Regulator notices JKH and Central Finance to reduce their NTB stakes

The Monetary Board has noticed both John Keells Holdings and Central Finance that they should reduce their group holdings in the Nations Trust Bank to a maximum of 20% by the end of next year and 15% a year after.

This requirement is to conform with the law that individual and aggregate related party holdings in commercial banks be restricted to a maximum of 15% although time-bound extensions, some granted as long as 10 years ago, have been allowed.

At Hatton National Bank for example, Harry Jayawardena related parties including Stassen, Milford and Distilleries, have been restrained from exercising voting rights in excess of the 15% cap by the non-registration of shares they continue to own. This is regularly reported in the HNB Annual Report.

In Stock Exchange filings last week, both JKH and Central Finance said that the Director of Bank Supervision of the Central Bank had conveyed to them that in terms of a Monetary Board decision both the JKH and Central Finance Groups “have been granted further time to reduce their shareholdings in NTB to 15% each.”

JKH has been granted further time till Dec. 31, 2021, and Dec. 31, 2022 to reduce its shareholdings in NTB to 20% and 15% respectively. The previous requirement was to meet the 20% cap by the end of this year.

Central Finance too has been granted further time till Dec. 31, 2021, to come down to 15%, JKH’s Stock Exchange filing said.

JKH currently holds 29.52% of the voting shares of NTB and 51.76% of its non-voting shares. Factoring non-voting shares, it currently holds an economic interest of 32.5% of the bank, it disclosed.

Central Finance’s group holding of NTB voting shares is 19.74% and together with its non-voting shares it has an economic interest of 21.38% in the bank, the company disclosed.

Analysts said that the options before shareholders holding more than the permitted cap would be to sell down or seek further extensions of the time limits granted to acheive permissible levels.

There was no clear indication whether they will be permitted to continue holding their present stakes enjoying dividends and other shareholder rights except voting rights.