2. CONTENTS
BANKING & FINANCE
Commercial Bank financial results – 30.09.2022
Commercial Bank’s Rs 5 billion debenture issue to open on 1st December 2022
Commercial Bank opens 269th branch in Kirillawala
Commercial Bank becomes only Bank in Sri Lanka to win National Quality Award from SLSI
Commercial Bank highest-ranked bank in ‘Business Today Top 40’ for 14th year
Commercial Bank declared ADB’s ‘Leading Partner Bank in SL’ for Trade & Supply Chain Finance
ECONOMY, BUSINESS & DEVELOPMENT
Inflation eases
Central Bank believes interest rates at peak levels after inflation turned a corner
Workers’ remittances up in September
Sri Lanka confident of managing imports with existing inflows until IMF deal comes through
Sri Lanka looks to lure foreign nationals with long-term residence visa
Apparel industry forecasts 30% decline in export orders for Nov-Dec. period
Rebound in tea output expected next year with availability of fertilizer, glyphosate
GLOBAL OUTLOOK
InternationalTourism moving towards pre pandemic levels
Fed officials see smaller rate hikes coming ‘soon,’ minutes show
UK on the brink of recession after economy contracts by 0.2% in
the third quarter
Chinese property market woe
Research & Development Unit
5. Research & Development Unit
Commercial Bank’s Rs 5 billion debenture issue to open on
1st December 2022
The Commercial Bank of Ceylon’s Rs 5 billion debenture issue will open on Thursday 1st December
2022, offering investors an opportunity to profit from the growth of the bank.
The Bank has announced plans to raise Rs 5 billion via 50 million Basel III-compliant debentures with an option to
increase it by a another Rs 5 billion in the event of an oversubscription, to further strengthen its Tier II capital base,
raise funds for the expansion of its lending portfolio, and bridge maturity mismatches in the assets and liabilities
portfolio of the Bank.
The Basel III-compliant, Tier II, Listed, Rated, Unsecured, Subordinated Redeemable Debentures with a *Non-
viability Conversion feature at the value of Rs 100 each will be offered in three tenures – Type A with a five-year
tenure, Type B with a seven-year tenure, and Type C with a 10-year tenure.
The five-year debentures will carry a fixed interest rate of 28.00% p.a. (AER 29.96%) payable semi-annually, while
the seven and 10-year debentures will offer a fixed interest rate of 27.00% p.a. (AER 28.82%) and 22.00% p.a.
(AER23.21%) respectively, also payable semi-annually.
While the minimum subscription per application for an individual qualified investor is set at Rs 5 million, the
minimum subscription per application for other qualified investors will be Rs 10,000/- or 100 debentures.
*Non-viability Conversion feature (NVCF) – During a trigger event NVCF securities will be automatically converted in to stock
6. Research & Development Unit
Commercial Bank opens 269th branch in Kirillawala
The Commercial Bank of Ceylon
recently opened its 269th
branch in Sri Lanka in a rapidly
developing, verdant town –
Kirillawala.
7. Research & Development Unit
Commercial Bank becomes only Bank in Sri Lanka to win
National Quality Award from SLSI
The Commercial Bank of Ceylon was recently honored by the Sri Lanka Standards Institution (SLSI) with the
National Quality Award – the highest award presented in the country to recognize performance excellence in
quality. Commercial Bank is the only bank in the country to be bestowed this prestigious award.
The Bank won this award in the Service sector under the ‘Large Scale Business’ category for excellence in quality
management and quality achievement at the annual awards program organised by SLSI.
8. Research & Development Unit
Commercial Bank highest-ranked bank in ‘BusinessToday
Top 40’ for 14th year
The Commercial Bank of Ceylon has become the highest-ranked bank and one of the five best-
performing companies in Sri Lanka for the 14th consecutive year in the latest Business Today Top 40
ranking released in November 2022.
Sri Lanka’s largest private sector bank, Commercial Bank has been placed third in the overall ranking this year.
Commenting on Commercial Bank’s performance in 2020-21, Business Today said: “With an emphasis on controlling operational
expenses and preventing any possible deterioration in its cost-to-income ratio and profitability, the Commercial Bank ended 2021
with solid growth by aligning its business with its strategic pillars of prudent growth and operational excellence.”
“The Bank heeded government calls to offer moratoriums to businesses. It restructured 25 per cent on the total portfolio of
advances through proactive communication and close staff monitoring,” Business Today observed, noting that “The Bank
successfully maintained a low non-performing loan ratio of 1.44 per cent, reflecting the high asset quality possessed by the Bank
and the success of the initiatives implemented to support customers navigating through a complex operating context.”
