UBL submits merger offer to Silkbank

KARACHI: United Bank Limited (UBL) has submitted an offer for the amalgamation of Silkbank Limited with UBL, a bourse filing said on Friday.

This potential amalgamation will proceed under Section 48 of the Banking Companies Ordinance, 1962, with regulatory oversight from the State Bank of Pakistan.

“Further to our disclosure dated April 28, 2023, [UBL] is pleased to inform that it has submitted an offer to [Silkbank] for the amalgamation of Silkbank with and into UBL pursuant to a scheme of amalgamation to be filed with and sanctioned by the SBP under Section 48 of the Banking Companies Ordinance, 1962 (Amalgamation),” UBL said in a notice sent to the Pakistan Stock Exchange.

“As consideration for the amalgamation, UBL has proposed to issue and allot new UBL ordinary shares to the shareholders of Silkbank on the basis of a ratio of one new UBL ordinary share for every 325 Silkbank ordinary shares,” it said. In a note, brokerage firm Arif Habib Limited said that upon completion, this ratio implies an estimated price for Silkbank shares at Rs0.96, considering UBL will issue 27.94 million new shares to Silkbank shareholders, it said.

“Post-amalgamation, UBL’s total outstanding shares would increase to 1,252 million, potentially diluting current shareholdings but strengthening UBL’s customer base,” it added.

“The transaction, while solidifying UBL’s balance sheet and market position, remains dependent on due diligence regarding Silkbank’s asset quality and liabilities. This expansion, if finalised, would represent a consolidation within Pakistan’s banking sector after seven years.”

In May last year, the Silkbank board of directors granted management permission to pursue a potential merger with UBL.

UBL has met the gross advance-to-deposit ratio (ADR) requirement of 50 per cent through lending over Rs200 billion to Pakistan Agricultural Storage & Services Corporation Limited (PASCO), reducing high-cost deposits, and increasing private lending, said the bank’s president at a corporate briefing session hosted by Topline Securities on Wednesday.

UBL has not recorded any additional tax expense due to ADR during the nine months of 2024.

UBL’s total investment portfolio stands at Rs5.986 trillion with a yield of 19.73 per cent. Of this, 55 per cent (Rs3.268 trillion) is invested in T-bills with a yield of 20.51 per cent, followed by floating bonds, which constitute 26 per cent of the portfolio (Rs1.558 trillion) and yield 20.91 per cent. Fixed bonds makeup 19 per cent of the portfolio, have a duration of 2.03 years, and yield 15.92 per cent.

Furthermore, the president highlighted that all banks are likely to pursue litigation, as the industry feels that the ADR tax is unfair.

UBL is also focusing on Islamic banking and planning to convert the entire Khyber Pakhtunkhwa and Balochistan regions into Islamic. It is expected to receive approval from the SBP by November.

Per the bank’s notice to the PSX, “the offer and the amalgamation remain subject to the approval of the board of directors and shareholders of UBL, execution of definitive transaction documents between UBL and Silkbank, and receipt of all corporate, regulatory, and third-party approvals and consent required for the amalgamation.”