To maintain appropriate liquidity and capital buffers in the banking sector, the Central Bank of Sri Lanka (CBSL) has directed all Licensed Commercial Banks (LCB) to refrain from buying back shares until December 21, 2022.
Companies buy back shares mainly to reduce the total number of shares outstanding for a company, which has a positive impact on earnings per share (EPS) and cash flow per share; this is known as a “float shrink,” while it could also increase the share prices in the market.
As per the Banking Act, the CBSL has further instructed LCBs to defer payments of cash dividends and to defer the repatriation of profits not already declared for 2021 and 2022 until the financial statements for 2022 are finalized and audited by external auditors.
“Licensed banks will give due consideration to the requirements of the Banking Act, Direction No. 01 of 2016 on Capital Requirements under Basel III for licensed banks, expected assets growth, business expansion, and the potential impact of the Covid-19 pandemic and prevailing macroeconomic conditions when deciding on payments of cash dividends and profit repatriations,” the CBSL statement said.
Other directions issued to LCBs include refraining from increasing management allowances and payments to directorial boards, refraining from incurring non-essential and urgent expenditure, having a board-approved policy to rationalize if such spending is to be incurred and exercising extreme due diligence and prudence when incurring capital expenditure if any.
The Commercial Bank of Ceylon PLC declared the distribution of the first and final dividend of 7.50LKR a share for its shareholders, which comes up to a total of 5.3 billion LKR. Hatton National Bank PLC has approved a dividend of 9LKR for its shareholders as the final dividend. Sampath Bank PLC has presented 4.25LKR per share as a dividend payment with a gross dividend payment of 4.8 billion LKR.
No.820, Mount Cresent,Malabe,Sri Lanka