Central Bank encourages NDB-DFCC merger

sriranga · 1 Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 5:38 am

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By Duruthu Edirimuni Chandrasekera

The Central Bank (CB) is preparing guidelines to encourage a merger of the two development banks – NDB and DFCC – in line with the recent budget proposal, a top official said.“The two development banks could now take a cue from the budget proposals and commence discussions as to how they could carry out a merger,” CB Governor Ajith Nivard Cabraal told the Business Times.

He said the CB would provide some guidance on these matters. Another official said such guidelines are likely to be incorporated along with the CB Roadmap for 2014 to be unveiled on January 2. President Mahinda Rajapaksa said in his budget speech last month that development banks would be encouraged to merge.The official said this is still voluntary, adding that this is an extended thinking on the government’s budget proposal stipulating that any finance company which is a subsidiary of another holding company, and finance companies which are subsidiaries of banks, should be absorbed into the main company/bank operations.

He added that along with policy, the process and governance requirements will be spelled out in these guidelines in a bid to smoothen the transition.
http://www.sundaytimes.lk/131208/business-times/central-bank-encourages-ndb-dfcc-merger-75464.html

Gaja · 2 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 9:01 am

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I don't think it will became reality, NDB is aggressive these days and giving competition equally with other commercial bank, however in my opinion DFCC & DVB lagging well behind that, i feel its due to the people in the top, i may be completely wrong at all

dudi · 3 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 9:22 am

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how about the NDB and the Union bank merger? a rumour was lingering in the air lately

rainmaker · 4 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 1:38 pm

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DFCC needs to get their arm twisted (by the CB) to sell the COMB stake

The problem with the banks in SL is that they are working on a western banking model in what effectively is an environment different from a "western" situation

This results in the banks accepting deposits from the mass but lending to a few.

It would require a financial genius to actually try change this and if it is changed would create a higher level of economic growth.

Redbulls · 5 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 1:58 pm

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rainmaker wrote:DFCC needs to get their arm twisted (by the CB) to sell the COMB stake

The problem with the banks in SL is that they are working on a western banking model in what effectively is an environment different from a "western" situation

This results in the banks accepting deposits from the mass but lending to a few.

It would require a financial genius to actually try change this and if it is changed would create a higher level of economic growth.

Certain extend, but in these third world countries most of them dance to the tune of the power. Which in our case needs to sell debenture or bonds to feed CB's tune. Write off mega loans (mostly state running banks) after political interference. etc etc.....

worthiness · 6 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 4:16 pm

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If state banks do write off mega loans given to influential privileged class, such parties are to be disclosed to public as majority shoulders the such losses directly or indirectly by paying in form of various named taxes. Also, they should be brought into justice irrespective of status, power & authority. I guess that misappropriation of public funds is kind of criminal offence.

Gaja · 7 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 6:03 pm

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One of the politician told that he was unable to settle the bank loan because he incurred the loss or something like factory was burn, if an ordinary person told this will the bank keep quite?

Leon · 8 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 9:44 pm

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Gaja wrote:One of the politician told that he was unable to settle the bank loan because he incurred the loss or something like factory was burn, if an ordinary person told this will the bank keep quite?

It is very sad to see how politicians behave, how they earn money. Irrespective of their party all are same.

Redbulls · 9 Re: Central Bank encourages NDB-DFCC merger Sun Dec 08, 2013 10:08 pm

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Leon wrote:
It is very sad to see how politicians behave, how they earn money. Irrespective of their party all are same.

Agreed. But we are the person elected them no? So who are the culprits, they or us?

worthiness · 10 Re: Central Bank encourages NDB-DFCC merger Mon Dec 09, 2013 1:58 pm

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Redbulls is correct. Majority still does not understand or care what has been happening in this small Island & let the minority who control the country at their whims & fancies. It is the big curse which will never be upon those leaches.

rainmaker · 11 Re: Central Bank encourages NDB-DFCC merger Mon Dec 09, 2013 2:47 pm

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I don't fully agree with the western banking model either. For example far too many loans are being used to fund real estate as opposed to small and medium businesses that create employment and production. --> this is occurring in SL with regards to credit being wasted on cars Razz

In SL what we need is banks funding large scale manufacturing (like China in the 1990s) and agricultural/fisheries promotion.

