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Amana Bank gets regulatory nod to bring in fresh capital with exception to single shareholder limit


22 May 2017 10:08 am - 0     - {{hitsCtrl.values.hits}}


In yet another exception to the banking sector single shareholder limit, the Central Bank has allowed one of the shareholders of Sri Lanka’s Amana Bank PLC to own up to 30 percent of the issued shares of the bank. 
In a disclosure filed with the Colombo Stock Exchange last Friday, Amana Bank said the Central Bank had granted approval for Islamic Development Bank (IDB)—the bank’s fourth 
largest shareholder—to own up to 29.99 percent of the voting shares by acting in concert with 
one of  its funds. 
Currently IDB has 120.4 million shares or 9.62 percent stake in Amana Bank, Sri Lanka’s first non-interest based Islamic bank, being its fourth largest shareholder.
According to Central Bank regulations, one party or parties acting in concert can own up to 10 percent in a bank. This can be extended up to 15 percent with special approval from the regulator, but must be brought down to below 10 percent during a period stipulated by the regulator. 
In recent times, the Central Bank had allowed several banks to have their key shareholders own even beyond 70 percent such as in the case of Union Bank PLC and Cargills Bank Limited. But they must gradually bring those 
stakes down to the regulatory limits over time. 
The issue of higher stake by a single party arises as Amana Bank early this month announced a rights issue of one new share for every existing share held, priced at Rs.3.80 a share, to raise Rs.4.75 billion to meet its minimum regulatory core capital requirement. 

The bank said, IB Growth Fund (Labuan) LLP (IBGF), a subsidiary of Islamic Corporation for the Development of the Private Sector (ICD), whose ultimate parent is IDB, has agreed to participate in its rights issue. 
“The decision was consequent to an investment agreement signed between the parties on 18th May, 2017, at a meeting held in Jeddah, Saudi Arabia,” Amana Bank said in a stock exchange filing. 
IBGF is the party with which Amana Bank has been in talks since last year 
for capital infusion. 
The bank had not mentioned in its filing that who would not subscribe to their rights allowing IBGF to buy additional rights. The bank is required to meet its minimum regulatory core capital of Rs.7.5 billion by June 30, 2017.
While the promoters of the bank could devolve their rights to IBGF for want of capital, there could also be a significant amount of unsubscribed rights because the existing shareholders are unlikely to subscribe to a share with a premium to its market price. 
At the last week’s close, Amana Bank’s share closed at Rs.3.60 whereas the rights shares are issued at Rs.3.80. 
Given the performance of the share price and the non-receipt of dividends since going public in December 2013, shareholders may not show appetite to contribute for any fresh capital calls by the bank.   
By March 31, 2017, Amana Bank’s core capital stood at Rs.5.3 billion. The forthcoming rights issue proceeds would push the bank’s core capital base above the Rs.10 billion.
As at March 31, 2017, Amana Bank’s promoters, Bank Islam Malaysia Berhad and AB Bank Limited held 14.44 percent stake each in the bank while Akbar Brothers Private Limited and Expolanka Holdings PLC held 9.98 percent and 7.22 percent stakes respectively being the third and the fifth largest shareholders.
For the quarter ended March 31, 2017, Amana Bank reported earnings of Rs.66.6 million or 5 cents a share, recording a 74 percent increase from the same quarter, last year. 


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