Sanasa Bank private placement to raise Rs. 3.3 b

In an effort to strengthen its capital base and lending portfolio, Sanasa Development Bank has decided on a private placement of ordinary shares at Rs. 140 a share and convertible loans from international lenders to raise Rs. 3.3 billion.

SDB has signed deals with the Netherlands Development Finance Company (FMO), the Dutch development bank and the SBI-FMO Emerging Asia Financial Sector Fund, the bank said in a stock market filing.

It also intends to sign an agreement with International Finance Corporation (IFC), the private sector lending arm of the World Bank.

SDB will issue 10.4 million shares at Rs. 140 each resulting in the three lenders having a 21.79% stake of the bank after the private placement.

The private placement and borrowings are subject to regulatory approvals with the loans being considered as Tier II capital, SDB said.

SDB’s current stated capital is Rs. 4 billion and the new funds will further strengthen SDB’s capital adequacy ratios and help meet loan demand from small businesses, it said.

They will also “ensure the bank is well geared to pursue loan book growth while maintaining healthy capital adequacy levels, thereby improving the profitability of the bank,” the statement said.

Rating agency Fitch earlier this month revised its sector outlook for Sri Lankan banks to Negative from Stable. 

The revision was announced as part of Fitch’s latest assessment on the Asia Pacific banking sector. Most of Asia-Pacific’s (APAC) banking sectors are facing a cyclical deterioration in asset quality in 2017, as a challenging economic environment continues to put pressure on borrowers. 

“Fitch Ratings’ 2017 outlook on more than three-quarters of the banking sectors in the region is negative,” it said.

With regard to Sri Lanka, Fitch believes operating conditions have become more challenging as signalled by the downgrade and revision of the outlook on the sovereign rating to ‘B+’/Negative from ‘BB-’/Stable in February 2016.