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Thursday March 28, 2024

UBL wins SBP approval for due diligence of Telenor Microfinance Bank

By Our Correspondent
February 09, 2022

KARACHI: United Bank Limited (UBL) on Tuesday said it had received an approval from the central bank to go ahead with the due diligence process for acquiring 55 percent shares in Telenor Microfinance Bank (TMB).

“The State Bank of Pakistan has granted in-principal approval to United Bank Limited to commence the due diligence of Telenor Microfinance Bank Limited for proposed acquisition of 55 percent sponsor shares in TMB, currently held by Telenor Pakistan BV (operating under the Easypaisa brand name), subject to the compliance with the applicable laws, rules, regulations,” the bank said in a bourse disclosure.

The Telenor Group seeks to sell its majority ownership stake in TMB as a part of its strategy to ensure long-term value creation for its shareholders.

MCB had also shown interest in acquiring TMB. In November, MCB Bank’s board of directors granted permission to conduct due diligence to buy stakes in TMB.

The group in a statement last year said TMB has been driving digital innovation in the financial sector for more than 10 years and has firmly established its position as a leading fintech company in Pakistan. A process to evaluate partners committed to support TMB’s long term growth strategy has been initiated, it said.

TMB is jointly owned by Telenor Group and Ant Group. The bank was established in 2005 and has successfully developed into a significant player in Pakistan’s financial landscape, providing both traditional banking solutions and digital financial services. In 2009, the bank launched Pakistan’s first mobile banking platform Easypaisa, transforming digital payments in the country.

For UBL, being one of the biggest banks in the country, this potential acquisition would help it diversify and expand further. However, analysts are concerned about the financial health of TMB.

“It is a great franchise in terms of user base but its financial health is not that great,” said Fahad Rauf, research head at Ismail Iqbal Securities, referring to TMB.

“Its cash burn rate is high, which is against the current trends of the banking sector business model, which is low risk and fairly simple,” he said.

“If the bank (UBL) decides to acquire it, we might see some slowdown in dividend payouts from the bank (UBL) due to higher cash burn.”

TMB posted a loss after tax of Rs10.7 billion in 2020, compared with Rs16.3 billion in the previous year, its annual report for the year 2020 showed.

The loss is attributed to credit impairment charges, it said. Total asset base of the bank amounted to R52.2 billion in 2020.