UAE investor acquires majority stake in Summit Bank

Involved issuance of 3.98 billion new ordinary shares

KARACHI:

UAE-based investor Naseer Abdulla Hussain Lootah has acquired troubled Pakistani bank Summit Bank with the aim of transforming it into a Shariah-compliant institution, according to a notification from the bank to the Pakistan Stock Exchange.

The acquisition involved the issuance of 3.98 billion new ordinary shares of the bank to Lootah at a discounted subscription price of Rs2.51 per share, giving him a 60% stake in the bank. “Consequently, to which the acquirer (Lootah) has become the majority shareholder of the bank,” the notice read. The acquisition was recently approved by the State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP), and Competition Commission of Pakistan (CCP).

Summit Bank’s President Jawad Majid Khan said in a press statement that, “The bank’s revival involved more than just new equity injection and Islamic banking.” Along with transforming the bank into a full-fledged Shariah-compliant institution, Summit Bank will undergo a complete overhaul of its operations, digitalisation, and rebranding, enabling it to have a fresh start and new identity.

The bank’s share price surged 16.67%, or Rs0.31%, to close at almost one-month high at Rs2.17 with a volume of 1.28 million shares at PSX.

The acquisition comes at a critical moment as Pakistan is passing through a historical economic crisis. The bank was significantly high in non-performing loans, paid-up capital, and capital adequacy ratio (CAR) at the end of the previous year. According to the bank’s annual report for 2022, the paid-up capital (net of losses) stood at negative (-) Rs21.801 billion, and the CAR was negative (-) 79.55%. However, the receipt of the new equity at Rs10 billion is expected to help turn these negative numbers into positive ones.

The bank’s gross non-performing loan (NPL) ratio as of December 31, 2022, stood at 65.78%, compared to 61.89% at the end of the previous year. The bank reported a net loss of Rs3.167 billion for the year ended December 31, 2022, compared to a loss of Rs2.887 billion for the prior year. On the positive side, the bank’s year-end deposits improved by Rs12.435 billion or 11.36% against prior year-end levels to end at Rs121.919 billion.

The new investor is reportedly in the process of devising a medium and long-term strategic and restructuring plan for Summit Bank with the assistance of AF Ferguson (a member firm of PricewaterhouseCoopers) and Co and Haidermota and Co (legal consultants). The renewed commitment to its clients and principles is expected to be a fundamental aspect of the bank’s success.

“The bank will also benefit from the investor’s relationships in the Middle Eastern banking industry,” said Khan.

Prominent UAE national, investor, and longstanding friend of Pakistan, Nasser Abdulla Hussain Lootah, said he had a vision for the bank to transform it into a full-fledged Islamic bank, providing exceptional services, innovative products, and a commitment to the principles of Islamic finance.

According to the PSX notice, Rs10 billion has already been injected into the bank in January 2023 through an advance payment for the proposed share issuance. A bank official, who asked not to be quoted, said the receipt of the new equity will help bank to turn the negative numbers into positive ones. The bank’s transformation is expected to begin from June 2023, with informal efforts already underway.

Published in The Express Tribune, April 27^th, 2023.

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