Sri Lanka’s Fixed Income business is facing a challenging climate due to non-conducive rate environment says one of the country’s largest and leading investment banks.
Chairperson of First Capital Holdings PLC (CFVF) Manjula Mathews in her latest annual review of the company points out that prevailing market conditions required a great deal of opportune refinement to the manner in which they operated in core businesses. She highlights the need to continue in efforts to create a meaningful and balanced service offering resilient enough to face challenging dynamics. First Capital Holdings is specialized in Capital Markets Advisory, Wealth Management, Fixed Income and Equities.
She says that the year under consideration proved challenging for First Capital as the Sri Lankan economy was characterised by a fundamental political transition culminating with the parliamentary elections in August 2015.
“Political uncertainty gradually allayed as the year progressed and we gained greater clarity regarding the macroeconomic growth agenda of the Government,” she notes adding that all core businesses felt in varying degrees the continuing impact of multiple factors – uneven market reactions and perception of policy measures, rising yield rates, volatility, subdued deal flows and low trading activity.
According to her, traditionally the main contributor to direct income, their Fixed Income business was negatively impacted by the non-conducive rate environment resulting in financial results posted for the full year reflecting the adverse impact from the operation. During the year under review comprising income from both fund based and fee based sources, the net trading income for the year amounted to Rs. 504 mn, a decrease of 67%. Net profit after taxation had decreased 95% to Rs. 47 mn falling from Rs. 985 mn in the previous year which included a one-off gain of Rs. 233Mn resulting from the deemed disposal of an equity investment.