Summit Bank keen to acquire 51pc shares in Burj Bank

The management of Summit Bank has sought a permission from State Bank of Pakistan (SBP) to acquire majority of shareholding of at least 51 percent in Burj Bank. According to the notification issued to Pakistan Stock Exchange, the bank management informed its shareholders that it has showed its interested in the share purchase deal of Burj Bank, a full-fledged Islamic Bank.

The interest of the Summit Bank is quite surprising to buy shares in a struggling bank as it has been trying hard to meet up its paid-up capital itself through right shares subscription and support of sponsor Suroor Investments.

The bank is not only in the process of finalizing its right share but it also has decided to increased its authorized capital share from Rs 20 billion to Rs 25 billion. But Summit Bank managed to record profit of Rs 238 million in 2015 from Rs 241 million reported in 2014. The bank's revenue earning improved to Rs 5.94 billion in 2015 from Rs 5.07 billion reported in 2014.

It will be challenging

task

for Summit Bank's management not only to strengthen its financial soundness along with operations in line with converting bank into conventional to full-fledged Islamic but to acquire shares of a struggling bank provided the central bank gives green signal for next step.

It is pertinent to mentioned here that Bank of Khyber has shown its interest to conduct due diligence of Burj Bank in February 2016 in order to acquire shares in the company. It is also seeking central bank permission for due diligence. At present, Burj Bank has engaged with multiple investors, interested to invest in the capital of the Bank.

Subsequently, the majority existing shareholders of the Bank (consisting of 71.80% shareholding in the Bank) are working on the proposal with one of the potential investors to allow them to inject fresh capital in the Bank so as to acquire 51% or more shareholding in the Bank to comply with the minimum capital requirement of Rs 10 billion as stipulated by the SBP. The bank has applied to SBP for the approval of the above arrangement and the response from SBP is awaited. However, the SBP has allowed the Bank an extension in meeting the MCR of Rs. 10 billion till November 30, 2015 and to maintain the CAR at 18% till such time. Previously, MCB Bank and National Bank of Pakistan (SBP) has completed its due diligence in order to obtain shareholding in the Islamic Bank which has been incurring losses with paid up capital less than the industry requirement.