ComBank stock takes a tumble following Rs.22.5bn rights issue announcement

The Commercial Bank stock yesterday took a tumble in the Colombo Stock Exchange (CSE), following the bank’s announcement to raise Rs.22.5 billion via a rights issue. 
The rights issue is to increase its Tier I and the total capital, to accommodate and facilitate future business growth.
The board of directors of Commercial Bank at the meeting held on the 28th of this month decided to recommend a rights issue for the approval of the shareholders of the company. Accordingly, the bank plans to offer 252.08 million voting shares on the basis of one for five, at Rs.85, to raise Rs.21.42 billion and 15.847 million non-voting shares, at Rs.68 per share, to raise Rs.1.09 billion.

Commercial Bank became the first bank to announce a rights issue as the country closes into striking a deal with the bondholders to restructure the country’s external debt. 
According to Softlogic Stockbrokers, Commercial Bank is among the banks with the lowest Tier I capital buffers at the end of 1Q2024.
“Given that it is a vital aspect to maintain sound capital buffers, in order to cover up for any potential losses whilst meeting the regulatory requirements, DFCC, COMB and NDB remained as some banks who held the lowest Tier I capital buffers as of end-1Q2024,” Softlogic Stockbrokers stated in a recent report.
In the first quarter of this year, Commercial Bank’s asset base experienced a one percent quarter-on-quarter (QoQ) marginal dip, amidst the Sri Lankan rupee appreciation, despite a 2 percent QoQ growth in its loan book, reaching Rs.1.2 trillion. 
The bank’s deposit base saw a marginal decline of 0.3 percent QoQ, to mark Rs.2.1 trillion, where the CASA ratio witnessed an improvement, rising to 40.5 percent in the quarter, from 37.1 percent a year ago.
The bank’s impaired loans (Stage 3) ratio stood at 5.6 percent in the quarter, compared to 5.9 percent in the fourth quarter of last year, while its provision coverage ratio improved to 44.6 percent in 1Q 2024, compared to 43.2 percent in 4Q 2023.
At yesterday’s market closure, the Commercial Bank shares were down by Rs.9.25 or 8.20 percent, to Rs.103.50, while its non-voting shares went down by Rs.6.85 or 7.57 percent, to Rs.83 per share.
The rights issue is subject to the CSE approving in principle and listing of shares and obtaining shareholder approval at an Extraordinary General Meeting, on a date to be decided in due course. (NF)