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‘Unique business model’:
State housing banks mull merger options
Several options should be considered to fulfil the government’s 2016
Budget proposal to consolidate HDFC Bank with the State Mortgage and
Investment Bank (SMIB) to set up one strong housing bank for Sri Lanka.
Banking sector analysts said if the two banks, HDFC and SMIB are to
be amalgamated in the near future it would be a ‘unique business model’
as HDFC Bank is a public quoted company, with a 51% stake owned by the
government, while SMIB is fully owned by the government.
“If the two banks are to be consolidated, a major study should be
carried out and a proper strategy should be tabled,” a senior economist
said.
“In the case of the HDFC Bank, whatever the bank is doing has to be
done with the concurrence of private sector shareholders, stock market
rules and regulations and also in accordance with the bank’s Act,” he
said.
Asked if there were any consolidation plans in the offing, following
the Budget proposal, Chairman, HDFC Bank, R.J.de Silva said the bank’s
priority this year is to set up a capital augmentation plan. “This is a
crucial year for us. The core banking system set up at massive expense
is on stream and will be in operation by August. Then the Bank will be
technologically upgraded. We are also addressing the mismatch between
short term borrowings and long term lending, which affects the interest
rate in favour of the poor and the middle class,” he said.
He added that the bank will launch a program to study the
possibilities of such a consolidation. “There are various options and
business models to consider. It cannot be done within a short
time-frame. We will accept government policy and work towards it.”
The chairman said, “One of the main areas for consideration is our
Act. Our Act needs amendments and we need to study the law. The bank’s
corporate management staff and the senior management are having
discussions on our future plans at present and very interesting
proposals have been received already,” he said citing “it is too early
to divulge details of these proposals.”
HDFC Bank is also planning to appoint an advisor to draw up a plan
for capital augmentation, strengthen treasury management program and to
advise the bank on several options in the event of a consolidation. “The
advisor will look at the options available to the bank and the
government in connection with the proposal.
“Since HDFC Bank is a listed company, it has more options than the
SMIB. The amalgamation, if it happens, will create a strong entity in
lending for the housing sector in the country,” de Silva said. According
to a senior financial analyst, some of the options the two banks can
consider include – a voluntary merger and two separate institutions
under one management. Strangely, the housing statistics reveal that only
one percent of the population in the country is without a house.
There are excess houses but mainly in urbanised areas. Many people
build houses as investments.“Therefore, the real problem is not having
livable houses. There are 650,000 houses which need urgent upgrading.
They need funds up to Rs. 50,000 to 200,000 each. We are striving to
support these people to upgrade their houses while disbursing housing
loans to others.” de Silva added that his bank will find ways to
increase its capital to Rs. 5 billion as per the Central Bank
stipulations by the beginning of 2018.
- CJ |
