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2 more small-sized banks seek merger

* Small banks finding it difficult to meet even the reduced capital requirements

By Mushfiq Ahmad

KARACHI: Two more small-sized banks have decided to seek merger despite the recent reduction in paid-up capital requirements by the State Bank of Pakistan (SBP).

The board of directors of Askari Bank Tuesday authorised the signing of a memorandum of understanding, in terms of which Mybank could merge and amalgamate into Askari Bank.

It was believed that the pace of mergers and acquisitions would slow down after the cut in paid up capital requirements, but "it seems small sized banks are finding it difficult to meet even the reduced requirements", said an analyst.

In April this year, the central bank lowered paid up capital requirements for banks and DFIs "in view of the general global slowdown in growth and capital accumulation by financial institutions and representations from shareholders".

Banks are now required to raise their minimum paid-up capital (free of losses) to Rs 6 billion by December 31, 2009, Rs 7 billion by December 31, 2010, Rs 8 billion by December 31, 2011, Rs 9 billion by December 31, 2012 and Rs 10 billion by December 31, 2013.

Earlier in September 2008, banks had been required to raise their paid up capital to Rs 10 billion by December 31, 2010, Rs 15 billion by December 31, 2011, Rs 19 billion by December 31, 2012 and Rs 23 billion by December 31, 2013.

Askari Bank said it would be applying to the SBP for obtaining approval to commence due diligence of Mybank. Upon being granted the requisite permission by the SBP to conduct due diligence, Askari Bank would commence the same in order to evaluate whether to proceed with the proposed amalgamation.

Besides this possible merger, the board of directors of Askari Bank on June 23 also gave in principle approval to initiate discussions with Askari Leasing for the merger of Askari Leasing with and into Askari Bank.

Askari Bank notified the Karachi Stock Exchange Tuesday after the meeting that Bank would be initiating discussions with Askari Leasing for a possible merger of Askari Leasing with and into Askari Bank.

Other possible mergers: Recently, the boards of Atlas Bank and Saudi Pak Commercial Bank (SPCB) also agreed for a potential merger of the two entities.

The majority shareholders of SPCB have entered into a memorandum of understanding with the sponsors of Atlas Bank for merger of Atlas into SPCB.

Atlas Group and KASB had announced in October last year that they would merge KASB Bank, KASB Capital and Atlas Bank to form KASB Atlas Bank. However, progress on that understanding reached between the two stalled towards the end of December owing to change in valuation of one of the banks.

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