Bank Alfalah is planning to invest Rs750 million in Alfalah Securities by issuing right shares, said Bank Director Abdullah Khalil Al Mutawa at the annual general meeting on Monday.
The decision to invest in a subsidiary did not go down well with bank shareholders who were already disappointed at the bank’s failure to announce a dividend for the first time in 19 years. A securities firm is a stock broker’s business, which charges a fee to act as an intermediary between buyers and sellers of stocks listed at equity markets.
The bank did not announce a dividend due to weak cash flow and non-availability of reserves for payouts, said BMA Capital Research Head Hamad Aslam.
Analysts were surprised that such a massive investment was being made in the asset management arm when telecom companies of the group, Wateen Telecom and Warid, were in the red. The group recently had to sell a 20 per cent stake in United Bank to improve its cash flow position.
The UAE-based bank, owned by the Abu Dhabi Group, has continued its aggressive horizontal growth of branch expansion which has resulted in a weak cash flow position, said an analyst.
The bank will open five new branches in Bangladesh after approval by the regulator, said Chief Executive Officer Sirajuddin Aziz.
“Around 20 to 25 branches will be added to the local network, taking total branches above 400,” added Aziz. Bank Alfalah is geared to enter untapped areas of the country, he said.
The Abu Dhabi Group has stakes in Bank Alfalah, United Bank Limited, Warid, Wateen Telecom and Alfalah Securities among others.
Investment losses: a key earning dampener
Devaluation of investment in associates, Warid in particular, has been a potential downside risk to the bank’s profitability since last year.
Provisions for diminution in value of investments swelled to Rs2 billion in 2010 compared with Rs317 million in the preceding year.
Group subsidiaries
join forces
The bank will soon introduce e-banking for its customers by collaborating with Wateen Telecom and Warid, said Aziz.
Talking about the group’s telecom companies, Aziz said that there is always a possibility of a merger and acquisition in the telecom sector. Bank Alfalah has an eight per cent stake in the two telecom companies.
The board of directors also announced the appointment of AF Ferguson & Co as the auditing firm for 2011.
Published in The Express Tribune, March 29th, 2011.
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