KASB BANK MERGER WITH ATLAS BANK

S.KAMAL HAYDER KAZMI,
Research Analyst
, PAGE
Nov 10 - 16, 2008

 

KASB Bank and its investment banking sister concern have merged with Atlas Bank to form a stronger entity with a wider reach and sufficient capital to guarantee security to depositors. New KASB-Atlas Bank, which also includes KASB Capital, will have a capital base of more than Rs 12.5 bn and branch network of over 110 branches. KASB-Atlas bank has increased number of branches and more importantly size of (combined) capital. The Enhanced paid-up capital of the new bank will ensure safety of customers of both the banks, adding the merger reflects commitment of Pakistani banks to fight through the difficult time of economic slowdown.

It is believed that KASB and Atlas Bank have sought the merger to meet a State Bank's regulatory requirement of the minimum paid-up capital of Rs5 bn by the end of 2008. In this way the total paid-up capital comes to Rs 9 bn as KASB Bank's capital is little over Rs4 bn while Atlas at around Rs 5 bn that barely meets the requirement. KASB Bank has 73 branches while Atlas Bank had 34 branches at start of the year. Meanwhile, SBP Governor Dr Shamshad Akhtar has approved the merger in principle. This Merger is in line with consolidation policy being pursued by State Bank to make financial sector of Pakistan more vibrant, robust and resilient so that it could meet financial needs of all sectors and segments of the society. With this new wave of mergers and acquisitions across the banking sector it is likely to yield more solid and substantive results, particularly in the present environment. The KASB-Atlas merger has come a day after Arif Habib Bank announced that a consortium led by banker Hussain Lawai, who is acquiring its majority stake.

BANKS BEFORE MERGER

KASB BANK FINANCIAL HIGHLIGHTS

[Rs in million)

INDICATORS 2007 2006 2005 2004
Paid-up Share Capital 4 ,015 2 ,293 2 ,015 1 ,707
Reserve Fund & Other Reserves 1 58 ( 131) ( 268) 5
Shareholders' Equity 4 ,173 2 ,162 1 ,747 1 ,712
Total Assets 4 0,891 2 6,539 1 9,103 1 5,853
Deposits 3 3,132 2 1,276 1 4,828 1 1,201
Advances-net 2 5,143 1 4,513 1 0,739 8 ,295
Investments-net 7 ,278 4 ,694 3 ,822 2 ,687
Pre-tax Profit / (Loss) 66 5 3 ( 511) 16
Post-tax Profit / (Loss) 198 137 ( 273) 98
No. of Branches 35 35 35 21
No. of Employees 892 694 569 398
Earning / (Loss) per share - Rs 0.90 0.62 ( 1.52) 0.68
Source: KASB bank

ATLAS BANK FINANCIAL HIGHLIGHTS

(Rupees '000)

INDICATORS 2007 2006 2005 2004
Paid-up capital 5,001,466 3,125,916 1,537,000 1,060,000
Shareholders' Equity 5,260,126 3,116,083 1,518,485 1,034,520
Deposits 15,322,671 8,842,946 2,186,005 232,663
Lending 4,427,824 3,500,844 4,847,386 2,421,660
Investments - net 5,566,841 3,645,195 1,735,015 1,007,630
Advances - net 9,242,511 7,833,786 799,411 57,617
Total assets 22,984,261 17,020,586 7,951,719 3,686,830
(Loss) / profit before tax (549,564) (140,836) 9,526 (37,667)
(Loss) / profit after tax (309,044) 8,682 3,788 (25,480)
Earnings Per Share (0.93) 0.04 0.03 (0.24)
Price Earning Ratio (18.28) 365.00 - -
Number of employees 781 247 152 55
Number of branches 25 20 11 2
Source: Atlas Bank

PACRA RATINGS OF ATBL

During July 2008, the Pakistan Credit Rating Agency (PACRA) has maintained the long-term and the short-term entity ratings of Atlas Bank Limited (ATBL) at A- (Single A minus) and A2 (A two), respectively.

RATINGS OF KASB CAPITAL LTD

During October 2008, JCR-VIS Credit Rating Company Limited has assigned entity ratings of 'A+/A-1' (Single A Plus / A-One) to KASB Capital Limited (KCL).

CONCLUSION

A fresh wave of mergers and acquisition was already expected after the State Bank recently announced new paid up capital requirements for next five years. According to SBP, the banks would need to have minimum paid up capital of Rs 5 bn by end of 2008; Rs 6 bn by end of 2009; Rs 10 bn by end of 2010; Rs 15 bn by end of 2011; Rs 19 bn by end of 2012 and Rs 23 bn by end of 2013.

MINIMUM CAPITAL REQUIRED BY SBP
YEAR CAPITAL
Dec-2008 Rs 5 bn
Dec -2009 Rs 6 bn
Dec -2010 Rs 10 bn
Dec -2011 Rs 15 bn
Dec -2012 Rs 19 bn
Dec -2013 Rs 23 bn
Various sources

Those with small and medium sized banks, which cannot meet State Bank requirements, will have no option other than looking for mergers or acquisitions. In a recent meeting the Governor SBP Dr Shamshad Akhtar said that small banks had no future because they could not compete with big banks' having larger network of branches. SBP has been encouraging mergers and acquisitions in the banking industry for last few years. As a result of it, there have been major mergers and acquisition during last three years. First, Standard Chartered acquired 95.37 percent interest in Union Bank for a sum of $487 million in 2006. The two subsequently merged. Then, ABN Amro acquired 93.3 percent shares of Prime Bank for $227 million and merged. NIB Bank, a subsidiary of Singapore state investor Temasek Holdings, acquired 56 percent of PICIC, which controlled PICIC Commercial Bank, for about $300 million. All in all, with this new merger we can expect KASB-Atlas bank to perform more solidly in the future and it will make a positive impact on the stakeholders.