Potential DFCC-NDB merger will ‘not be forced’ assures Theagarajah

Rajendra Theagarajah

The Chief Executive Officer of National Development Bank Plc (NDB), Rajendra Theagarajah last week denied claims by a former head of the bank that the two private development banks, NDB and DFCC have been ‘forced’ by the banking regulator, the Central Bank of Sri Lanka to go for a merger. In a recent interview with The Nation, opposition parliamentarian Eran Wickramaratne had said the Central Bank had compelled the merger by hinting in their Master Plan that their expected outcome in consolidation is where “there will be a large development bank that will provide substantial impetus to development banking activities in the country”.

“Nobody needs to force us into this. I think the comment is coming from an outsider’s point of view and we from inside the Banks can assure that if this happens it wouldn’t be forced on us,” Theagarajah said in response.

When asked what progress the two banks had made in their discussions pertaining to the potential merger, the NDB CEO said, “We are very open about the proposal. Its still early days and there is not much to talk. Besides, as a policy we have come to an agreement that we will talk about it only in a common platform which is when we sit together. So it’s not fair to say anything.”

Meanwhile, analysts from a reputed equity research firm last week said they saw clear benefits of scale for the large scale development bank through the proposed merger between NDB and DFCC. They, however, noted that the two banks have comparable current and savings account (CASA) bases, branch networks, similar books and the similarities come down to each bank having their own Investment Banking units and Stock brokering arms.

“Voluntary Retirement Schemes (VRS) may be a possible tool the management has at hand, but we see VRSs being expensive for the firm both in terms of the explicit cost and from unintended key job losses. Hence, even though the major development bank makes sense from a Treasury perspective it may be hard to make economic sense to equity holders in the medium term,” a report by Bartleet Religare Securities titled ‘Looking for opportunities in a forced marriage’ said.

- See more at: http://www.nation.lk/edition/biz-news/item/26448-dfcc-ndb-merger-%E2%80%98not-forced%E2%80%99.html#sthash.bIVrcjpE.dpuf

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