Dubai Bank to divest holding in BankIslami

Another shareholder says UAE-based bank wants to sell 144.2m shares

KARACHI: Dubai Bank PJSC wants to sell its shareholding in BankIslami Pakistan, a stock filing said on Wednesday.

Another shareholder, Jahangir Siddiqui and Company, reported that it has received a letter from the UAE-based bank, saying it wants to sell 144.2 million shares in BankIslami Pakistan. The stake that Dubai Bank PJSC wants to sell constitutes 14.3% of the total issued shares of BankIslami Pakistan.

Dubai Bank is offering its stake to Jahangir Siddiqui and Company and another (unnamed) shareholder of BankIslami Pakistan under its shareholders’ agreement that mandates a right of first refusal on a proportionate basis.

However, Jahangir Siddiqui and Company said the final decision on the offer will be taken by its board of directors.

With a stake of 25%, Dubai Bank was the largest shareholder in BankIslami until the end of 2014. It was followed by Jahangir Siddiqui and Company (21.2%), and two individuals with a stake of 9.8% each.

However, BankIslami Pakistan conducted its right shares issue recently that increased its shareholders’ equity to Rs9.9 billion on April 30 to meet the central bank’s capital adequacy requirements. It is unclear if Dubai Bank subscribed to the newly issued right shares. The website of BankIslami Pakistan still shows Dubai Bank as its single largest shareholder though.

Glance at the past

Dubai Bank was acquired by Emirates NBD in October 2011. The acquisition of Dubai Bank granted Emirates NBD a 24.8% stake in BankIslami Pakistan through Dubai Bank. It was decided in April 2012 that Dubai Bank will merge with Emirates Islamic Bank and this amalgamation is currently under progress.

At the current share price of BankIslami Pakistan, the proposed deal is worth in excess of Rs1.75 billion, although the parties involved are not bound to strike the deal at the market price.

Most analysts The Express Tribune spoke with expressed their inability to comment on the reason behind the possible exit of Dubai Bank from BankIslami Pakistan. “Maybe the UAE-based bank wants to sell its shareholding because BankIslami Pakistan has now acquired a conventional bank,” one analyst said while referring to the recent merger of the Islamic lender with KASB Bank that had faced capital adequacy issues for many years.

“Sometimes foreign banks divest their holdings in smaller banks in other markets purely because of compliance-related issues,” he added.

BankIslami Pakistan had 213 branches with total equity of over Rs7 billion at the end of the first quarter of 2015, latest period for which official data is available. Its profit after tax for the January-March quarter was Rs71.2 million, down 5.6% from the same quarter of 2014.

Published in The Express Tribune, July 30^th, 2015.

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