The State Bank of Pakistan has asked Habib Bank and Bank Alfalah to conduct due diligence of SilkBank. The two banks are to conduct the business viability of Silkbank’s consumer banking portfolio. The chief spokesman of the State Bank of Pakistan (SBP) said that they have granted approvals to conduct due diligence on SilkBank and its applications. The bank is to be put up on sale after a deal with a multi-industry company.
Banks are required to maintain a minimum capital requirement of Rs10 Billion and an adequacy ratio of 11.5%. The fund will help SilkBank achieve its financial requirements. Silkbank was previously owned by Saudi-Pak Commercial Bank which comes under Arif Habib Corp (28% shareholder), Shaukat Tarin (12%), IFC (8%), Nomura (4%), BoM (3%).
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According to a senior research analyst, Masroor Hussain, at Foundation Securities:
“I think the reason why shareholders of Silkbank is seeking to sale its consumer banking business is because it’s one of the only few good things about the bank and therefore sellable”
Silk Bank made a loss of Rs 3.9 billion which was 37% of its equity. As a result, the bank was unable to meet the minimum capital requirements set by the central bank. Moreover, the bank’s loan portfolio was no better – 32% of the loan book constituted of bad loans.
Masroor Hussain further added “As per the numbers, the bank doesn’t seem in a very good shape so it is unlikely to attract any buyers specially when it is trading at P/BV [price to book value] of 1.2x whereas most of the profitable banks are trading below their book values”
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