Thursday, May 3, 2012

NSB board convenes special meeting, leaves it to The Finance to explain deal

The director board of state-owned National Savings Bank (NSB) convened a special meeting yesterday as questions continued to be raised about the bank’s purchase of The Finance Company shares at an inflated price last week.

 The Island Financial Review learns that the NSB employees’ union had questioned the deal, while several brokering firms too have taken a critical stance. Opposition legislatures have also voiced their concerns over the deal.

When asked for a comment, NSB Chairman Pradeep Kariyawasam told The Island Financial Review that it was strategic investment made at the invitation of The Finance Company.

"They (The Finance) will call a media briefing shortly to explain the rational behind the deal. We (NSB) do not necessarily have to explain it ourselves. If the need arises, we would issue a statement later," Kariyawasam said.

Last week, NSB purchased around 7.8 million shares of The Finance Company at a consideration of Rs. 391 million. Shares were purchased at Rs. 49.74, around Rs. 20 above the market price when the deal was finalised, amounting to a 66 percent premium.

The Island Financial Review learns NSB have been offered two seats of the board of The Finance.

The Finance Company reported a Rs. 17.5 million loss for the December 2011 quarter, which translated to a Rs. 15.8 million profit for the nine months ended December 31, 2011.

"The investment by NSB was on the future of TFC. This is an institution with a long and prestigious history. However, after the Ceylinco debacle, there  were doubts cast upon the company’s future.

When I was appointed as Chairman of the company and the new Director Board took over, upon intervention of the Central Bank, TFC was in great financial difficulties. From a Rs. 1.7 billon loss-making venture, the company has witnessed a significant turnaround, making Rs. 15 million in profit during the last three quarters," TFC Chairman Preethi Jayawardena was quoted in a media report.

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