BankIslami aims to acquire EGIB
Tuesday, January 19, 2010
By Saad Hasan
KARACHI: BankIslami on Monday announced its intention to buy Emirates Global Islamic Bank (EGIB), indicating that it had a robust last (Oct-Dec 2009) quarter after accumulating losses until September 30, 2009.
In a notice sent to stock exchanges, BankIslami said a memorandum of understanding had been signed between the two banks for a possible merger or acquisition. But in any case, BankIslami would remain the surviving entity, it added.
BankIslami had accumulated losses of Rs495.68 million in the nine months to September 2009 but its CEO Hasan Bilgrami had told The News in an interview last year that it was set to break even by December 2009.
Besides spreading the branch network, the acquisition will help the two Islamic banks in raising the minimum capital. Accumulated losses have reduced BankIslami’s capital to Rs4.8bn and it had been in search of a suitable bank to acquire for the past few months.
Under central bank’s regulations, all banks were required to have minimum capital of Rs6 billion by end-December 2009. It is unlikely that profits of BankIslami in the Oct-Dec 2009 quarter will be enough to shore up the capital to that level.
The capital of EGIB has also dropped to just Rs3.695bn because of accumulated losses of Rs833m in the Jan-Sept 2009 period. It has 60 online branches in 36 cities around the country. With 102 branches of its own across 49 cities, the acquisition or merger will give an edge to BankIslami in the market.
Earlier, BankIslami had announced that it was looking to acquire even a conventional bank. However, industry people say a series of bank acquisitions by Hussain Lawai-led consortium has left few choices.
Against a depressing overall performance of the banking industry, BankIslami has seen tremendous growth in deposits in the last few months. Its deposits surged 83 per cent to Rs22.8bn by the end of September 2009 from Rs12.47bn in December 2008.
BankIslami is also close to acquiring one of the two consumer portfolios of Citibank Pakistan. It has carried out due diligence of Rs3bn auto and house financing portfolios of the leading consumer finance provider of yester years.
Pakistan has seen many acquisitions in recent years. Mauritius-based Suroor Investment is in the process of buying Arif Habib Bank, Mybank and Atlas Bank. Hussain Lawai, the President of Arif Habib Bank, who has wooed foreign investors to acquire local banks, is targeting a financial institution with 200 branches when all the three banks are merged. He says the process of acquisition and merger is expected to be completed by March 31, 2010.