In the wake of media reports raising speculation that the state-owned People’s Bank is to be semi privatized by entering the Colombo Bourse through an Initial Public Offering (IPO), Chairman of the Securities and Exchange Commission (SEC) Dr. Nalaka Godahewa last week denied any knowledge on the matter.
Speaking to The Nation Gain, Dr. Godahewa further noted that the Sri Lanka President, at the opening ceremony of the Oluvil Fisheries Harbour, recently had categorically mentioned that the government was not looking at privatizing any State Owned Enterprise, let alone the respective bank.
“I have not been informed about this,” the head at SEC said, hesitating further to comment on the development.
According to a media report from a weekend newspaper, the Government had considered retaining 51 percent of the bank’s stake to itself, and divesting the remaining 49 percent through a private placement or an IPO.
Meanwhile, analyzing the pros and cons of the predicted move, Research Analyst attached to Lanka Securities (Pvt) Limited Radhika Ratnayake said that if the country’s second biggest bank entered the Stock Exchange, the market liquidity is set to improve, attracting more local as well as foreign investors to engage with the CSE.
Since the two state banks had poured credit to loss making SOEs over the past years, she believed that this move can be identified as counter measure to enhance the leverage ratio of the bank by decreasing the asset to equity difference from the current 20 times, to about 10 times, which will then put the bank on par with private banks of the country in terms of equity position.
In addition, Director at TKS Securities Danushka Samarasinghe expressed that in the event where People’s Bank gets listed on the CSE; there will be a significant boost in the economy and thus is a win-win situation both to the bank, CSE and the economy as a whole.
“Like any other listed company, the bank will then have to ensure transparency and will be responsible to an even broader stakeholder base,” the analyst indicated. Furthermore, he believed the listing will also result in an increase in efficiency within the company, as it is accountable to those who have invested in shares with the objective of making profits.