JS Bank Limited, on Tuesday, expressed its intention of acquiring BankIslami Pakistan with controlling stake with over 51% shareholding. This is aimed at expanding its footprint in the financial industry.
Management control of the Shariah-compliant Banklslami will also enable JS Bank to kick-start its journey in Islamic banking, a division that is growing with every passing day and is eating away at the market share of conventional banking.
“The expected acquirer already owns 7.79% shares (86.32 million shares) in the target bank and further intends to acquire voting shares such that it owns and controls at least 51% of the overall paid-up capital of the target,” Next Capital said in a letter to the Pakistan Stock Exchange (PSX) on Tuesday.
However, the parties are yet to determine and agree upon the price of majority share acquisition.
JS Bank will increase its shareholding to the intended level by purchasing the remainder from the current owners and the general public. However, the number of shares required to be purchased from each remains undecided.
The parent company of JS Bank, Jahangir Siddiqui and Company Ltd (JSCL), currently owns 21.26% (235.68 million ordinary shares) in the bank. The announcement largely failed to buoy investors at the PSX, as share prices of the acquirer and targeted bank both closed on a sluggish note.
BankIslami’s share price inched up 0.08% (or Rs0.01) to close at Rs12.23 with a traded volume of 1.93 million shares. The share price of JS Bank, however, dropped 2.25% (or Rs0.11) to close at Rs4.78 with 477,500 shares turnover at PSX.
The announcement of the intention to acquire voting shares and control of the bank is subject to obtaining the requisite regulatory approvals including a clearance of fit and proper criteria from the State Bank of Pakistan (SBP). “The public announcement of intention may be withdrawn if the requisite approvals are not granted by the concerned regulatory authorities,” said Next Capital in its letter.
BankIslami has reported a net profit of Rs2.85 billion in the first nine-months (Jan-Sep) of 2022, as compared to Rs2.13 billion in the previous year of 2021. On the flip side, the provisions and write offs-net of the Shariah-compliant bank surged to Rs2.25 billion in the first nine months of 2022, as compared to a mere Rs32 million in the previous year of 2021. The basic earning per share of the bank improved to Rs2.57 in the nine-month period, as compared to Rs1.92 in the previous year.
The banking industry has continued to thrive mostly through safe lending to the government. Recently, the government resolved to transform the entire conventional banking system into Shariah-compliant banking.
Published in The Express Tribune, November 16th, 2022.
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