Bond Worrys

Sri Lankas commercial banks are in for a rough ride this year with the bond markets falling on top of increased taxes.
The banking sectors 2004 first quarter interim results saw commercial banks significantly under-performing the broader market.rn

rnSector profits fell over 30 percent year on year and share prices fell on average by 30.8 percent since October 31, 2003 – except for NDB Bank which rose due to the recent takeover by NDB. rn

rnMarket analysts point to the bond markets reversal in late 2003 as one main reason for poor performance by commercial banks this year.rn

rnDuring the first 10 months of 2003, bond yields tumbled sharply and aggressive traders enjoyed significant capital gains by leveraging their portfolios and running maturity mismatches. rn

rnHatton National Bank (HNB) and Seylan Bank booked the largest bond trading capital gains (BTCG) in 2003.rn

rnHNB made Rs. 1,293.3 mn on BTCG which was 82.3 percent of HNBs net profit for December 31, 2003.rn

rnSeylan made Rs. 1,130.