19th June 2023
DOMESTIC DEBT RESTRUCTURING - DDR
What is Debt Restructuring ???
Debt Restructuring is the process undertaken to reestablish debt sustainability and the decision to
restructure is undertaken when no other option to re-gain
debt sustainability is considered politically or socially
acceptable.
Debt Restructuring aims at:
Methods and Types for Debt Restructuring
Manageable levels of Gross Financing Needs
(GFNs)
Face Value Reduction
Manageable levels of debt services denominated
in domestic and foreign currency
Declining Debt to Gross Domestic Product (GDP)
ratio to manageable levels in the medium-to-long
run
Source: Senfin Research, Central Bank Sri Lanka
Maturity Extension
Coupon Adjustment
OR a combination of all 3 types
DOMESTIC DEBT RESTRUCTURING - DDR
Overview of Central Government Local Currency Debt
1.1%
Overview of Central Government Local Currency
Debt: LKR 13,189 Bn (USD 36.3 Bn)
0.3%
Overview of T-Bills holders
17.5%
CBSL
Deposit Taking Institutions¹
as at end 2022
Debt Category
Amount
T-Bills
LKR 4,126 Bn
(USD 11.4 Bn)
T-Bonds
LKR 8,722 Bn
(USD 24.0 Bn)
Non-Deposit Taking Institutions²
18.7%
Other³
62.4%
0.3%
3.4%
Commercial loans in local currency LKR 104 Bn
and banks’ overdraft
(USD 0.3 Bn)
CBSL advances
0.10%
9.0%
Deposit Taking Institutions¹
Superannuation Funds
Non-Deposit Taking Institutions²
Other³
44.5%
42.7%
Source: Senfin Research, Central Bank Sri Lanka Investor Presentation March 2023
Non-residents' holdings
Overview of T-Bonds holders
LKR 236 Bn
(USD 0.6 Bn)
Notes: (1) Including Licensed Commercial Banks, Licensed Specialized Banks and Registered Finance Companies, (2) Including
superannuation funds (if not specified elsewhere), corporations, insurance companies,, government institutions, funds and SOEs, local
individuals and others (e.g., societies, clubs, associations), (3) Including Treasury securities used for repurchase transaction allocations.
Only T-Bills held by the
CBSL will be
considered for treatment
to create some
fiscal space
CBSL
Non-residents' holdings
A voluntary domestic debt
optimization
operation without
coercion is envisaged
Sri Lankan government
and its advisors will
initiate consultations with
major T-Bonds holders
to gauge options and
constraints
BANKING SECTOR COMPARISON
Government Securities Vs Total Assets
Government Secrities as a % from Total Assets
COMB
BOC
5%
23%
1%
HNB
13%
4%
PB 1%
10%
2%
6%
6%
16%
NTB
7%
PABC
7%
SEYB
12%
14%
7%
5%
DFCC
2%
Treasury Bills
5%
10%
Treasury Bonds
3%
3%
3%
2%
9%
1%
15%
20%
25%
Sri Lanka Sovereign Bonds (SLSB)
Source: Senfin Research, Company Annual Report Data as at end 2022
Peoples Bank, Bank of Ceylon,
and Commercial Bank of
Ceylon PLC have a high
component of Treasury Bonds
from their total assets.
(29%, 28% & 23% respectively.
2%
7%
13%
9%
0%
3%
•
4%
29%
NDB
SAMP
2%
Commercial Bank of Ceylon
PLC has 36% of its Total
assets from Government
Securities.
1%
8%
28%
•
30%
35%
40%
Sri Lanka Development Bonds (SLDB)
COMB
Commercial Bank of Ceylon PLC
SAMP
Sampath Bank PLC
HNB
Hatton National Bank PLC
SEYB
Seylan Bank PLC
NTB
Nations Trust Bank PLC
DFCC
DFCC Bank PLC
NDB
National Development Bank PLC
PABC
Pan Asia Banking Corporation PLC
BOC
Bank of Ceylon
PB
People's Bank
BANKING SECTOR COMPARISON
Treasury Bonds
Treasury Bonds
LKR Bn
1,239
BOC and People’s Bank have
invested in Treasury Bonds, LKR
1,239 Bn, and LKR 903 Bn
respectively.
