HBL enters microfinance banking segment

Acquires majority shareholding in First MicroFinance Bank

KARACHI: Habib Bank (HBL) has entered the microfinance banking segment by acquiring a majority shareholding in Pakistan’s third largest microfinance bank in terms of the value of savings, according to a regulatory filing by the country’s biggest commercial bank on Thursday.

Although the stock notice did not mention the value of the transaction, the consolidated annual report of HBL for 2015 shows the bank had offered to purchase 50.51% of the shareholding of First MicroFinance Bank (FMFB) at a consideration of Rs2 billion. The transaction had already received approval from shareholders at the annual general meeting held on March 27, 2015.





FMFB will become a subsidiary of HBL after completion of the transaction.

FMFB is the first and oldest microfinance bank in Pakistan with a presence in over 150 locations covering 66 districts. Its roots lie in the credit and savings programmes of the Aga Khan Rural Support Program (AKRSP) dating back to 1982.

Pakistan’s largest conventional bank with total assets of over Rs2.2 trillion, HBL operated 1,663 branches at the end of 2015. The two entities are already associated by means of their parent company. Aga Khan Development Network, through Aga Khan Fund for Economic Development (AKFED) and Aga Khan Agency for Microfinance (AKAM), owns more than 20% shares in both HBL and First Microfinance Bank.



First Microfinance Bank became profitable in 2013 when it posted earnings per share of Rs1.06 after recording a loss per share of Rs0.93 and Rs0.50 in 2011 and 2012, respectively. The operating profit of First Microfinance Bank was Rs171 million in 2013, up 204.8% from the preceding year, according to the statement of material facts released by HBL last year.



Although financial statements of First Microfinance Bank are not available publicly, centralised databank for the microfinance banking industry shows its total value of savings at the end of 2015 was Rs9.6 billion with a market share of 14.9%. Its gross loan portfolio was over Rs6.2 billion, which made it the fifth largest provider of microcredit with a market share of 6.8%.

HBL is apparently on an expansion spree. One of its wholly owned subsidiaries, HBL Asset Management, recently purchased 100% shares of PICIC Asset Management Company from NIB Bank for Rs4.1 billion.

Published in The Express Tribune, May 27^th, 2016.

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