Research Analyst
1 - 7, 2010

Mybank Limited was incorporated in 1992 as a commercial bank. It operates with over 80 branches network all over Pakistan. Its paid-up capital is PKR 5.303 billion, equity PKR 5.069 billion, and total assets PKR 38.756 billion.

The bank is listed on Karachi & Lahore stock exchanges. The State Bank of Pakistan and the Securities & Exchange Commission of Pakistan govern it.


Due to deteriorating economic conditions, no fresh lending was made during 3rd quarter 2009. Investment portfolio, though remained almost at the same level, was directed towards safer investments with minimal direct and indirect exposure towards corporate debt and more towards liquid government backed securities. Managing assets was the biggest challenge for the bank.


Arif Habib Bank Group had decided to purchase majority shares of the Mybank, and the group finalised details for purchase of the bank.


SEP 2009  SEP 2008
Loss/ PBT (1,516,321) 532,149
Loss/ PAT (1,167,048) 502,988
Admin Expenses 785,166 646,263
Loss/ EPS Rs, (2.20) 1.24
. SEP 2009 DEC 2008
Advances 18,909,559 20,940,081
Deposits 23,043,293 28,032,735
Investments 10,375,561 10,294,970
Net Assets 6,023,803 6,143,068

Mybank has been facing serious problems as it failed to raise fresh deposits. It also failed to meet the State bank's criteria of raising minimum paid-up capital (MCR). Buyers thrice rejected the bank while they were close to strike a deal. Earlier, in August 2009 the Askari Bank refused to buy the bank.

Mybank's paid-up capital was about Rs 4.243 billion which was much below the SBP's criteria. In 2008, banks were required to raise MCR at Rs 5 billion which the Mybank failed to meet, and in 2009 banks were asked to raise the paid-up capital of Rs 6 billion.

The State bank has power to liquidate, acquire, or carry out forced sale if a bank fails to meet the SBP criteria. However, so far no action has been taken by the SBP against any bank on failure to meet the MCR criteria.


Pakistani banking sector has faced a tough year due to slowdown in economic activities.

The continued slowdown of economic growth was reflected in the banking system causing an increase in the non-performing loans, as the overall macroeconomic outlook with slight improvement on a few fronts remained tenuous.

The NPL's accumulated at relatively faster rate of 6.0 percent in the third quarter of 2009 and reached to Rs 422 billion. Due to a reduction in loans and advances, the infection ratio deteriorated.

Due to growth in capital as well as further decline in risk-adjusted exposures, the baseline indicators of solvency improved. However, risk to solvency from heightened credit risk and deteriorating asset quality has further increased in the year.

The asset base of the banking system showed marginal growth during the calendar year while the deposits base grew significantly in the second quarter of the year.

The bank made secure investments despite the high interest rates as it extended loans to the government projects.

On the asset side, decline in advances took place in both public and private sector lending. However, lending to power sector actually showed significant growth.

In the third quarter of 2009, investments posted a strong increase of 13.1 percent, mainly in the government papers followed by bonds of public utilities and a marginal increase in equity investments.

Due to low aggregate demand in the economy as well as abroad, high borrowing costs on account of tight monetary policy, unresolved political and security issues, and the heightened credit risk in the economy, banks' lending to private sector reduced significantly since the inception of the year.

The reduction in deposit base during the Q3 of calendar year 2009 was accompanied by concomitant decline in advances and increase in short-term federal government papers, thus slightly improving the fund-based liquidity indicators of the system.

The consumer loans continued their downward slide with increasing NPL's as banks avoided the risks associated with the financing. Rate of interest on these loans remain high and inflationary pressures restrain the purchasing power of the consumers.

The profitability of the system came under stress due to ongoing macro-economic environment, local security situation, slow down in credit demand and worsening credit quality. The banking system reported a pre-tax profit for the first nine months of 2009, down by 14 percent compared with the corresponding period of last year. Increased provisions, lower non-interest income, and high administrative expense are the some of inhibitions.


Analysis of Minimum Capital Requirement (MCR) shows that 28 banks including five foreign banks are fully compliant with the MCR criteria. Remaining banks are in process of meeting the MCR through either fresh capital injection or merger and acquisition with other banks.

As such, most of the LPBs are expected to comply with the capital adequacy ratio and MCR in coming quarter. Other banks with major public sector share are under the process of restructuring/privatization.


Mybank witnessed a substantial increase of infected portfolio in its balance sheet causing further devaluation of its share price. The infected portfolio had made the deal costlier for the Askari Bank.

Mybank has to spruce up its market position, its ability to meet the MCR and tackle bad debt while it has to increase fresh deposits.