Consortium eyeing another bank



By Shahid Iqbal


KARACHI, April 14: The consortium, which recently acquired the Saudi-Pak Commercial Bank, is eying to buy another bank in Pakistan as part of its expansion plan.

“We are looking and searching to buy another bank in Pakistan for which initial progress has been made,” Shaukat Tarin, who leads the consortium, told Dawn on Monday.

Mr Tarin unveiled a detailed plan of the consortium while speaking to employees from Sindh at a local hotel on Sunday.

The consortium comprises International Finance Corporation (IFC), Bank Muscat and Nomura International.

Mr Tarin did not specifically mention the name of any bank the consortium was interested to buy. He, however, said that he has an agreement with the Mybank.

“It’s not necessary that we will go for Mybank. There are other banks which are interested to sell stakes,” said Mr Tarin.

Small banks in Pakistan have been in a difficult situation as cost of funding is almost double here than large banks, which compels them to sell out their stakes.

Banking sources said that a major shareholder of the Mybank is in the process of assessing and selling its shares which may lead to sale of the entire bank. However, no such initiative has been made by the Mybank management.

The sources also identified another bank held by a brokerage house which may sell its stakes in the near future.

Banking analysts said that sale of small banks was in the right direction and as per a strategy of the State Bank of Pakistan during Dr Ishrat Husain’s tenure when it was stated that only seven to eight large banks were enough for Pakistan’s economy.

Merger or acquisition of small banks is a common practice the world over, mainly because large banks rule banking industry and because small banks are unable to compete with them.

Pakistan, too, has witnessed a wave of mergers, with foreign banks seen as key players in the game.

“A bank with Rs60 to Rs70 billion in its balance-sheet is not safe. We must improve this situation,” said Mr Tarin, adding his consortium was quite capable of investing as much as required to improve its balance-sheet.

However, the new management of the Saudi-Pak Commercial Bank is dealing with huge losses as well as its non-performing loans (NPLs). Till the end of 2007, the bank showed NPLs worth Rs6.136 billion. The most critical was the NPL-to-advance ratio which was 19.5 per cent at the bank, highest among all banks. The average NPL-to-advance ratio of the banking industry is 6.5 per cent.

Mr Tarin said that a plan had been chalked out to expand the Saudi-Pak Bank’s branch network to 200 in four to five years. Currently it has 55 branches.

He was of the view that banks still have a wide scope in Pakistan as bank’s contribution to economy was much lower than the developed world.

“Banking is still 33 per cent of the GDP, which is much lower than other countries where this ratio is 90 to 100 per cent,” said Mr Tarin, adding potential for growth is open for another 20 years in Pakistan.