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There has been widespread speculation about the purpose for which Sri Lanka’s second largest private bank Hatton National Bank (HNB) will utilize the whopping Rs.15 billion worth funds planned to be raised through rights and private placements.
One such speculation is that HNB is heading for a merger with another private bank.
By Indika Sakalasooriya
There has been widespread speculation about the purpose for which Sri Lanka’s second largest private bank Hatton National Bank (HNB) will utilize the whopping Rs.15 billion worth funds planned to be raised through rights and private placements.
According to the disclosure that was filed to the stock exchange by the bank last week, the monies are raised to strengthen the bank’s capital base or the balance sheet, supporting overall growth.
However, the hype surrounding the rights and placement suggests that HNB is targeting something more than strengthening its balance sheet.
One such speculation is that HNB is heading for a merger with another private bank. In fact Sri Lanka’s banking sector is overwhelmed with stories of mergers and if one takes the contemporary history of the Sri Lanka’s banking sector, there are quite a few failed merging attempts.
For example in 2007, Commercial Bank and National Development Bank (NDB) explored ways for a merger. But, negotiations were not fruitful, and ultimately the plan was abandoned.
Yet the need for consolidation in the banking sector to go to the next level was not discarded, and the banking regulator was seen actively promoting the notion.
In case HNB is looking for a merger, does it require such huge amount of money for the purpose?
“There are so many ways to do mergers without the involvement of big bucks. Share swaps are one such method. The two companies involved can merge swapping shares and this does not require funds,” an analyst pointed out.
“But if the bank is looking for an acquisition, then it needs money. But there are regulatory restrictions when it comes to such acquisitions” he added.
Most of those who speculate about a merger are of the view that HNB is looking at NDB for the purpose. They rationalize their argument by bringing into the notice that state- owned institutions own nearly 22 percent of HNB and 33 percent of NDB. It is also believed that HNB recently bought a 2 percent stake in NDB from the market.
However it is not clear whether they are trying to say is if the private sector banks do not consolidate of their own, government is going to do it.
They also point out that the appointment of Dr.Ranee Jayamaha, an ex-Central Banker as the Chairperson of HNB is also aimed at this.
When looking at the financial accounts of the two banks, it is evident that NDB has a relatively strong balance sheet than HNB. In case the two banks are going for a merger through share swap, HNB may need the money to bridge the balance sheet disparity in order to make the merger a win-win situation for both entities.
Another not-so-strong speculation is that HNB is opting for regional expansion utilizing the funds expected to be raised. If a bank is to regionally expand, at least to neighbouring India, it needs to possess a very strong balance sheet. So if the bank aims to strengthen its balance sheet with raised monies, one would argue that it is looking at regional expansion.
The market talk also suggests that HNB is looking at acquiring stake of an insurance company operating in the country.
http://print.dailymirror.lk/business/127-local/43412-speculation-swirls-about-hnb-fund-utilization.html
One such speculation is that HNB is heading for a merger with another private bank.
By Indika Sakalasooriya
There has been widespread speculation about the purpose for which Sri Lanka’s second largest private bank Hatton National Bank (HNB) will utilize the whopping Rs.15 billion worth funds planned to be raised through rights and private placements.
According to the disclosure that was filed to the stock exchange by the bank last week, the monies are raised to strengthen the bank’s capital base or the balance sheet, supporting overall growth.
However, the hype surrounding the rights and placement suggests that HNB is targeting something more than strengthening its balance sheet.
One such speculation is that HNB is heading for a merger with another private bank. In fact Sri Lanka’s banking sector is overwhelmed with stories of mergers and if one takes the contemporary history of the Sri Lanka’s banking sector, there are quite a few failed merging attempts.
For example in 2007, Commercial Bank and National Development Bank (NDB) explored ways for a merger. But, negotiations were not fruitful, and ultimately the plan was abandoned.
Yet the need for consolidation in the banking sector to go to the next level was not discarded, and the banking regulator was seen actively promoting the notion.
In case HNB is looking for a merger, does it require such huge amount of money for the purpose?
“There are so many ways to do mergers without the involvement of big bucks. Share swaps are one such method. The two companies involved can merge swapping shares and this does not require funds,” an analyst pointed out.
“But if the bank is looking for an acquisition, then it needs money. But there are regulatory restrictions when it comes to such acquisitions” he added.
Most of those who speculate about a merger are of the view that HNB is looking at NDB for the purpose. They rationalize their argument by bringing into the notice that state- owned institutions own nearly 22 percent of HNB and 33 percent of NDB. It is also believed that HNB recently bought a 2 percent stake in NDB from the market.
However it is not clear whether they are trying to say is if the private sector banks do not consolidate of their own, government is going to do it.
They also point out that the appointment of Dr.Ranee Jayamaha, an ex-Central Banker as the Chairperson of HNB is also aimed at this.
When looking at the financial accounts of the two banks, it is evident that NDB has a relatively strong balance sheet than HNB. In case the two banks are going for a merger through share swap, HNB may need the money to bridge the balance sheet disparity in order to make the merger a win-win situation for both entities.
Another not-so-strong speculation is that HNB is opting for regional expansion utilizing the funds expected to be raised. If a bank is to regionally expand, at least to neighbouring India, it needs to possess a very strong balance sheet. So if the bank aims to strengthen its balance sheet with raised monies, one would argue that it is looking at regional expansion.
The market talk also suggests that HNB is looking at acquiring stake of an insurance company operating in the country.
http://print.dailymirror.lk/business/127-local/43412-speculation-swirls-about-hnb-fund-utilization.html
