Perpetual Treasuries 14-month profit exceeds Rs.10bn: leaked CB report

Perpetual Treasuries Limited (PTL), the controversial primary dealer connected to the family of former Central Bank Governor Arjuna Mahendran, has recorded a mammoth after-tax profit exceeding Rs.10 billion within a period of 14 months, according to a draft report by the Central Bank, which was leaked to the public domain by a whistleblower within the bank. 

The Central Bank on Monday acknowledged the authenticity of the report and said a complaint in this regard was made to law enforcement authorities to probe the whistleblower. The bank also said the internal processes of the bank with regard to the report hadn’t been completed at the time of its leak and the final report was yet to be submitted to the Monetary Board. 
Based on the published accounts of PTL, Mirror Business last week reported that the primary dealer recorded a profit-after tax of Rs. 5.1 billion for the year ended March 31, 2016, against a Rs.960 million profit in the year before. 

The revelation sent shockwaves across the country’s financial sector as PTL’s profit was not only extraordinarily high compared to its peers but also well above the profits of some of the mid-size commercial banks in the country. 

However, according to the leaked Central Bank report, for the 14 months from April 2015 to May 2016, the PTL has reported an after-tax profit of as much as Rs.10.1 billion. To put things into context, during the same period, the cumulative profit after-tax of its peers was just Rs.544 million. 
This in fact will become another stunning revelation for the country’s financial sector as PTL has posted a whopping Rs.5.0 billion after tax profit in just two months—a performance inconceivable even for the country’s most valued business entities. 

According to the leaked Central Bank report, these massive gains have been made by the company immediately after the two bond issues of March 29 and 31, 2016, in which PTL had effective participation rates of 34 percent and 31 percent respectively, with a success rate of 96 percent and 72 percent, respectively. 

Sri Lanka’s Central Bank issued the 2030 bond on March 29, 2016 to raise Rs. 10 billion, but ended up accepting Rs.29 billion at an after-tax weighted average yield of 14.23 percent. 
On March 31, 2016 the Central Bank further issued 2028 bond to raise another Rs.10 billion, but ended up accepting bids up to Rs.21.7 billion at an average yield of 13.72 percent. 
However, the bond yields significantly came down two days later in the secondary market giving windfall capital gains for the buyers of these bonds at the primary market. 
There is an inverse relationship between the bond yield and prices—higher the yield, lower the price and vice-versa. 

As per the leaked report, PTL’s return on assets (RoA) was a massive 115 percent, while the return on equity (RoE) was a staggering 225 percent as of April 30, 2016.