Sampath proceeds with Rs 1.7 b Rights Issue

Funds for branch expansion and increasing lending portfolio:

Ravi LADDUWAHETTY

Sampath Bank PLC will now proceed with its Rs. 1.7 billion Rights Issue where one share for every four shares will be offered at Rs. 100 each.

“The Bank recently asked the Colombo Stock Exchange for a postponement of the Rights Issue as it planned to raise Rs. 100 per share but in depressed market conditions, the share price had dipped to the nineties which was the reason why the bank asked the Exchange to postpone the issue,” Sampath Bank Company Secretary S. Sudharshan told Daily News Business yesterday.

However, with the share rising to Rs. 97 and above, we are confident that the share price will rise to over Rs. 100 making the Rights Issue sensible and the Board of Directors has decided to proceed with Rights Issue with the market picking up, he said.

He said the Bank will await CSE approval which will be subsequently followed by the Bank presenting it for the shareholder approval.

The funds will be used for the routine branch expansion which takes place where 10 branches are added annually and for the expansion of the lending portfolio.

Sampath Bank which commenced the first online banking system in Sri Lanka and the Automated Teller Machines, has a total tally of 112 branches, the remaining three branches to be opened by end 2008 will be Wellawaya, Kattankudi and Buttala. It has already opened seven branches this year at Matugama, Batticaloa, Chilaw, Mawathagama Hingurakgoda Akkaraipattu and Kalmunai.

The branches opened in 2007 were Balangoda, Ja-Ela, Narammala, the Kandy Corporate Branch, Gampola, Nikaweratiya Pelmadulla, and Ambalantota Wattegama.

However, ten branches scheduled for 2009 have not been determined yet. The Bank has also not determined the ratio between the investments for the branch expansion and the amount to be disbursed for income generating assets.

However, Sudharshan conceded that the investment for the setting of a branch is around Rs. 15 million. “ The investments are almost the same for each branch irrespective of the location and the only variable is only the rent costs,” he explained.

Responding to a question on Sampath Bank being grilled by the Central Bank on a US$ 20 million Bond Issue by a Japanese Investment Bank and another investigation by the Terrorism Investigations Unit on a US$ 5 million loan given to a client for the purchase of a ship, Sudharshan said that they were not a probe in that sense of the word but a routine inspection to clarify matters.

“The Central Bank does routine checks on banks like auditors to verify company matters. This is not a threat on the survival and continuity of the bank,” he said.