Unfortunately such projects are few and far between. Hence whilst other countries follow this path, SL will fall behind.

nathanfornash · 12 Re: Central Bank encourages NDB-DFCC merger Sun Dec 29, 2013 11:01 pm

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Gaja wrote:I don't think it will became reality, NDB is aggressive these days and giving competition equally with other commercial bank, however in my opinion DFCC & DVB lagging well behind that, i feel its due to the people in the top, i may be completely wrong at all

I think you are in fact completely wrong in that you seem to have got the names of the two banks mixed up. NDB is like a dead duck and arriving "late to the party" in most products, whereas banks like DFCC, Sampath etc. have (in certain areas) best practices on par with any international bank and their development over the last 10 years is amazing if you look at it objectively. In comparison there has been no visible change at NDB other than a total move away from development banking while still not fully integrating in to commercial banking (as a result floating in no mans land). However these banks are all too small to compete globally or meet government aim of borrowing (ultimate goal) so it seems pretty certain that this merger will happen within next year or two.

And I believe dfcc sold out comm bank stake years ago and are no longer a top shareholder (as all these banks now have govt as majority shareholder it does not really matter).

Gaja · 13 Re: Central Bank encourages NDB-DFCC merger Mon Dec 30, 2013 8:40 am

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nathanfornash wrote:

Gaja wrote:I don't think it will became reality, NDB is aggressive these days and giving competition equally with other commercial bank, however in my opinion DFCC & DVB lagging well behind that, i feel its due to the people in the top, i may be completely wrong at all

I think you are in fact completely wrong in that you seem to have got the names of the two banks mixed up. NDB is like a dead duck and arriving "late to the party" in most products, whereas banks like DFCC, Sampath etc. have (in certain areas) best practices on par with any international bank and their development over the last 10 years is amazing if you look at it objectively. In comparison there has been no visible change at NDB other than a total move away from development banking while still not fully integrating in to commercial banking (as a result floating in no mans land). However these banks are all too small to compete globally or meet government aim of borrowing (ultimate goal) so it seems pretty certain that this merger will happen within next year or two.

And I believe dfcc sold out comm bank stake years ago and are no longer a top shareholder (as all these banks now have govt as majority shareholder it does not really matter).

Still DFCC is the largest shareholder of the commercial bank.

Most of my clients were the customers had several facility with the DVB running in to Multiple of 100 Millions, however they left the DVB due to the redtape works

Backstage · 14 Re: Central Bank encourages NDB-DFCC merger Tue Dec 31, 2013 9:08 am

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I heard that the merger announcement would be in the first quarter. (heresay)

raa · 15 Re: Central Bank encourages NDB-DFCC merger Tue Dec 31, 2013 9:49 am

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Wow it's been a very long time since I last posted here! Maybe a year... Very Happy

Consider the merger announcement is already made at the time of the budget. Doesn't matter when the formal announcement happens, we all know its coming. With all things Sri Lankan, I wager than any merger will happen in 2015 or 2016 (2016 being the last year by which the finance sector should have consolidated according to the government's vision/plan/wishes).

Our finance sector is in danger of being overly competitive with too many fish in the pond. UK, an economy many times our size doesn't have this many big banks! The other play to speculate or wager on will be non-bank financial institutions. Government wants to halve the number of players I think (not sure of exact figure) which I think is good, specially as vehicle imports are slashed and business volumes are low. All NBFI with assets less than 5bn will have to close down/acquire/or merge so CSF (I think they have just over 5bn), SEMB, and a few of the smaller ones will create some news in the coming year.

Happy New Year to all! Smile

kas · 16 Re: Central Bank encourages NDB-DFCC merger Tue Dec 31, 2013 11:11 pm

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Hi All, I think if the merger takes place there will be an increase in the NAV, how will this impact the share price? I see this as a medium term investment (two years max) if this takes place. Combined entity will have more lending capacity plus, ability to attract many low interest credit lines due to the development bank factor. My only issue is how they are going to manage operational aspects such as branch network, their decision making structures and how senior management will blend in to one entity. Please share your views and wish you all a happy new year.