KASB Securities merges with Bank Islami
Moratorium on bank had caused liquidity issues for the brokerage house
PHOTO: PPI
KARACHI:
KASB Securities has now become a subsidiary of Bank Islami after the latter acquired the parent company of the brokerage house at a nominal value of Rs1,000, a stock filing said on Friday.
A standalone brokerage house previously owned by KASB Bank, KASB Securities became part of Bank Islami following the government’s approval of the merger scheme of its parent company with the Islamic lender on May 7.
KASB Bank, which ceased to exist after the central bank cancelled its banking licence on May 7, held the largest stake (77.1%) in KASB Securities at the end of 2014.
Individual investors owned 21.4% shares while associated companies, such as KASB Corporation, owned about 1.1% shares in KASB Securities, a publicly listed company.
Without being at fault per se, KASB Securities became a victim of its parent company’s lack of capital adequacy. Counted among prominent brokerages in the country, KASB Securities posted a net profit of Rs108.6 million in 2014, up 33.4% from its earnings in the preceding year.
KASB Securities came under pressure on November 14 when the government imposed a six-month moratorium on KASB Bank, its majority shareholder, and restricted the bank’s depositors from making withdrawals of more than Rs300,000.
Being a subsidiary of KASB Bank, KASB Securities used its parent company for a ‘majority of its banking arrangements, including daily clearing for all transactions executed on the Karachi Stock Exchange (KSE)’. Resultantly, the moratorium on KASB Bank worsened KASB Securities’ liquidity position, as its funds remained frozen in the accounts of its parent banking institution.
Three days after the imposition of the moratorium on KASB Bank, the Securities and Exchange Commission of Pakistan (SECP) temporarily restricted KASB Securities trading facilities on the KSE as well as the Pakistan Mercantile Exchange (PMEX). According to KASB Securities, all new investments for KASB Securities’ clients were temporarily put on hold due to the quantum of the money stuck in its deposit accounts with KASB Bank.
The brokerage house claimed in its latest financial statements that all requests for transfer of shares and payments by its clients were honoured while the company was under SECP restrictions.
Its trading rights on the KSE were restored partially by the SECP on December 2, 2014, whereas further relaxations were granted on February 3 and March 25. According to KASB Securities’ latest quarterly report, it was expecting its trading rights on the KSE to be fully restored after the lifting of the KASB Bank moratorium.
KASB Securities also maintained affiliation with Bank of America-Merrill Lynch, but it was terminated following the regulatory action against its parent company last year.
Delisting notice
Meanwhile, as a final full-stop to the KASB Bank saga, the bank that ceased to exist after its amalgamation with Bank Islami was approved on May 7 will be delisted on May 11 from the KSE, according to a notice posted on the stock exchange website.
The notice added that, according to the amalgamation scheme, Bank Islami shall pay a token consideration of Rs1,000 for the entire shareholding to its shareholders.
Published in The Express Tribune, May 9th, 2015.
KASB Securities has now become a subsidiary of Bank Islami after the latter acquired the parent company of the brokerage house at a nominal value of Rs1,000, a stock filing said on Friday.
A standalone brokerage house previously owned by KASB Bank, KASB Securities became part of Bank Islami following the government’s approval of the merger scheme of its parent company with the Islamic lender on May 7.
KASB Bank, which ceased to exist after the central bank cancelled its banking licence on May 7, held the largest stake (77.1%) in KASB Securities at the end of 2014.
Individual investors owned 21.4% shares while associated companies, such as KASB Corporation, owned about 1.1% shares in KASB Securities, a publicly listed company.
Without being at fault per se, KASB Securities became a victim of its parent company’s lack of capital adequacy. Counted among prominent brokerages in the country, KASB Securities posted a net profit of Rs108.6 million in 2014, up 33.4% from its earnings in the preceding year.
KASB Securities came under pressure on November 14 when the government imposed a six-month moratorium on KASB Bank, its majority shareholder, and restricted the bank’s depositors from making withdrawals of more than Rs300,000.
Being a subsidiary of KASB Bank, KASB Securities used its parent company for a ‘majority of its banking arrangements, including daily clearing for all transactions executed on the Karachi Stock Exchange (KSE)’. Resultantly, the moratorium on KASB Bank worsened KASB Securities’ liquidity position, as its funds remained frozen in the accounts of its parent banking institution.
Three days after the imposition of the moratorium on KASB Bank, the Securities and Exchange Commission of Pakistan (SECP) temporarily restricted KASB Securities trading facilities on the KSE as well as the Pakistan Mercantile Exchange (PMEX). According to KASB Securities, all new investments for KASB Securities’ clients were temporarily put on hold due to the quantum of the money stuck in its deposit accounts with KASB Bank.
The brokerage house claimed in its latest financial statements that all requests for transfer of shares and payments by its clients were honoured while the company was under SECP restrictions.
Its trading rights on the KSE were restored partially by the SECP on December 2, 2014, whereas further relaxations were granted on February 3 and March 25. According to KASB Securities’ latest quarterly report, it was expecting its trading rights on the KSE to be fully restored after the lifting of the KASB Bank moratorium.
KASB Securities also maintained affiliation with Bank of America-Merrill Lynch, but it was terminated following the regulatory action against its parent company last year.
Delisting notice
Meanwhile, as a final full-stop to the KASB Bank saga, the bank that ceased to exist after its amalgamation with Bank Islami was approved on May 7 will be delisted on May 11 from the KSE, according to a notice posted on the stock exchange website.
The notice added that, according to the amalgamation scheme, Bank Islami shall pay a token consideration of Rs1,000 for the entire shareholding to its shareholders.
Published in The Express Tribune, May 9th, 2015.