NTB top shareholders positive on bank

The two biggest shareholders of Nations Trust Bank (NTB) Plc are taking up their full share in the bank’s billion-rupee rights issue which closes on February 8, despite being compelled to reduce their stake to 15 percent and below in five years, under Central Bank rules.

Already some institutional investors are interested in the excess stake that John Keells Holdings (now holding 29.9 percent) and Central Finance (20 percent) have at NTB – once the five year period ends, according to NTB Chairman Ajit Gunawardene.

“We (JKH and Central Finance) are confident of the future of the bank and are willing to put in the capital now so that eventually when we have to trim our stake we will be doing so at a profit,” he told The Sunday Times FT in an interview while discussing the bank’s 2007 calendar results. “We have five years (till 2013) to dispose the excess holdings and (if we didn’t have any confidence) we could have used this opportunity to renounce our rights and sell it to another party. We are not doing for the stated reasons,” Gunawardene, also Deputy Chairman at JKH, said.

The banking group, the biggest amongst small banks, announced this week that group post tax profits for 2007 reached Rs.504 million, its highest ever, while the Earnings Per Share was Rs. 4.01, an increase of 56% over 2006. The growth was facilitated by an all round improvement in performance with net income growing by 30 percent to Rs. 3.4 billion and net interest income increasing by 24 percent in the midst of volatile market conditions.

Gunawardene said they would be following Central Bank rules which restrict directors to a 9-year term but that directors vacating their posts would be done in way that would not de-stabilise the bank.

The bank hopes to raise a total of Rs 3 billion from the 1-for-3 rights issue and two warrants. The rights issue at Rs 25 will raise Rs 1.3 billion and closes on February 8 with two warrants attached to that. One warrant is exercisable in 2010 at Rs 30 per share and the second warrant exercisable in 2011 at Rs 35 per share.

Gunawardene said capital is required to support the growth of the balance sheet. “As the balance sheet grows we have to retain a certain capital adequacy. The upfront capital we are raising will not only augment the capital raised but also be utilised and channelled into significant investments for growth,” he said, adding that this would include development of products, IT, distribution channels.

Most of the growth in the bank has been seen in the services sector. “A lot of this is generated out of consumerism and we have seen a lot of growth and activity in the small and medium businesses mostly in the services area. We have seen a significant development in small and medium industry growth,” he said, adding that the vehicles leasing business has grown sharply due to the expansion of the transport sector like trishaws, buses and vans. Small construction is also growing fuelled by the tsuanami and Middle East remittances. “Although this is a turbulent environment we see tremendous growth potential,” he said.