Amana Bank PLC, Sri Lanka’s first non-interest-based Islamic bank, which was in extensive talks with some prospective foreign parties to obtain fresh capital, now appears to have returned to its own shareholders, seeking support to meet the interim minimum core capital target given by the regulator.
Accordingly, the bank yesterday announced to raise Rs.4.75 billion by way of a rights issue. The bank will issue 1.25 billion new shares or one new share for every existing share held at a price of Rs.3.80 each.
At yesterday’s market close, the Amana Bank’s share closed at Rs.3.70, gaining 10 cents or 2.78 percent during the day.
Amana Bank currently has a stated capital of Rs.5.87 billion represented by 1.25 billion shares and the rights issue, if fully subscribed, will raise the stated capital up to Rs.10.62 billion.
By end-December 31, 2016, the bank’s core capital base stood at Rs.5.3 billion.
According to the Central Bank’s minimum capital enhancement plan originally announced in 2014, all banks were required to raise their minimum core capital or Tier I capital up to Rs.10 billion by January 1, 2016.
However, for a few banks the regulator granted extended time till January 2018 to meet the requirement in full but with an interim target of Rs.7.5 billion by January 1, 2016.
This January, the Central Bank for the second time extended the time for Amana Bank till June 30, 2017, to meet the interim core capital target of Rs.7.5 billion as the bank was in the middle of negotiating a deal with a few foreign parties to inject equity.
The bank then said it held discussions with Islamic Corporation for the Development of the Private Sector (ICD), the fund manager of IB Growth Fund (Labuan) LLP – (IBGF), with a view to sought its participation in a proposed issue of shares.
Since January 2017 however the bank did not make any disclosures in relation to the progress of these negotiations.
Amana Bank is the fourth bank to announce a rights issue this year. In March, Pan Asia Bank raised Rs.2.0 billion via rights while Commercial Bank and Hatton National Bank announced Rs.10 billion and Rs.15 billion rights, respectively, thereafter.
Bank Islam Malaysia Berhad, AB Bank in Bangladesh and Islamic Development Bank based in Saudi Arabia together account for a 38.5 percent stake in Amana Bank.