Summit shows interest in Burj Bank buyout

KARACHI: Summit Bank has expressed an interest in acquiring a majority stake in full-fledged Islamic commercial Burj Bank, it said on Friday.

"We have indicated our interest in acquiring the majority shareholding in Burj Bank Limited and in this connection have applied to the State Bank of Pakistan…for permission to conduct due diligence of Burj Bank Limited," it said  in statement issued to the Pakistan Stock Exchange.

Analysts said the summit Bank shows its interest to buy majority stakes in Burj Bank to become a full-fledge Islamic bank and expand its reach nationwide.

"There has not been any agreement between Summit Bank and the shareholders of Burj Bank Limited for the acquisition of their majority shareholding,” the statement said.  “In the event that any agreement is reached and signed for the acquisition of the majority shareholding and is approved by the State Bank of Pakistan, Summit Bank Limited will make the requisite disclosure under the Listing Regulations and company with all the requirements of the Exchange in respect of the same."

Summit Bank is the fourth bank, which sought permission from the central bank to conduct due diligence of the Burj Bank. Previously, Bank of Khyber, National Bank of Pakistan and MCB Bank have conducted conduct due diligence, but did not offer a price to acquire the full-fledged Islamic Bank available for sale.

 Analyst Fawad Khan at KASB Securities said the possible acquisition would help the Summit Bank to convert its operations fully from conventional bank to an Islamic bank.

“The possible acquisition is not aimed at meeting regulatory requirements, including minimum capital requirement and capital adequacy ration,” Khan said.  Summit Bank was not short of such obligations,however, Burj Bank was in need to fulfill such regulations.

"The idea is to grow in size…the likely acquisition would reduce cost of operations as both the banks are small in size," he said.

Summit Bank is operating 192 branches nationwide as on December 31, 2015 and the acquisition would almost double its branches network. The bank plans to open more braches going forward.

“Moreover, for offering Shariah compliant banking services, the Bank has 10 Islamic Banking Branches and two Islamic Banking Windows as on December 31, 2015," according to the Summit Bank annual report 2015.

Summit Bank has earned profit after tax of Rs217.22 million in the year ended December 31, 2015 against Rs229.45 million in the preceding calendar year.  The profit was slightly lower than the last year figure due to higher tax expense during the current year.