KASB sold despite Chinese investor’s assurance

According to the SBP spokesperson Abid Qamar, CIG’s offer was just an intention

ISLAMABAD:

China-based Cybernaut Investment Group (CIG) gave solid commitment to the State Bank of Pakistan (SBP) to invest $50 million in KASB Bank to meet equity shortfall in addition to putting in more money, but the offer failed to impress the central bank which has decided to sell KASB Bank to Bank Islami for Rs1,000.

An April 20 Letter of Intent (LoI), addressed to the SBP governor by CIG, spelled out a plan to inject $50 million into KASB and its future business model in order to revive the bank that is under the SBP moratorium.

The group offered to immediately invest $5 million after execution of shareholders agreement, the LoI showed. Another $15 million, which will be placed in Industrial and Commercial Bank of China’s Karachi branch and transferred upon written consent of SBP, will be invested by May 13. CIG also offered to invest another $30 million by September 30 next year, bring the total injection to $50 million.

In the fourth phase, CIG committed to meet any shortfall in the Minimum Capital Requirement of KASB Bank on a date agreed with SBP.

The letter was signed by Dr Tom Zhang, Executive Partner of CIG.

However, SBP, in its response dated April 27, said Cybernaut ‘failed to satisfy the State Bank’ and argued that the Chinese group could not establish fitness and propriety of a potential investor and did not fulfill the regulatory approvals. CIG wanted to convert KASB into a focused trade and corporate bank aimed at benefiting from huge business opportunities under China-Pakistan Economic Corridor. It also wanted to close down 50% loss-making branches of KASB.

When contacted, the SBP spokesperson Abid Qamar insisted that CIG’s offer was just an intention. He also said that Jehanghir Siddiqi was not a factor in the SBP’s plan to amalgamate the bank with Bank Islami and insisted that KASB’s net worth was negative.

KASB’s SBP-verified statement, however, showed that it had net assets of Rs1.34 billion on November 30, 2014. A KASB official said that the bank also has over Rs2 billion in deferred tax assets, which would have helped the Chinese investors bridge the remaining equity gap.

Published in The Express Tribune, April 30^th, 2015.