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| Arif Habib Bank in talks to acquire local bank |
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Saturday, July 04, 2009
By Saad Hasan
KARACHI: Arif Habib Bank, which just days back announced selling majority of its shares to a Mauritius-based investment firm, is looking forward to acquiring a local bank with a view to expanding the branch network, its President Hussain Lawai told The News on Friday.
Suroor Investment Ltd, owned by a sheikh of Dubai who also has a stake in Dubai Islamic Bank, signed a share purchase agreement on June 30 to buy 60 per cent shares of Arif Habib Bank (AHB). This agreement is part of a broader investment deal between Lawai and Arif Habib Securities, the sponsors of AHB.
Lawai is leading a consortium of investors who will invest in AHB. “This is just one half of the deal,” Lawai said referring to Suroor’s acquisition. “Now five investors together will pump Rs2 billion to raise the capital base.”
The new investment will increase the paid-up capital of AHB to Rs7bn from current Rs5bn, which is just enough to meet the central bank’s minimum capital requirement (MCR).
Seasoned banker Lawai, who was the first president of the privatised MCB Bank, made a comeback to the Pakistani banking industry last year after a long gap. He has been heading AHB as President and CEO since late 2008.
The AHB deal came at a time when the State Bank of Pakistan (SBP) was pushing the idea of consolidation for smaller banks, which were facing difficulty in raising deposits as the economy slowed down.
But even after the new investment, Lawai acknowledged that with only 34 branches AHB would still need to acquire another bank for increasing its outreach. “Therefore, we are in talks with three banks,” he said without naming any one. “Hopefully, everything would be finalised before this year’s end.”
Interestingly, the international financial turmoil which had stalled the leveraged buyout process is actually helping acquisitions in some cases. Citing Suroor’s acquisition of AHB for Rs9 per share, which is a far cry from AHB’s IPO of Rs21 per share early last year, he said shares were reflecting their real value making it easy for investments to flow in. However, the financial downturn and its economic repercussions have turned out to be devastating for some other smaller banks, which have lost their equity to rising non-performing loans.
Atlas Bank and Silkbank have called off a planned merger, which was needed by both to raise their paid-up capital to meet the SBP’s MCR of Rs5 billion for 2008. At the end of first quarter in March 2009, Atlas and Silkbank had paid-up capital of Rs3.4bn and Rs4bn respectively. Both banks have up till July 31 to either come up with fresh capital investment or merge with some other bank.
Abdul Aziz Rajkotwala, CEO of Atlas, said the SBP has allowed 10-15 days to his bank for coming up with a new plan to raise its capital. “We might not be able to sign any deal but surely we will submit a plan by the end of this month.”
Silkbank was acquired by a consortium of IFC, Bank Muscat, Nomura International and Sinthos Capital last year. The consortium was led by Shaukat Tarin, who is currently the finance adviser.
After seeing that even the global banking system was in crisis, the SBP revised the MCR for banks in Pakistan. Now banks are required to have MCR of Rs6bn by the end of 2009 and then they have to increase it by Rs1bn each year till 2013.
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ISSN 1563-9479 
