Three strongest private banks make cash calls within weeks of each other

Three of the country’s strongest privately owned banks have made cash calls on their shareholders within a matter of weeks to increase their Tier l capital to comply with Basel 111 requirements.

Hard on the heels of the Commercial Bank of Ceylon PLC’s recent rights issue for both its voting and non-voting shares, Hatton National Bank floated a similar rights issue which closed last week for its voting and non-voting shares.

Now Sampath Bank PLC on Friday announced a rights issue under which slightly over 31.03 million new shares will be issued in the proportion of one new share for every six shares held at a price of Rs. 245 a share. Sampath has only voting shares with no non-voting category.

Commercial Bank priced its new shares at considerably less than the trading price of these shares at the time the rights issue was floated giving its existing shareholders a distinct price advantage and ensuring the likelihood of full subscription that was achieved.

"Some of the major shareholders of ComBank like motor vehicle importer Indra de Silva and the DFCC Bank, ComBank’s top shareholder, sold part of their holdings to raise funds to subscribe for their rights," a share analyst said.

"In the event, Silva bought a part of the DFCC holding that was put out for sale after he had sold his stake and subscribed to the rights accruing to those shares."

ComBank priced its voting shares at Rs. 113.16 and the non-voting shares at Rs. 90.80 offering one new share for every 10 held on the rights issue. The day the issue was announced the voting shares were trading above the Rs. 140 level. The issue was fully subscribed infusing Rs. 10.1 billion zero cost capital into the bank’s books.

HNB which offered both its voting and non-voting shares in the proportion one for 10, priced the voting shares at Rs. 220 and the non-voting at Rs. 190 seeking to infuse Rs. 15 billion new equity funds into its books.

"Unlike ComBank, HNB priced its rights fairly close to the trading price giving its shareholders less of an advantage," a broker said. "In fact, when the issue closed last week, the non-voting shares were trading at around the issue price."

Analysts said that ComBank shareholders who applied for additional shares over and above their rights entitlement from unsubscribed rights were satisfied to some extent indicating that some shareholders did not subscribe despite the profit that could have been made by taking and selling the shares.

Whether this would be so in the case of HNB too is being watched by the share broking and trading community. The Sampath share closed on Friday at Rs. 272.10 against the rights price of Rs. 245.

HNB has not yet made an announcement on the results of its rights issue. This is likely to be made in the near future, analysts said.

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