Samba Bank raises Rs5 billion via TFCs

KARACHI: Samba Bank Limited has received Rs5 billion through term finance certificates (TFCs) to meet its tier-2 capital requirements, it said.

“We are pleased to inform you that the bank has received Rs5 billion in its designated account for receipt of proceeds against the issue,” the bank said in the filing with the stock market.

“State Bank of Pakistan (SBP) had granted its final approval to the bank for issuance of rated, privately placed, unsecured and subordinated TFCs of Rs5 billion,” it said.

The funds will be utilised in business operations and will contribute towards the bank’s tier-2 capital for complying with the capital adequacy ratio requirements.

Samba Bank Limited is a majority owned subsidiary of Samba Financial Group of Saudi Arabia.

Samba Financial Group (SFG), parent entity of Samba Bank, has entered into a legally binding merger agreement with National Commercial Bank (NCB) of Saudi Arabia on 11 October, 2020.

Pursuant to the terms of merger agreement, the merger will be implemented through the merger of SFG into NCB, which will result in all of the assets and liabilities of SFG being transferred to NCB.

On completion of merger NCB will continue to exist, whereas SFG will cease to exist as a legal entity and its shares will be cancelled and new shares in NCB will be issued to shareholders of SFG.

Consequently, upon completion of the merger, the shares of Samba Bank Limited held by SFG will be transferred to the merged entity.

Financial institutions with majority foreign shareholding may also raise additional tier 1 capital in the form of foreign currency subordinated debt/ loan from their existing foreign sponsors under the SBP’s regulations.

Debt/ loan raised from foreign sponsors will only qualify for meeting the applicable requirement of capital adequacy ratio. The debt/ loan will not be considered for minimum paid up capital requirements (net of losses). The debt/ loan will be subordinated to all other claims of the banks except claim of common shareholders and the banks will formally execute the debt/ loan subordination formalities with their foreign sponsors. The admissibility of subordinated debt/ loan, for CAR purposes, will be subject to the limits as enforced through the applicable instructions.

The banks, with prior approval of SBP, may return the amount of debt/ loan (through exercising the call option) to their foreign sponsors after five years from its receipt within SBP. However, the banks will not be able to exercise the call option unless the called amount of debt/ loan is replaced with the capital of same or better quality.