Mahendra resigns as COMBank Chairman; Captains’ buy in

Senior business leader and longstanding Board member Mahendra Amarasuriya yesterday resigned as Chairman of Commercial Bank Plc a move which is likely to evoke mixed reactions in banking and corporate circles.

Amarasuriya, a highly respected corporate figure, announced his resignation during a Board meeting of Commercial Bank yesterday, throwing open the mantle of leadership at Sri Lanka’s largest private sector bank.

Amarasuriya was originally to step down end of this week in compliance with the rules of Central Bank that require those who had served nine consecutive years on commercial bank Boards as well as those over 70 years of age to step down as part of good corporate governance.

However in a rare case of honour, Amarasuriya who was considered fit and upright to continue to serve as Chairman at Commercial Bank, prompting one bold shareholder and good governance activist K.C. Vignarajah to challenge the Central Bank ruling as far as Amarasuriya was concerned.

Amarasuriya, who completed silver jubilee on the Commercial Bank Board and 16 years as Chairman, resigned despite Vignarajah successfully obtaining a District Court order staying the Central Bank ruling until 27 January. This was inspire of  the Supreme Court ruling in favour of the Central Bank directives previously. In addition to Amarasuriya two other long standing directors H. Wanasinghe (over 80 years of age and completing 21 years on the Board) and B.R.L. Fernando (16 years on the Board and Deputy Chairman since April 2006) too resigned yesterday.

By virtue of the articles of Association, senior Director and management consultant Dinesh Weerakkody (a director since July 2005) is now Acting Chairman.

He is likely to appointed at the next Board meeting of Commercial Bank unless rumours of new appointee and most recent Deputy Governor of Central Bank D.D.H. Dheerasinghe a fresher on Commercial Bank Board gets himself elevated.

Banking industry analysts were unanimous in commending Amarasuriya for over the years giving leadership to Commercial Bank, once focusing narrowly on corporate banking or trade finance to become the most profitable corporate as well as the largest private sector bank.

His resignation midst controversy and legal battles is likely to disappoint some whilst there will be spontaneous hurrahs from camps which calls for timely stepping down after a job well done. Though Vignarajah is convinced Amarasuriya has many more good years ahead in the best interest of the institution others feel it was in the best of corporate governance that veteran corporate figure should call it quits.

The latter however don’t champion the other extreme of retired civil servants or central bankers being thrust into a chairmanship of a blue chip corporate and a premier bank. Dheerasinghe retired only a fortnight ago and is yet to feel the customary “cooling period” before taking up a Board position in a commercial bank, regulation of which he was an integral part.

A former Deputy Chairman of Hayleys Plc, Chairman of United Motors and Past President of International Association of Lions Clubs , Amarasuriya also holds 670,645 voting shares and 227.821 noin voting shares of Commercial Bank.

Government entities-controlled DFCC Bank holds 15% stake in Commercial Bank whilst EPF holds 9.28% along with 10% by Sri Lanka Insurance Corporation.

In a separate development Commercial Bank shares continued to dominate trading on the Colombo stock market for the second consecutive day. It saw 2.13 million of its shares traded for Rs. 213 million of which 1.9 million changed hands via crossings at Rs. 100 each the same price at which slightly over 7 million did on Wednesday.

Speculation was that Captains were heavily on the buying side having collected quantities since last week. Captains of late has been on the selling side of premier blue chip John Keells Holdings, and analysts viewed the high networth investor family was seeing greater upside on the banking blue chip.

Sellers of Commercial Bank of late has been SBI Ven Holdings Ltd of Singapore/Japan and Janus Overseas Fund. Captains also hold 3.5% stake in second largest private sector bank HNB as of September 30, 2011 in addition to being the largest shareholder of JKH.

Others also noted that a few other high networth investors and institutions have zoomed in to Commercial Bank, which is attractive given its forecast FY12 earnings price ratio of around 10 times.