By Bandula Sirimanna
First finance company to respond to new Central Bank rules
Battling in a difficult financial and negative net-worth situation, the Finance Company Plc (TFC) is close to striking a merger deal with a state bank in accordance with new Central Bank (CB) rules aimed at consolidating the non-banking financial sector, official sources said.
First finance company to respond to new Central Bank rules
Battling in a difficult financial and negative net-worth situation, the Finance Company Plc (TFC) is close to striking a merger deal with a state bank in accordance with new Central Bank (CB) rules aimed at consolidating the non-banking financial sector, official sources said.
TFC is the very first Non Banking Financial Institution (NBFI) to identify a partner to merge to reach the stipulated Rs. 8 billion in assets and capital of Rs. 1 billion.
The top management of the bank held a discussion with CB authorities on Friday, January 17th to explore the possibility of merging the company with the State Mortgage and Investment Bank (SMIB), the sources said.
The regulatory process will commence shortly after the handing over of the merger plan by TFC to the CB before the March 31st deadline.
However Kamal J. Yatawara, Director/CEO of the company and former President Finance Houses Association of Sri Lanka told the Business Times that three financial institutions have stepped into merger talks with the TFC and the final decision would be conveyed to Colombo Stock Exchange in accordance with listing regulations and before that he was unable to name the institution earmarked for the possible merger.
Provided the regulatory review concludes positively the newly-merged integrated company is expected to provide financial services including business loans, housing loans, leasing, hire purchase, trade finance, foreign currency exchange, foreign remittances, fixed deposits, savings and pawning for customers and new innovative financial products, he revealed.
He said the CB took timely action to consolidate the 58 non-bank financial institutions into 20 larger ones, as most of the NBFIs were struggling to survive as a result of losing confidence on finance companies, with the recent collapse of CIFL. On top of it banks were reluctant to lend to non-bank lenders such as TFC and the interest rate was also high, he said, adding that this made them difficult to survive.
TFC is the country’s oldest finance company and its CEO was hopeful that its “unparalleled” branch network strategically located countrywide and the merger of the company with a strategic partner will help (TFC) bounce back on a platform of efficiency and customer service.
The company is carrying accumulated losses of Rs.6 to 8 billion with total liabilities of Rs.6.6 billion over total assets. Mr. Yatawara said the company has been able to reduce 60 per cent of the accumulated losses amounting Rs. 12 .8 billion.
“The negative impact created by a share transaction of the company during the early part of the year under review hampered the planned growth in the deposits, loan disbursements and real estate sector,” he pointed out.
Commenting on the CB’s plan to merge NBFIs, economic expert and MP Dr. Harsha de Silva told a gathering of disgruntled CIFL depositors who were at a Sathyagraha campaign demanding the repayment of their deposits, that there was a move to merge TFC with a state bank.
Such mergers will only allow the owners and the directors of questionable companies to get away but there will not be any redress for poor depositors.
He said that he has brought to the notice of parliament that troubled finance companies are headed by people with strong links to the Government, raising more questions over the CB’s newly-unveiled plans.
He noted when shares of TFC were bought at Rs. 50 through the National Savings Bank inflating the market rate of Rs. 30. Today the share price has gone below Rs. 10.
Under this set up now the CB is matchmaking to link the loss making TFC with a state bank, he revealed.
The company has not met any regulatory requirements of the CB and losses have grown over the last few years even when it was under the CB restructuring process, even with hand picked directors, he said adding that all these details were disclosed in parliament by him.
The top management of the bank held a discussion with CB authorities on Friday, January 17th to explore the possibility of merging the company with the State Mortgage and Investment Bank (SMIB), the sources said.
The regulatory process will commence shortly after the handing over of the merger plan by TFC to the CB before the March 31st deadline.
However Kamal J. Yatawara, Director/CEO of the company and former President Finance Houses Association of Sri Lanka told the Business Times that three financial institutions have stepped into merger talks with the TFC and the final decision would be conveyed to Colombo Stock Exchange in accordance with listing regulations and before that he was unable to name the institution earmarked for the possible merger.
Provided the regulatory review concludes positively the newly-merged integrated company is expected to provide financial services including business loans, housing loans, leasing, hire purchase, trade finance, foreign currency exchange, foreign remittances, fixed deposits, savings and pawning for customers and new innovative financial products, he revealed.
He said the CB took timely action to consolidate the 58 non-bank financial institutions into 20 larger ones, as most of the NBFIs were struggling to survive as a result of losing confidence on finance companies, with the recent collapse of CIFL. On top of it banks were reluctant to lend to non-bank lenders such as TFC and the interest rate was also high, he said, adding that this made them difficult to survive.
TFC is the country’s oldest finance company and its CEO was hopeful that its “unparalleled” branch network strategically located countrywide and the merger of the company with a strategic partner will help (TFC) bounce back on a platform of efficiency and customer service.
The company is carrying accumulated losses of Rs.6 to 8 billion with total liabilities of Rs.6.6 billion over total assets. Mr. Yatawara said the company has been able to reduce 60 per cent of the accumulated losses amounting Rs. 12 .8 billion.
“The negative impact created by a share transaction of the company during the early part of the year under review hampered the planned growth in the deposits, loan disbursements and real estate sector,” he pointed out.
Commenting on the CB’s plan to merge NBFIs, economic expert and MP Dr. Harsha de Silva told a gathering of disgruntled CIFL depositors who were at a Sathyagraha campaign demanding the repayment of their deposits, that there was a move to merge TFC with a state bank.
Such mergers will only allow the owners and the directors of questionable companies to get away but there will not be any redress for poor depositors.
He said that he has brought to the notice of parliament that troubled finance companies are headed by people with strong links to the Government, raising more questions over the CB’s newly-unveiled plans.
He noted when shares of TFC were bought at Rs. 50 through the National Savings Bank inflating the market rate of Rs. 30. Today the share price has gone below Rs. 10.
Under this set up now the CB is matchmaking to link the loss making TFC with a state bank, he revealed.
The company has not met any regulatory requirements of the CB and losses have grown over the last few years even when it was under the CB restructuring process, even with hand picked directors, he said adding that all these details were disclosed in parliament by him.
People’s Leasing discussing mergers
The People’s Leasing Company (PLC) has begun discussions with some four finance companies to acquire them, PLC officials said.
“They have approached us and we’re talking to them,” a senior official told the Business Times.
The official added that they may also wrap up a deal involving a big finance company and another company where one will purchase a small finance company’s assets and the other will buy its infrastructure.
(Duruthu)
The People’s Leasing Company (PLC) has begun discussions with some four finance companies to acquire them, PLC officials said.
“They have approached us and we’re talking to them,” a senior official told the Business Times.
The official added that they may also wrap up a deal involving a big finance company and another company where one will purchase a small finance company’s assets and the other will buy its infrastructure.
(Duruthu)
http://www.sundaytimes.lk/140126/business-times/tfc-to-strike-merger-deal-with-a-state-bank-80866.html
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