The magazine further added that “the top corporates in the Business Today Top 40 list demonstrate hope for the country and the
people, that they have the agility to respond to the unexpected and come out, often a bit bruised but wiser, to lead the
development trajectory into the coming years.”
Commercial Bank paid Rs. 8.3 billion in total as taxes in respect of 2021.
9. Research & Development Unit
Commercial Bank declared ADB’s ‘Leading Partner Bank in
SL’ forTrade & Supply Chain Finance
The Commercial Bank of Ceylon was honoured as
the Asian Development Bank’s (ADB’s) ‘Leading
Partner Bank in Sri Lanka’ for the second
consecutive year at the 2022 Trade and Supply
Chain Finance Program (TSCFP) Awards that
recognize the contributions of leading partner
banks to trade in Asia and the Pacific.
The award was presented to Commercial Bank for
recording, with the ADB’s assistance, the highest
number of transactions in Sri Lanka’s trade and
supply chain finance domain between 1st July
2021 and 30th June 2022.
Commercial Bank was among 25 banks that were recognized in 10 categories at the ADB TSCFP Awards
ceremony held recently in Singapore.
11. Research & Development Unit
Inflation eases
Sri Lanka’s *headline inflation (year on
year) eased for the second consecutive
month in 2022, latest data revealed.
CCPI headline inflation (YoY) dropped to
66% in October and 61% in November
from 69.8% recorded in September 2022
NCPI headline inflation for the month of
October 2022 dropped to 70.6% from
73.7% in September 2022.
CCPI year on year food inflation dropped to 73.7% in November from 85.6% in
October 2022
Source: DCS- Sri Lanka
* Headline inflation is a measure of the total inflation within an economy, including commodities such as food and energy prices (e.g., oil and
gas), which tend to be much more volatile and prone to inflationary spikes.
12. Research & Development Unit
Central Bank believes interest rates at peak levels after
inflation turned a corner
The Central Bank believes that interest rates may have reached their
highest levels after inflation peaked in September and showed a slight
deceleration in October amid the ultra-tight monetary policy and higher
taxes brought in to reduce demand in the economy.
“In respect of inflation, as we predicted last time, it has turned around.
And the question a lot of people ask is when and how will our market
interest rates move in coming months.
One reason for the rates to climb was the higher inflation expectations,
where people believe inflation to go further up.
However, as the inflation expectations have now been anchored, inflation
should continue on a downward path. This is where we think, even
market rates have peaked,” CBSL governor said.
In an economy, the interest rates closely follow the path of inflation, as central banks raise interest rates until they see a meaningful
reduction in the rate of inflation. Once inflation starts falling, it provides central banks with the space to cut rates, so that economic
activities, which slowed down, can be rebooted again.
Global central banks, with the exception of China and Japan, have raised their rates at a faster clip since last year, before
accelerating in the recent past to tamp down inflation, which reached decades-high levels.
Source: CBSL
13. Workers’ remittances up in September
Research & Development Unit
Source: CBSL
Workers’ remittances income
continued its ascent in September
reflecting that the worst may be over
for the poor run of the key foreign
currency inflow source to Sri Lanka,
which is instrumental in helping the
country to fund its essential imports.
Sri Lanka received USD 359mn in
September 2022 from expatriates living
and working abroad, marginally up by
1.7% from the same month last year.
14. Sri Lanka confident of managing imports with existing
inflows until IMF deal comes through
Research & Development Unit
The Central Bank expressed confidence that Sri Lanka could continue to manage its
imports with what it earns from exports and remittances in the interim until the
International Monetary Fund (IMF) deal comes through as its activation could get
delayed till next January from a December target.
“We could manage the situation for five months since July without any significant inflows, I
don’t see any reason why we cannot do that going forward,” CBSL governor said.
Although there hasn’t been any significant bridge financing during this period, he said there
were some small amounts received from the Asian Development Bank and the World Bank.
He emphasized how the tight monetary policy helped in curtailing the import bill, making the
Central Bank’s job relatively easy in meeting the importer dollar requirement from the inflows.
15. Sri Lanka looks to lure foreign nationals with long-term
residence visa
Research & Development Unit
Sri Lanka launched a long-term
residence visa scheme for
condominium property holders
in Sri Lanka in an effort towards
luring foreign nationals to
invest in the country.
The scheme was launched by
Sri Lanka’s investment
promotion agency, the Board of
Investment (BOI), in
collaboration with the
Immigration and Emigration
Department and Defense
Ministry.
