NBP OFFERS 5 PER CENT MORE SHARES
Government keeps its words of privatization
By AMANULLAH BASHAR
Sep 30 - Oct 06, 2002
Keeping its words to implement privatization programme through the dis-investment of public sector entities, the government is offering 18,652 more shares of the National Bank of Pakistan to the public for the second time in a year on October 7-9.
Earlier the government had offered the similar size of its share holdings in the National Bank, which however were doubled due to over subscription by the public. The difference between the two transactions is however the price of the shares which were offered at the par value of Rs10 per share in the first transaction. Encouraged by the impressive results of the first transactions the managers of the proceedings have recommended a price value of Rs21 per share this time.
Another difference between the two transactions, according to market experts, is the determination of the timings for the public offer i.e. October 7-9 falling on the eve of a big national event i.e. National and Provincial elections scheduled on October 10. As far as the small investors are concerned, a large number of them may not be able to keep aloof of the mounting electioneering campaigns, which would naturally be on the peak at that time. Hence the response of the investors may not repeat the performance of the first transaction. In accordance to yet another expert opinion, the timings of the offer may not affect the proceedings noticeably as the major chunk of the shares is likely to be lifted by syndicated buyers.
IP Securities however while commenting on the offer, has strongly recommended the investors take advantage of the opportunity. Enthused by the success of their earlier off-load of Rs18.6 million shares to the general public in November 2001, National Bank of Pakistan has once again entered into the stock market, says IP. It also indicated strong possibilities for an additional 5 per cent of green shoe option this time too. This means that if the offer of 18.6 million shares gets over subscribed the government would exercise the green shoe option and will keep up to 37.2 million shares out of the total applications for subscription. The shares are offered at Rs21, which is at a discount of 7.4 per cent compared to its current market of Rs22.55.
Ever since the shares of National Bank have started trading formally on the bourses, the stock price has appreciated by 34 per cent, while the average trading price had been Rs20.57. As regard to the financial performance of the bank there is no doubt over the fact that the bank for last three years has moved towards the road of progress.
Recently released excellent half-yearly results for the financial year 2002 clearly speak of the growth in earnings that have witnessed an increase of 283 per cent as compared to the same period last year.
With the largest deposit base in the country the bank carries every reason for a better performance in the years to come.
The amalgamation of Mehran Bank and NDFC into national Bank was based on an agreement withh no profit and loss between government of Pakistan and National Bank. Though the union has had added to the amount of non-performing loans of the bank, however the bank is hopeful of recovery and expects that these mergers would result in bringing gains to the bank rather than any negative implications.
The subscription would remain open from October 7 to October 9, 2002.
As a result of making public, the smaller shareholders of the National Bank would get the voting rights under the Bank Nationalization Act as soon as 26 per cent shares in the bank were divested. In this respect, either the Act would need to be amended or additional shares would have to be offered. The government would consider the options in due course. The government intended to privatize NBP eventually.
The representatives of Elixir Securities and Taseer Hadi Khalid, the lead manager for this transaction in their detailed presentation in the road show recommended Rs21 as the sale price of the share which they feel would be an attractive offer price and it would enhance the value for all shareholders. National Bank has the cheapest multiple in the market as compared to other listed banks.
It may be noted that during the restructuring process, over 3000 employees of the National Bank had opted for Voluntary Hand Shake Scheme while 200 branches were closed down. The closure of the branches as well as the voluntary retirement of the employees saved about a billion rupees per month for the bank, while was a cost restructuring exercise. The branch network had been rationalized and currently the bank was operating with 1200 branches all over the country. The bank plans to have corporate branches next year. The bank has successfully increased its deposit base during the first half of the current financial year holding 22 per cent of the market shares with 9 million customers, 32 per cent in terms of transaction and 38 per cent in respect of bill payments.
The credit rating of the bank had been upgraded from AA+ to A1+ due to its improving profitability and continued improvement in the performance. For the second consecutive year National Bank has been recognized as the best bank of the "Banker" UK 2002.