Financial moves: HBL looking to acquire First Microfinance Bank

Acquisition to be ‘by way of equity’ over the next three years.

KARACHI:

Habib Bank (HBL) is expected to enter the microfinance banking segment by acquiring Pakistan’s second largest microfinance bank in terms of the value of savings, according to a regulatory filing by the country’s biggest commercial bank on Thursday.

“HBL intends to look at acquiring significant shareholding in First Microfinance Bank, which already has a base and presence in the microfinance sector all over Pakistan,” HBL said in the notice while choosing not to disclose the amount of investment it is willing to commit.

However, under the statement of material facts that it published a fortnight ago along with its annual report for 2014, HBL disclosed that it is committed to investing a maximum amount of Rs2 billion in acquiring First Microfinance Bank ‘by way of equity’ over the next three years.



Pakistan’s largest conventional bank with total assets of over Rs1.7 trillion, HBL operated nearly 1,600 branches at the end of 2014.

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 2014 was Rs8.7 billion with a market share of 20.1%. Its gross loan portfolio was over Rs5 billion, which made it the fifth largest provider of microcredit with a market share of 7.6%.

HBL intends to obtain a “majority shareholding” in First Microfinance Bank, reads the ‘special resolution’ that will be proposed at the 73rd annual general meeting of HBL shareholders on March 27.

The exact shareholding that HBL is going to acquire depends on the share price, which will be determined following the completion of due diligence and valuation by an independent firm of chartered accounts. However, HBL has stated that it will purchase shares up to a total value of Rs2 billion. First Microfinance Bank had equity of Rs1.1 billion at the end of 2013.

The State Bank of Pakistan (SBP) has granted HBL the permission to conduct due diligence and evaluate the operations of First Microfinance Bank.

Currently, HBL does not hold any shares in First Microfinance Bank directly. However, the two entities are 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.

Published in The Express Tribune, March 20^th, 2015.

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