DVB’s Rs. 5 bn debenture issue oversubscribed in a few hours
June 5, 2015
DFCC Vardhana Bank PLC (DVB), Sri Lanka’s fastest growing commercial bank recently concluded the second listed debt issue in its 12 year history, on 29 May 2015. The first debt issue was launched to list the bank in 2011 in accordance with regulations set by the Central Bank of Sri Lanka (CBSL). The most recent debt issue was an immense success and will play a crucial role in supporting the bank’s continued growth and progress. DFCC Bank PLC has majority ownership of DVB and owns 99.17% of the bank.
The bank is known for its commitment to developing innovative products and services and introduced another industry first with its latest debt issue. It was the first listed debt issue consisting of two types of debt rankings, viz senior and subordinated. Investors were given a choice of selecting between the rankings as opposed to interest rate types, drawing attention to the stability of the organization. The senior debt carried a National Long term Rating of AA- while the subordinated debt carried a National Long term Rating of A+. Both ratings were affirmed by Fitch Ratings. The issue was extremely successful and was oversubscribed in both categories, within hours of the issue opening to the public.
Both instruments carried a tenor of 5 years with a bullet capital repayment and annual interest payments of 9.10% and 9.40% for senior and subordinated debt respectively. The investments offered attractive rates of interest to both types of investors based on their selection of the rank of debt. The debentures were quoted on the Colombo Stock Exchange (CSE), therefore investors could buy and sell the debentures in the secondary market. The debenture holders will carry the investments in their Central Depository System (CDS) accounts after the allotment process to ensure the convenience of transactions.
The debentures will assist the improvement of any asset and liability mismatches in the bank. In addition the subordinated debt component will boost the tier II capital ratio of the bank in accordance with Basel II guidelines. The bank’s capital adequacy ratios as at December 31 2014 stand at comfortable levels of 13.08 for total capital and 12.24 for tier 1 respectively. DVB is poised to grow its asset base and the debenture issue will support the growth process without the bank incurring the stress of any additional capital requirements. DVB is one of the best capitalized banks in the mid sized banking category. In terms of interest rate risk, the fixed rate will assist in mitigating any interest rate risk which arises due to market interest rate changes.
DVB’s debt issue was managed by Capital Alliance Partners Limited and Acuity Partners (Pvt). Limited. The structuring partner for the issue was DFCC Bank’s Funding and Capital Markets Division.
Commenting on the successful debenture issue, Lakshman Silva, CEO, DFCC Vardhana Bank stated, “The success of this debenture issue is a testament to the trust that the public has in DVB’s strength and stability as well as its capabilities as a leading commercial bank. We are immensely grateful to all of our investors and partners, for helping us to raise the required funding through this issue. We will now be able to smoothen out any mismatches in regards to liabilities and asset maturity. I am also pleased with the ratings which we received from Fitch Ratings and National Long-Term Ratings for this debenture issue. Fitch Ratings recently equalized DVB’s rating with that of its parent company DFCC Bank PLC, as it considers DVB to be core to the DFCC operation. DVB accounts for 50% of DFCC’s consolidated assets and the two banks’ operations and management are highly integrated. The ratings capture DFCC’s strong consolidated profitability and capitalization, taken in the context of the rapid growth in commercial banking via DVB. The re-affirmation of the ‘AA-(lka)/Stable’ rating is also an independent and fair confirmation of the bank’s stability despite the continuous growth which it has recorded over the year.”
DVB, one of the most trusted banks in Sri Lanka has been yielding consistent growth and profitability over the years. The closely knit banking duo DVB and DFCC provide their corporate and retail clients with a wide range of banking solutions. In 2003, DFCC Bank expanded its banking activities through its commercial arm, DFCC Vardhana Bank. Since then, DVB has supported the strategic expansion of the DFCC Group and enabled it to enhance its product offering. DFCC Vardhana Bank (DVB) ended 2014 on an excellent note by recording an impressive profit after tax of over Rs.1 billion and the bank’s total assets were valued at over Rs. 100 billion. The bank recorded a profit after tax of Rs. 1.12 billion for the year ending March 2014, which is an 80% growth over 2013. The financials have improved even further in Q1 this year, with DVB recording a stellar performance, with a profit after tax of Rs. 336 million and total assets valued at a sum of Rs. 107.8 billion.
DFCC Vardhana Bank is known for its energy and professionalism and is one of the most dynamic commercial banks in the country. This year, DVB celebrates 12 years of excellence in the financial services industry.