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Sale of 45% of the existing issued share capital of a LICENSED SPECIALIZED BANK In Sri Lanka

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  1. 1. Sale of 45% of the existing issued share capital of a LICENSED SPECIALIZED BANK In Sri Lanka Transaction Ticket Size US$ 23 Mn
  2. 2. •The Licensed Specialized Bank (LSB) is predominantly involved in housing finance providing banking products for housing and housing development projects with 31 branches covering all the provinces of the country. • The LSB was incorporated by Government of Sri Lanka in 1984 as a building society with primary objective of providing housing finance and credit facilities. It was converted to a public corporation and subsequently became a Licensed Specialized Bank (LSB) in 2003. The LSB is a listed public company being listed on the Colombo Stock Exchange
  3. 3. Product Portfolio Housing loans are the main income generator of the LSB. Housing loans are broadly categorized into four distinct areas by the LSB based on the collateral type. • Loans secured by mortgages - Housing loans secured by primary mortgage over residential properties accounts for largest component of the loan book (51%). Mortgage loans amounted to LKR 7bn in 2011 compared to LKR 6.7bn in 2010. • Loans against EPF - The LSB has a distinct advantage of being one of the 7 banks of the country who are authorized to issue housing loans against individuals Employee Provident Fund’s credit balance. The LSB is also one of the two state sponsored banks who are eligible for Shamodha Home Loan Scheme available to EPF members which was initiated by Ministry of Labour Relations and Foreign Employment. Loans against EPF amounts to 41% of the total loan portfolio. • Loans given against guarantees and cash backed loans - Housing loans given against personal and institutional guarantees amounted to 6% of the total loan portfolio. Loans given against the deposits or cash backed loans amounted for 2% of the total loan portfolio. • Project Loans - The LSB also grants special loans for public sector projects but which amounts to very small amount of the total loans. For 2011 project loans stood LKR 125mn about 0.8% of the total gross loans. The LSB has also started providing loans on gold collateral which is a strong growth area in the country which also leads to improved asset quality of a bank.
  4. 4. Product Portfolio Funding sources of the LSB are mainly by way of attracting public deposits and fixed income investments. The main product lines are: • Savings Deposits - Being a LSB, the bank has the approval from CBSL to raise funds through public deposits. Its Savings Deposits have increased by 48% last year to LKR 1.5bn. • Fixed Deposits - Fixed deposits accounts for highest portion of the deposits of the bank as it accounts to 75% of overall deposits. Fixed deposits have increased by 38% with the figure amounting to LKR 9.1bn. • Structured Investment Product (SIP) - SIP is a fixed income investment product with fixed maturity value without intermediate interest payments (similar to a zero coupon bond). This product has seen considerable demand last year with a growth of 95% amounting of LKR 1.6bn in product sales.
  5. 5. Market Presence • The LSB has 31 branches and 301 ATMs. The client base is mainly from the Western province with 52% of the loan book coming from the Western Province. • The LSB’s client base is mainly low and middle income group which accounts to about 70% of the portfolio. • Over the years the LSB has strategically distributed its loan portfolio proportionately among the different income segments of the population. • The LSB has about 25-30% market share of housing finance for low and middle income group. It has about 2-3% of overall housing finance market. • Average size of a housing loan of the LSB is LKR 0.33mn in 2011, which is approximately an 18% increase from 2010.
  6. 6. Industry Analysis • After the end of 30 year old civil conflict, the island nation Sri Lanka has started to break free of the economic shackles which have put it considerably behind the world economic growth race In the past. •With the war ending opening up of new economies in North and East is very robust. Among the key growth sectors of the economy housing finance is expected be one of the fastest growing industries benefiting from post war euphoria. • According to Central Bank of Sri Lanka (CBSL) annual report of 2011, there exists a strong mismatch between current housing stock (supply) and householder accommodation requirement(Demand) • It is estimated there will be an additional 50,000 to 60,000 units per year organic growth in the housing market. •It is expected that in the newly activated economies of the North and East the demand/supply mismatch is approximately 1 million units. • It is estimated that up to one third of the current housing stock in the country needs to be upgraded, creating further supplementary demand. • The rapid urbanization of the country will play an important role in housing market growth. Sri Lanka is identified as a fast urbanizing country coupled with rapid economic growth. Currently urban sector accounts to about 21.5% of the population and it is expected to reach 50% by 2020.
  7. 7. Last Traded Price (Rs.) Market Capitalization (Rs.) Market Cap/Total Market Cap (%) 45.90 2,970,212,864.00 0.12% Beta Values Against ASPI (As of 1st Qtr 2013) 1.27 Beta Values Against S&P SL20 (As of 1st Qtr 2013) 1.19 Company statistics