It’s a total of 25% from the
government-issued treasury bonds.
903
COMB has invested LKR 563 Bn in Treasury Bonds.
It is the largest listed commercial bank that
invested 23% of its assets in Treasury Bonds.
Based on the decision which is finalizing for the
DDR COMB will get the major Positive/Negative
impacts on their market stability and
performances.
563
SAMP has invested LKR 219 Bn in Treasury Bonds.
It is the second largest listed commercial bank that
invested 16% of its assets in Treasury Bonds.
219
90
BOC
PB
COMB
SAMP
SEYB
Source: Senfin Research, Company Annual Report Data as at end 2022
70
HNB
58
53
52
NTB
DFCC
NDB
14
PABC
BANKING SECTOR COMPARISON
Treasury Bills
Treasury Bills
LKR Bn
230
HNB has invested LKR 230 Bn in
Treasury Bills.
It is the largest listed commercial
bank that invested 13% of its
assets in Treasury Bills.
Only T Bills
held by
CBSL will be
considered
for debt
restructuring
115
84
49
38
HNB
COMB
NDB
DFCC
Source: Senfin Research, Company Annual Report Data as at end 2022
BOC
35
SEYB
28
NTB
27
SAMP
17
15
PB
PABC
BANKING SECTOR COMPARISON
Sri Lanka Sovereign Bonds (SLSB)
Sri Lanka Sovereign Bonds (SLSB)
LKR Bn
These banks have
already done the
provisioning for the
debt restructuring in
the International
Sovereign bonds
(ISB).
HNB and COMB have invested LKR
210 Bn and LKR 197 Bn in SLSBs
respectively.
210
197
HNB is the largest listed commercial
bank that invested 12% of its assets
in SLSB respectively.
Those provisionings
are nearly 35% - 40%.
And the negotiations
with private creditors
are expecting a 20%
haircut.
93
54
36
19
HNB
COMB
BOC
NDB
Source: Senfin Research, Company Annual Report Data as at end 2022
SAMP
PB
14
13
9
PABC
SEYB
NTB
5
DFCC
If so, these banks will
get a profit from the
Impairment
provisioning which
they did.
BANKING SECTOR COMPARISON
Financial Highlights
Net Interest Margins
Since the beginning of 2022, Licensed
8.1%
7.0%
6.8%
NIM 1Q2022
Commercial Banks’ (LCB)'s Net Interest
NIM 1Q2023
Margins
(NIMs)
have
experienced
a
consistent increase due to the prevailing
5.9%
high-interest rate environment. In the first
5.2%
3.9%
4.2%
4.2%
5.1%
quarter of 2023, the sector's average
4.3%
3.9%
3.2%
3.0%
NIMs stood at 5.4%, reflecting a positive
4.1%
3.4% 3.5%
trend.
Typically,
when
interest
rates
decrease, NIMs for the banking industry
tend to decline. However, we anticipate
that the current expansion of the gap
between lending and deposit rates will
enable them to sustain elevated profit
margins for a significant duration.
NTB
HNB
SEYB
SAMP
Source: Senfin Research, Company Quarter Report Data – 31st March 2023
DFCC
PABC
NDB
COMB
BANKING SECTOR COMPARISON
Financial Highlights
CASA ratio
COMB
38%
The current Account and Savings Account (CASA) Ratio
denotes how much of the total bank deposits is the money
SAMP
32%
from the current accounts and savings accounts.
The higher the CASA ratio, the better the financial health of the
NTB
30%
bank, and also it shows the better creditability position in
banks as well.
HNB
28%
COMB, SAMP, NTB, and HNB have successfully maintained
their CASA ratio during the past quarters, allowing the bank to
SEYB
27%
continue to benefit from the low-cost funding source. In
comparison to the leading banking entities in the industry,
NDB
20%
COMB, SAMP, NTB, and HNB ratios can be considered
competitive.
