3 banks to raise capital this year

At least three banks will have to comply with the Central Bank ( CB)’s minimum capital requirements and resort to raising capital this year, banking sector analysts say.

Union Bank, Pan Asia Bank and Amana Takaful Bank will either have to resort to a rights issue or a private placement to raise capital, they note.

This has come after capital adequacy requirements were introduced by the CB under Basel III with effect from 1 July 2017. The implementation of BASEL III by

January 2020 has prompted banks to raise their capital base.

The banking sector which contributed to 23.4 per cent of the 4Q earnings ( up 27 per cent year on year) will see the industry remain slightly challenging in the short to mid- term due to the transition to higher capital standards under Basel III and adoption of SLFRS 9, although in the long run implementation of Basel III and SLFRS 9 will improve the resilience and stability of the banking sector.

On a positive note, the 4Q non performing loan rate has slowed. The NPL stock dropped by 0.2 per cent in 4Q compared to 3Q. This was after eight quarters of increases. “With the recently introduced moratorium, businesses have started to pay the interest on their loans,” Atchuthan Srirangan, Assistant Manager – Research at First Capital told the Business Times.

The moratorium is to restructure both performing and non-performing loans, halting principal payments until December 31, while interest repayments continue.