KARACHI: MCB Bank has planned to buy 55 percent stake in the Burj Bank Limited through financial leverage of Islamic Corporation for Development of Private Sector to revitalize operations and business of emerging Islamic Bank.
The management disclosed to its shareholders that MCB bank has reached an agreement with majority of shareholders of Burj Bank Limited to invest in new and existing shares along with additional investment by the private sector investment arm of Islamic Development Bank.
The bank has sought approval of State Bank of Pakistan (SBP) to issue NOC for purchase of major shares in Islamic Bank as per terms and conditions on shares transactions and investment in financial institutions.
It is worthwhile mentioning here that MCB has been already given permission to establish a separate subsidiary of Islamic Bank by banking regulatory recently from its 28 branches Islamic Banking Division.
The bank posting outstanding profit growth of 4 percent (Rs 21.5 billion) in a tough year of 2013 through managing its non-interest income and other income sources, taking lead among major banks of the country.
Analysts said the investment of leading bank as if MCB Bank in growing Islamic Bank will give lease of life to Burj Bank Limited that needs a financial backing of a group to sustain its operations in Pakistan.
They said Burj Bank could stabilise its business again with profits after injection of funds by leading bank and arm of Islamic Development Fund as bank is operating with 25 branches countrywide with its attracting product portfolios.
The Islamic bank will have concrete support and business guidance as members of the board from MCB Bank will play their role after its proposed sale and purchase of major stakes. This may keep the bank’s performance towards growth in the highly competitive market of Islamic Banking, they added.
Burj Bank, which emerged as fastest growing and profitable bank till 2012, is now facing extremely challenging pressures from its operational sides as its losses were stood at Rs 645 million due to higher administrative expenses and Non-Performing Loans. Burj Bank NPLs reached to Rs 356 million by end of third quarter of 2013 that were stood at Rs 84 million in the past year. Similarly, its administrative expenses increased from Rs 1.138 billion to Rs 1.850 billion till September 2013-end.
The fresh investment will also help Burj Bank Limited to meet MCR level of Rs 10 billion by State Bank of Pakistan.
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