PABC
18%
Notably, despite the effects of the ongoing economic crisis
and the low-rate environment, the banks were able to grow the
DFCC
Source: Senfin Research, Company Quarter Report Data – 31st March 2023
18%
composition of their CASA.
BANKING SECTOR COMPARISON
Financial Highlights
Regulatory Capital Ratios
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Common Equity Tier I Capital
Ratio
COMB
SAMP
HNB
Source: Senfin Research, Company Quarter Report Data – 31st March 2023
Tier 1 Capital Ratio
SEYB
NTB
Total Capital ratio
DFCC
NDB
PABC
Leverage Ratio
Statutory minimum requirement
BANKING SECTOR COMPARISON
Financial Highlights
Asset Quality (Quality of Loan Portfolio)
9%
60%
8%
52.8%
55.5%
49.3%
7%
6%
51.0%
51.2% 50%
50.9%
39.9%
40%
37.6%
5%
30%
8.1%
4%
3%
5.8%
7.3%
20%
5.4%
2%
4.8%
3.8%
4.0%
3.4%
10%
1%
0%
0%
COMB
SAMP
HNB
Impaired Loans (Stage 3) Ratio (%)
Source: Senfin Research, Company Quarter Report Data – 31st March 2023
SEYB
NTB
DFCC
NDB
PABC
Impairment (Stage 3) to Stage 3 Loans Ratio
BANKING SECTOR COMPARISON
Financial Highlights
Debt Security-Related Ratios
Debt to Equity Ratio (%)
Interest Cover (Times)
83.4%
10.1
74.0%
6.7
41.0%
4.8
3.7
28.2%
16.7%
4.2
23.1%
21.1%
10.7%
COMB
SAMP
2.6
2.2
HNB
SEYB
NTB
Source: Senfin Research, Company Quarter Report Data – 31st March 2023
DFCC
NDB
1.4
PABC
COMB
SAMP
HNB
SEYB
NTB
DFCC
NDB
PABC
BANKING SECTOR COMPARISON
Conclusion
•
COMB will have the highest impact if the DDR takes
place, and it has invested a considerable portion in
Treasury Bonds.
MPS
TTM EPS
PE
NAV
PBV
Dividend
DY
COMB
66.00
13.00
5.08
156.18
0.42
5.58
8.5%
SAMP
56.00
10.62
5.27
106.62
0.53
4.60
8.2%
Assets which stands at LKR 69.8 Bn. However,
HNB
136.00
32.44
4.19
341.10
0.40
5.00
3.7%
HNB has invested largely in Treasury Bills which
SEYB
33.50
7.91
4.24
93.29
0.36
2.00
6.0%
NTB
68.40
27.12
2.52
152.7
0.45
4.00
5.8%
DFCC
45.80
11.64
3.93
144.05
0.32
2.00
4.4%
NDB
49.10
8.75
5.61
182.5
0.27
-
-
PABC
12.50
4.77
2.62
47.32
0.26
-
-
•
HNB however, sees a low impact on the DDR as it
has a lower investment compared with its Total
have a lower impact as mentioned by the Central
Bank of Sri Lanka, currently that it’s not exposed to
the DDR plan.
•
On the flip side, If the DDR does not take place the
banking sector counters such as COMB and SAMP
are expected with better performance as a result of
better margins.
Source: Senfin Research, Company Quarter Report Data – 31st March 2023
DISCLAIMER
Analyst Certification
I, Mihiri Jayasekara, certify that the views expressed in this report accurately reflect my personal views about the company. I also certify that no part of my compensation was, is, or
will be, indirectly or directly, related to the specific view or recommendation expressed in this report.
I, Dinushi Ellepola, certify that the views expressed in this report accurately reflect my personal views about the company. I also certify that no part of my compensation was, is, or
will be, indirectly or directly, related to the specific view or recommendation expressed in this report.
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Senfin Securities Limited (SSL) has no direct affiliation with the company/companies covered in this report and does not receive any material benefit from the company for
publishing this report.
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+94 11 2359102 /+94 70 4724925
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Research Analyst
+94 11 2359134 /+94 719 471462
mihiri.jayasekara@senfinsecurities.com
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+94 11 2359114 /+94 70 4724921
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