JS Bank restrained from acquiring BIPL

SHC interim order says one group cannot have two commercial banks at a time


Salman Siddiqui March 08, 2023
JS Bank declares cash dividend of Rs1.2 per share. PHOTO: FILE

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KARACHI:

JS Bank, on Tuesday, announced that the Sindh High Court (SHC) through an interim order has restrained it from acquiring majority stake (with management control) in BankIslami Pakistan Limited (BIPL).

The bank was temporarily stopped from acquiring BIPL on the submission that one group cannot have two commercial banks at a time, it was learnt.

In a notification sent to the Pakistan Stock Exchange (PSX), JS Bank Company Secretary and Head of Legal Hasan Shahid said, “An interim injunction has been granted by the SHC against the bank (JS Bank) in relation to its proposed acquisition of majority shares and control of BankIslami Pakistan Limited.”

“The legal advisor of the bank (JS Bank) is of the view that the order has been granted mainly because misleading and incomplete information regarding applicable laws was provided by the plaintiffs in support of their frivolous application,” reads the notification.

The plaintiffs who approached the court to stop the proposed transactions include Muhammad Ayub Tareen, Mohsin Balagamwala, Asif Mannan and AKD Investment Management Limited, the bourse filing said.

JS Bank’s share price dropped 2.84%, or Rs0.12, to close at Rs4.10 with a volume of 27,000 shares at PSX.

The share price of BIPL, however, improved 0.76%, or Rs0.08, to close at Rs10.59 with 3.97 million shares having changed hands at the bourse.

Advocate for the plaintiffs said in an application to the SHC that the court may be pleased to restrain the JS Group, particularly JS Bank and Jahangir Siddiqui & Co Limited (JSCL) from acquiring majority/controlling shareholding in BIPL, and from taking any further action in pursuance of JS Bank’s public announcement of intention to acquire at least 51% shares and control of Bank Islami Pakistan “till the next date of hearing”.

The suit for declaration and injunction reads that, “Neither one person can be a director in more than one financial institution nor one group should have more than one bank.”

“Post-acquisition, BIPL will become a subsidiary of JS Bank Limited and will continue to operate as a separate legal entity providing Islamic banking services as it does today,” the suit reads quoting the bank’s president and CEO saying this in an email to its staff.

In the year 2013, JS Bank had sought an NOC/clearance from the Securities and Exchange Commission of Pakistan (SECP) and State Bank of Pakistan (SBP) for the merger of HSBC Bank Middle East Limited (HSBC) with JS Bank, it said.

“The SBP …refused to provide the NOC/clearance unless the SECP provided its NOC.”

The overall policy of the SBP, as well as the legislation in question, is to ensure that no individual or group is able to dampen competition and increase its own influence in the banking sector at the cost of efficiency and contest, which would in essence increase any group’s ability to manipulate and influence the same, it said.

 

Published in The Express Tribune, March 8th, 2023.

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