Lankan banking industry needs capital consolidation
Welcoming the regulatory sponsorship on industry integration, Rajendra Theagarajah, new CEO of NDB reiterated that the banking industry needs capital consolidation.
“There’s a need to consolidate capital. We can’t have small banks ‘floating around’ doing nothing,” he told journalists at a media briefing on Thursday, to announce the largest listed corporate debenture in the country, NDB’s Rs. 10 billion debenture issue was oversubscribed having reached the expected amount within 10 minutes of its opening. Mr. Theagarajah’s comments came on the back of the Central Bank (CB) plans to issue guidelines to encourage the two development banks – NDB and DFCC – to merge in keeping with the recent budget proposal.
When queried on recent efforts to raise US$ 250 million, he said that NDB hasn’t abandoned the attempt. Mr. Theagarajah said they are still on the “look out” for foreign funding and at the “right rate” the bank will go for it. “These are two things. When there is the right opportunity, we will be raising money from the domestic market and on the foreign side, we will raise funds at the right rate,” he said.
With four types of A+ debentures in three tenures of five, 10 and 12 years, the bank issued 50 million rated, unsecured, subordinated, redeemable debentures at Rs. 100 each with an option to issue a further 30 million debentures and another option of 20 million debentures in the event of over subscription of the first two options. Mr. Theagarajah said that the investors would be happy to match their aspirations with the bank’s own internal consumption demand.
“NDB is very much here to do business. We have a very firm and optimistic view of the country and we look forward to leveraging on it.”
NDB Investment Banking Cluster CEO Vajira Kulatilaka adding to the discussion said the main requirement in the capital market was to deepen the yield growth and this debenture will support the capital markets.
“The type of demand indicates that they really want these kinds of instruments in the market,” Mr. Kulatilaka said.
NDB Bank CFO Faizan Ozman said that the funds up to 12 years will help the bank’s Tier II capital. The bank is growing, and this will help us fund the liquidity mismatches and also the asset portfolio.”