Summit Bank approves new scheme for merger with Sindh Bank

KARACHI: The board of directors of Summit Bank Limited approved a revision in swap ratio with regards to its proposed merger into Sindh Bank Limited, a bourse filing said on Friday.

“Now, one ordinary share of Sindh Bank Limited is proposed to be issued for every 4.17 ordinary shares of the (Summit) bank as a consequence of this proposed amalgamation,” Summit Bank (SMBL) said in a notice to Pakistan Stock Exchange.

Previously, one ordinary share of Sindh Bank (SBL) was proposed to be issued for every 3.85 shares of Summit Bank.    

The bank said the revision is, however, subject to all applicable regulatory approvals, including the approval of the State Bank of Pakistan and the bank’s shareholders in a general meeting.

Summit Bank convened an extraordinary general meeting of the bank’s shareholders on November 7 for the approval of new amalgamation scheme.

Analyst Mustafa Mustansir at Taurus Securities Limited said SMBL is trading at a price by volume of 0.47x, down 31 percent since the announcement of amalgamation scheme. The decline followed a recent downturn in the market.  

“We believe the decline in SMBL      s adjusted book value of three percent quarter-on-quarter to Rs6.2/share at 2QCY17-end from Rs6.4/share at 1QCY17 as against two percent increase in SBL’s book value over the same period to be a major reason for the revision.”

Mustansir said SMBL has been struggling to meet minimum capital requirement for long. It had a capital adequacy ratio of 9.52 percent till June-end as compared to 10.26 percent by December-end, below the minimum requirements of 10.65 percent in 2016 and 11.28 percent in 2017.

Summit Bank obtained an extension for capital adequacy ratios (CAR) compliance from the State Bank of Pakistan (SBP) up to September 29.

The central bank allowed relaxations to the Summit Bank pertaining to CAR and leverage ratio under Basel III deductions.  

Summit Bank registered a profit after tax of Rs84.78 million in January-March this year compared with a loss after tax of Rs649.33 million in the same period of the past year.

In contrast, gross profit of the public-sector small-tier Sindh Bank increased to Rs873.82 million in January-March 2017 from Rs776.5 million a year ago.

Sindh Bank had paid-up capital requirement of Rs10 billion with Rs16.249 billion equity during the first quarter.

The bank’s deposits stood at Rs123 billion. Sindh Bank, in its first quarterly financial statements, said the bank is pursuing a comprehensive bank-wide strategy aimed at increasing business volumes, net interest and fee-based incomes.

It has plans to open 40 branches during 2017, expanding the bank’s network to 300 online branches.

A senior banker said the potential merger could create a bank with assets of nearly Rs300 billion. 

“The new combined entity would have 500 branches across the country, while its market capitilisation could be more than Rs30 billion,” he said. “The equity of an integrated financial institution is expected to reach Rs26 billion.”