KARACHI: Bank Islami is going to take over KASB Bank in line with an amalgamation scheme prepared by the State Bank of Pakistan (SBP), stock filings by the two banks said on Tuesday.
The SBP’s confidential scheme will result in the acquisition of KASB Bank, the country’s smallest lender, by Bank Islami at a ‘token nominal value’, according to the statements released by the two banks.
KASB Bank lacked capital adequacy, which led the federal government to impose a six-month moratorium on it last November in order to allow the SBP to prepare a scheme for either the reconstruction of the banking company or its amalgamation with ‘any other banking institution’.
With a branch network of 105, KASB Bank’s total equity at the end of the last year was only Rs1.3 billion. It has not published its annual accounts yet.
In contrast, Bank Islami had 213 branches at the end of 2014 with total equity of Rs6.2 billion. Its profit after tax for 2014 was Rs313.6 million, up 69.3% from the preceding year’s earnings.
The stock price and volumes traded of KASB Bank increased massively last week on rumours that it was going to receive fresh equity injection from Chinese investors.
Its share recorded the highest turnover on the exchange for three days in a row last week, driving up its price by as much as 97%.
However, the news of KASB Bank’s upcoming acquisition by Bank Islami seems to have dampened investors’ hopes. Although KASB Bank’s share recorded the second highest turnover on the exchange on Tuesday, its price plunged by almost 28% during the day to close at Rs2.43.
Similarly, the share of Bank Islami also shed 3.7% to close at Rs9.53 at the end of the trading session.
Bank Islami will consider the amalgamation scheme prepared by the SBP in the upcoming meeting of the board of directors for comments/suggestions/objections on April 29, the bank said in its statement.
The successful completion of the amalgamation scheme will lift the federal government’s moratorium that places restrictions on the maximum amount depositors can withdraw from KASB Bank.
