Union Bank taps into royal investment

Touted as a significant milestone in the annals of the banking industry and the corporate sector in Sri Lanka, Union Bank has successfully raised Rs.420 million as capital from the Prince Faisal Al Faisal Bin Abdullah Al Saud, the grandson of King Faisalof Saudi Arabia and investment banker Alex Lovell.

Prince Faisal and Lovell officially became members of the Board of Directors at Union Bank this Friday. At a press conference on the same day, Union Bank Chairman Ajith De Zoysa said this could be the first investment of this nature from a member of a royal family from any country to Sri Lanka in the recent past.

The new capital infusion also means Union Bank is compliant with the minimum Tier One Capital requirement of Rs.2.5 billion set by the Central Bank (CB) on all licensed commercial banks by the end of 2009. Sampath Bank and the other Directors of Union Bank as major shareholders have already committed a total of Rs.500 million as new capital and with the Rs.420 million capital from the new investors, Union Bank is already in compliance with the Tier One requirements levied by the CB for the end of 2008. "The fact that both these shareholders have entered the Bank at a premium price stands testimony to the potential of the bank and the confidence placed in the Sri Lankan economy going forward," De Zoysa said, adding he hopes this is a precedent to be followed by many others provided that the fundamentals governing the macro economic environment and the individual business conditions are conducive for investment. He said it is paramount that peace, which is durable and acceptable to all communities will reach Sri Lanka as early as possible.

De Zoysa said the investment gives confidence to other foreign investors and that Sri Lankan should look towards the Middle East as an untapped source where US$15 billion is waiting to be invested. De Zoysa said the Bank will be looking at Initial Public Offerings (IPO's) and public issues to raise the rest of the capital required by the CB by 2009. "The economy cannot attract a wide spectrum of investments if there is no permanent peace, an absolute pre-requisite for the private sector which is considered the engine of economic growth in our country." De Zoysa added that it 'is our collective responsibility to achieve stability in order to a diverse pool of funds from the local and foreign investor community, particularly from the Middle East.'

Union Bank Chief Executive Officer Mahen Fernando said the investment is a tremendous boost to the Bank and shows the confidence that the business community has in it. He added that Union Bank will roll out an expansion plan in the coming months. Lovell, a private equity investor, working primarily in Asia and the Middle East said he has been successful at targeting companies in Asia.