Financial Times

Sharp fall in bank earnings forecast
By Duruthu Edirimuni
Retailer investors chased what was seen as undervalued land and property stocks last week as stockbrokers forecast a 20 percent decline in the earnings of the banking sector. Investors were keen on stocks like CT Land, Colombo Land, Vanik and Ceylinco Seylan Development.

The share price of CT Land had risen from nine rupees to Rs. 20 by Friday. Analysts said that the book value of the building and land of CT Land is at Rs. 626 million, but they feel the actual value to be five times more.

Likewise, Colombo Land book value is at Rs. 562 million, and analysts say that it is worth much more. But some brokers said speculative trading that has driven up prices of property stocks may not last much longer.

Last week the blue chips were not traded much and analysts expect it to be likewise next week and also for the retailers to punt on low valued stocks. Meanwhile, analysts forecast that the entire banking sector would post a half yearly decline of at least 20 percent in earnings.

This is because of the increase in VAT from ten to fifteen percent, the 20 percent tax on foreign currency business units (FCBU) and the very large bond trading losses that were posted by Seylan Bank, HNB and NTB.

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