstone of an economic strategy designed to deliver an overall growth target of 7.5% in 2013 -
a level China barely beat in 2012 when growth eased to its slowest pace in 13 years, expanding by 7.8 %.

17. Analysis & Forecast > >

18. Macro Trends
Cont..

19. Macro Trends

20. Sri Lanka Growth Forecasts (%)
2012 (E) 2013(F)
Central Bank of Sri Lanka 6.5 7.5
International Monetary Fund 6.0 6.25
World Bank 6.1 6.8
Economist Intelligence Unit 6.2 7.0
HSBC 5.8 6.1

21. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the
information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise,
suffered in consequence of using such information for whatever purpose.
Research & Development Unit