NBP management revokes plan to acquire Burj Bank
The management of governmentowned National Bank of Pakistan (NBP) revoked its interest to acquire operations and assets of Burj Bank after its deal was not successful with the management of Burj Bank.
NBP completed due diligence of the Islamic Bank in the mid of but its negotiation with the management fell flat as similar with MCB Bank which also did a same exercise in vain.
Official sources in NBP said the negotiation with Burj Bank was complicated because of the attitude of its management which is not flexible on the sales value and transfer of operations and assets.
NBP has planned to establish 100 percent wholly-owned Islamic banking subsidiary. It has also planned to enhance its network of Islamic Banking Division with 175 branches at different locations across the country in next one and half years.
Analysts said that the acquisition of the bank could have been a fast-track measure of the NBP to set up its separate subsidiary of NBP which operates Islamic banking in full-fledge style. However, it is esay to build and expand their own network instead of acquiring a loss-making bank is a hectic and critical process.
Earlier, MCB Bank had also planned in the same lines to set up a separate subsidiary of Islamic Banking. It however expressed its interest in acquiring 55 percent shareholding in Burj Bank in collaboration with by Islamic Corporation for Development of Private Sector, the private sector investment Development Bank.
Besides vulnerable financial stability, the bank is also barely meeting regulatory financial requirement of MCR at Rs 10 billion and CAR of 18 percent. The central bank has given its relaxation for meeting these mandatory requirement based on its plan, which will be intimated by bank in the next few weeks.
Recently, Bank of Khyber has shown its interest to conduct due diligence of Burj Bank in order to acquire shares in the company, according to notification issued to Pakistan Stock Exchange. The exercise of due diligence will be approved by State Bank of Pakistan.
The State Bank of Pakistan (SBP) vide BSD Circular No. 7 of 2009 specified that banks operating in Pakistan are required to raise their issued and paid up capital (free of losses) to Rs 10 billion in a phased manner by December 31, 2013. But the bank is running short of Rs 4.564 billion for meeting its paid-up capital requirement. The central bank specified that the Burj Bank should maintain capital adequacy ratio at 23% instead of the required 10%. Its CAR as at September 30, 2015 was 18.27%. At present, Burj Bank has engaged with multiple investors, interested to invest in the capital of the Bank.