Applicant Class Minimum
Investment
Maximum Visa
period
Eligible
persons
Individual
Condominium
Property
(Urban area)
USD 200,000 10 Y
Applicant,
Spouse and
Dependants
Condominium
Property
(Urban area)
USD 150,000 05 Y – Renewable
Condominium
Property
(Sub urban area)
USD 75,000 05 Y – Renewable
Company
Condominium
Property
(Urban area)
USD 500,000
Per unit value
USD 150,000 and
the total value
USD 500,000
05 Y
04 Directors,
their spouses and
dependents
Condominium
Property
(sub urban area)
Per unit value
USD 75,000 and
the total value
USD 500,000
05 Y
Source: BOI
Read More: https://investsrilanka.com/2022/11/11/boi-launches-long-term-residence-visa-scheme-for-condominium-property-holders/
16. Research & Development Unit
Apparel industry forecasts 30% decline in export orders
for Nov-Dec. period
Sri Lanka’s apparel exporters are forecasting a drop in export orders with the main export markets,
gripped by inflationary pressures, plunging into a recession.
Sri Lanka Apparel Exporters Association’s (SLAEA) newly-elected Chairman Indika Liyanahewage noted
that the apparel exporters are forecasting around 30 percent decline in orders during the November-
December period.
Sri Lanka’s main apparel exporting markets, the United States (US) and European Union (EU), are
currently facing economic recessions coupled with inflationary pressures stemming from Russia’s
invasion of Ukraine.
Liyanahewage expects these global headwinds to impact Sri Lanka’s apparel exports in the coming six
months.
According to SLAEA immediate past Chairman Aroon Hirdaramani, the apparel exports are expected to reach USD
5.5bn at end of this year, up from USD 5.4bn recorded last year, however, below the industry forecast of USD 6bn.
17. Rebound in tea output expected next year with availability
of fertilizer, glyphosate
Research & Development Unit
The Regional Plantation Companies (RPCs) expect Sri Lanka’s tea production to
rebound to 300 million kilograms in 2023, after falling to a record low of estimated 260
million kilograms this year, amid the short-lived ban on chemical fertilizers and other
agrochemicals.
However, the tea export revenue is estimated to increase marginally to USD 1.4bn this
year, due to the high prices, compared to USD 1.3bn recorded in 2021.
RPCs are expecting to receive the popular weedicide glyphosate within the next one to
two months, through Ceylon Petroleum Corporation.
19. International tourism moving towards pre pandemic
levels
International tourism is on course to reach 65% of
pre-pandemic levels in 2019 by the end of this year,
according to the World Tourism Organization.
More than 700mn people visited another country in
the first nine months of 2022, up by 133% on the
corresponding period in 2021. Countries in Europe
were the most visited; over the summer arrivals
there reached 90% of pre-pandemic levels.
Destinations with notable increases of tourists
include Turkey (possibly because it is one of the few
European countries that now welcomes Russians)
and Serbia.
Research & Development Unit
Source: World Tourism Organization
20. Fed officials see smaller rate hikes coming ‘soon,’ minutes
show
Federal Reserve officials earlier this
month agreed that smaller interest rate
increases should happen soon as they
evaluate the impact policy is having on
the economy, meeting minutes released
Wednesday (23) indicated.
Markets widely expect the rate-setting
Federal Open Market Committee to step
down to a 0.5% increase in December,
following four straight 0.75% hikes.
Research & Development Unit
Source: US Federal Reserve
21. UK on the brink of recession after economy contracts by
0.2% in the third quarter
The U.K. economy contracted by 0.2% in the third quarter of 2022, signaling what could be the
start of a long recession.
The contraction does not yet represent a technical recession — characterized by two straight quarters of
negative growth — after the second quarter’s 0.1% contraction was revised up to a 0.2% increase.
The Bank of England last week forecasted the country’s longest recession, suggesting the downturn that
began in the third quarter will likely last deep into 2024 and send unemployment to 6.5% over the next
two years. (Present unemployment remains at 3.6% in 2022 Jul/Sep)
Research & Development Unit
Source: CNBC
The country faces a historic cost of living crisis, fueled by a squeeze on real incomes from surging energy and
tradable goods prices. The central bank recently imposed its largest hike to interest rates since 1989 as
policymakers attempt to tame double-digit inflation.
22. Chinese property market woe
Research & Development Unit
China announced a set of measures to boost liquidity in the
troubled property market, such as extending deadlines for
loans to developers.
The package is seen as the most significant attempt yet by the
Chinese authorities to bail out the sector, which is burdened by
debt and falling sales. The prices of stocks and bonds of
Chinese property companies rose sharply in response.
China is facing a real estate crisis as highly leveraged real estate
giants such as Evergrande (whose liabilities exceed USD 300bn)
are facing difficulties after Chinese authorities imposed new
tightened regulations in early 2020 on debt limits of real estate
companies .
Source: Nikkei, World Bank, Reuters
At present a large stock of houses remain unsold as property companies are finding it increasingly hard to
convince buyers. Investments to real estate market have also dropped to record levels.
23. 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.
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