Saudi Pak Commercial Bank Limited
The new management will ensure effective monitoring of operations and financial performance of the bank
From SHAMIM AHMED RIZVI
Oct 29 - Nov 04, 2001
Unlike the manner in which the National Bank of Pakistan took over the control of the National Development Finance Corporation, (NDFC) the Saudi Pak Industrial & Agriculture Investment Company (Pvt), Ltd. which obtained the operational control of Prudential Commercial Bank through purchase of controlling stakes handled the change in a smooth and professional manner without causing any panic in public or agony to the depositors.
The State Bank of Pakistan approved the transfer of majority control and management of the Prudential in favour of M/s Saudi Pak on Sept. 15, 2001. It opened the counter on 19th allowing depositors to withdraw from their account as much as they wished without any restriction. They also assured the depositors that all their contracts with the previous management will be honoured if the depositors opted to continue business with the Bank under the changed name and the new management. In view of the NDFC experience where accounts holders wanted to withdraw in billions and the changed regional scenario, Saudi Pak supplied Rs.2.4 billion in cash to their 20 branches with clear instructions that all cheques issued by the depositors must be honoured. As a result of this expert handling of the situation, net cash outflow during the next 3 working days was not more Rs.175 million.
In case of NDFC, the State Bank notified on 27th August that all depositors accounts of the NDFC have been transferred to National Bank. On Aug. 29 another notification issued said that depositors can withdraw only up to Rs.100,000 from their account from Sept. 5 and up to Rs.2,50,000 in the 3rd week of Sept. and the balance in the month of November. Besides it was also announced that depositors will be paid profit on their deposits up to Aug. 27, 2000 only. This decision was by any standard, illegal, immoral and against business ethics. As a result the panicky depositors thronged NDFC branches in, 1000s and in some cases police had to be called to save the banks property and officials from the wrath of panicky depositors. The National press was highly critical of the State Bank and the National bank of Pakistan for handling the issue in a most "crude, callous and unprofessional manner creating panic amongst the depositors and shaking the confidence of the investors in banking institutions.
True to its reputation Saudi Pak handled almost a similar situation in a most commendable and professional way. With full confidence they allowed the depositors to withdraw as much as they wanted without any limit and without putting any time schedule. This restored the confidence of the depositors and as a result they did not rush for withdrawals.
Saudi Pak Industrial and Agricultural Investment Company (Pvt) Limited acquired management of Prudential Commercial Bank Limited (PCBL) through purchase of controlling equity stake. The bank has been renamed as Saudi Pak Commercial Bank Limited. It will be working under new board of directors PCBL was placed under moratorium of 180 days by the Federal Government on March 17,2001.
The bank originally commenced operations in 1994 and was listed on stock exchanges at Karachi and Lahore. It has its registered office at Islamabad, Head Office at Karachi and a network of 20 branches in main business cities of the country. The paid up capital of the bank was Rs.500 million. It is being enhanced to Rs. 1,500 million through issuance of 100 million shares at Rs. 10/- per share on 25 per cent discount as loan support as approved by majority shareholders in their meeting of September 04, 2001. The Saudi Pak has already paid cash of Rs. 500 million towards purchase of bulk shares to obtain the control of the bank. The remaining shares will be subscribed by general public. The new bank will thus become one of the largest in terms of paid up capital in the private sector banks.
The refloatation of the bank under its new name will lead the bank to a turn around in its business and profitability. The bank will win the confidence and trust of depositors as it will be owned and managed by a financial institution having strong financial health and progressive approach. It will offer quality services of divers range to its customers and will be equipped to handle the trade transactions with the Middle Eastern countries especially Saudi Arabia.
The new management will ensure effective monitoring of operations and financial performance of the bank. Commercial banking services to be offered by the proposed Saudi Pak Commercial Bank will be supplemented by investment services of Saudi Pak itself and leasing operations of its affiliate, Saudi Pak Leasing Company Limited which is the fifth largest company in the leasing sector.
Saudi Pak Industrial and Agricultural Investment Company (Pvt) Limited is a joint venture of the Government of Kingdom of Saudi Arabia and Islamic Republic of Pakistan. Its Board of Directors has equal representation from both governments. Saudi Pak has an excellent record of performance. It achieved record level of approvals add disbursements in the year 2000, despite difficult business environment. An aggregate amount of Rs.1,705 million was approved in 2000, up by 25.1 per cent from Rs.1,363 million in 1999. Total cash disbursements were Rs.1,477.5 million in 2000 up by 33.3 per cent from Rs.1,108.5 million in 1999.
Loan recoveries of Saudi Pak stood at Rs.754.6 million in 2000, posting 23.3 per cent increase against Rs.612 million recovered in 1999. The current loan dues collection ratio stood at 93.3 per cent in 2000. Saudi Pak's total income increased to Rs.1,107 million in 2000 as compared to Rs.946 million in the previous year. Profit before provision was Rs.597.2 million up by 42.2 per cent over last year.
Saudi Pak's long-term and short-term entity rating has been assessed at AA (Double A Plus) and A1 (A One Plus) by DCR-VIS Credit Rating Company Limited. Saudi Pak is highly regarded in the financial and corporate circles and has the capability to advance business and resources of the acquired bank.