Fauji Foundation, a leading group of companies in Pakistan, has expressed interest in buying Silkbank in a bid to expand its footprint in the diversified business as the bank has opened doors for the conglomerate to evaluate its possible price.
"We would like to inform … Fauji Foundation has expressed interest in acquiring a majority stake in Silkbank Limited," Silkbank Company Secretary Faizul Hasan Hashmi said in a notice sent to the Pakistan Stock Exchange (PSX) on Thursday.
As part of the process, Silkbank has been requested to allow Fauji Foundation to conduct due diligence of the bank and "in this regard Fauji Foundation intends to apply to the State Bank of Pakistan (SBP) for requisite approval of the same."
Subject to SBP's approval, the board of directors of the bank gave its in-principle approval to Fauji Foundation on Thursday (Jan 28) for conducting the required due diligence and evaluating the information that would be provided by Silkbank in that regard, he stated.
Pak-Kuwait Investment Company Head of Research Samiullah Tariq said that the bank was short of the required minimum capital requirement (MCR) set by the regulator ie the SBP. "The flow of new investment will help the bank to meet the regulatory requirement."
Despite a relatively smaller bank, "it has a good consumer banking portfolio and has also notably progressed in digital banking in recent times," he said.
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"The bank is committed to adhering to the given targets and is confident of reaching capital compliance by December 31, 2020," according to Silkbank's condensed interim financial statement for six months ended June 30, 2020.
The board has given certain targets to the management that would ensure improvement in all key ratios of the bank in 2020, it said.
As on June 30, 2020, the equity of the bank stood at Rs12.44 billion excluding the surplus on revaluation of assets. This includes share capital (net of losses and discount on shares) of Rs11.62 billion.
"By virtue of the same, the capital adequacy ratio (CAR) of the bank is 8.36%," said the bank.
Alpha Beta Core CEO Khurram Schehzad said Fauji Foundation had stakes in over 18 subsidiaries in fertiliser, cement, oil and gas, food grain and banking sectors.
On the other hand, Silkbank has deposits worth Rs154 billion. It has lent Rs99 billion and invested Rs131 billion in government securities.
The bank has reported a profit after tax of Rs151 million for the nine-month period ended September 30, 2020. However, it has an accumulated loss of Rs13.5 billion.
Published in The Express Tribune, January 29th, 2021.
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