NTB may consider rights issue

The Nations Trust Bank (NTB) is planning a rights issue in the near future with top management saying ‘it is an option’ if the bank is to grow further.

“We are in a growing mode and in such a situation we need to go to the shareholders and ask for help,” Zulficar Zavahir, CEO, NTB told The Sunday Times FT. He said a rights issue is ‘an option’, but did not give a specific time period.

The bank released its second quarterly accounts recently and as at end June the tier two capital adequacy at a group level was 10.71 percent, down from 11.86 percent in December last year. At a bank level the unaudited tier two capital adequacy was at 10.55 percent during the same period, whereas the audited accounts in December 2006 showed 11.89 percent. The minimum capital adequacy should be at 10 percent as per regulator’s requirements. “When you analyse these results, it is evident that NTB needs to raise capital to comply with Central Bank requirements of 10 percent. It may be through a rights issue, which is the easiest option,” an industry analyst said.

Zavahir said that this is because the balance sheet has grown and as such the capital adequacy will decrease. “We have not taken the profits into the second quarterly results this year because the results are unaudited. If you account the profits, then the capital adequacy will at least increase by one percent,” he said.

However, the industry analyst said the loan growth during this period will also need to be accounted, if the profits are accounted in the balance sheet, which in turn may decrease the capital adequacy below the minimum Central Bank requirement of 10 percent.

“The only other option for NTB to raise capital and other than through a rights issue is to float a debenture or curtail loan growth,” he said.