Aug 23 - 29, 20

Mauritius-based Suroor Investment having acquired majority in three listed banks of Pakistan has renamed its flagship Arif Habib Bank as Summit Bank. In an attempt to meet minimum paid up capital requirement stipulated by State Bank of Pakistan (SBP), ultimate merger of three banks is forecasted. Summit Bank being headed by Hussain Lawai is being termed a giant in making and the story is being followed by the sector experts as well media.

Lately, the SBP issued notification for change of name of Arif Habib Bank to Summit Bank and change of name became effective from August 18, 2010. The bank has an authorised capital of Rs6 billion and paid-up capital of Rs5 billion. The management intends to double it in a short period by injecting fresh capital. The bank has a network of 40 branches/sub branches. The branch network is spread over Sindh, Punjab, Khyber Pakhtunkhwa, Balochistan and Azad Jammu and Kashmir. The bank plans to open further offices to better cover all four provinces within a short span. All branches are online providing real time services to its customers.

Suroor Investment made the first acquisition in Pakistan by acquiring slightly more than 297 million ordinary shares of Arif Habib Bank Limited for a total consideration of Rs2.673 billion or Rs9 per share. It was followed by acquisition of slightly more than 59 per cent shares of Mybank and about 58 per cent shareholding in Atlas Bank. All these banks were in dire need of additional capital. Therefore, the growing consensus is amalgamation of Mybank and Atlas Bank into Summit Bank.

Many bankers believe that the decision by the sponsors of Atlas Group to sell must have come after its merger talks with Silkbank (formerly Saudi Pak Bank) aborted in the middle following the mutual consent that the initiative was unlikely to be of significance for long-term plans of the two banks.

Atlas Bank itself is an interesting history of mergers and acquisitions. In 1990, Atlas Investment Bank came into existence when Atlas Group and the Bank of Tokyo-Mitsubishi joined hands. Later in 2002, the Bank merged with Atlas Lease and acquired Dawood Bank in December 2005.

Atlas Bank and Atlas Investment Bank joined to form Atlas Bank. Its capital markets arm was also incorporated in 2006 and is currently a wholly owned subsidiary of the bank. In August 2007 the bank signed an agreement with DEG of Germany.

Along with Summit Bank, another emerging and fast growing bank is Silkbank. On September 15, 2001, under the supervision of the central bank, Prudential Bank was acquired by the management and associates of Saudi Pak Industrial and Agricultural Investment Company (SAPICO).

On March 31, 2008, a consortium comprising of IFC, Bank Muscat, Nomura International and Sinthos Capital and led by senior bankers Shaukat Tarin and Sadeq Sayeed acquired over 86 per cent stakes in Silkbank for around $213 million, (Rs29.3/share). As of December 31, 2009, it operated 82 branches in Pakistan. The bank besides offering full commercial banking services also provides insurance products, such as Roshan Mustaqbil, an education plan; Sunehra Kal, a savings and investment plan; and Mehfooz Har Pal, an accident and hospitalisation plan. In addition, the company offers debit card, mobile banking, e-statement, SMS alerts, internet banking, and automated teller machine services.


Many experts had opposed granting of a dozen permissions to set up commercial banks. However, the criticism was rejected because at that time 'big five' commercial banks were operating under the state control. A paradigm shift took place in 1998 when Pakistan had to face economic sanctions, after it attained the status of atomic power, against the wishes of many developed countries. As a result, many foreign banks sold their Pakistan operations. The situation has virtually reversed at present as half a dozen foreign banks are operating in the country compared to over two dozen local banks.

The major reason for mergers and acquisitions in banking sector is endeavor to meet minimum paid up capital requirement. While some of the private banks, often termed 'orthodox' have successfully managed to meet the enhanced requirement nearly a dozen are struggling for their survival. Having failed in mobilising additional capital these entities have no option but to go for amalgamation and come up with a new name for the merged entity. One of the obstacles is loss of a flagship enterprise capable of yielding numerous benefits.

Some of the experts are opposing creation of giants after the recent financial crises in the US, which subsequently engulfed the entire world. Until lately concept of 'financial super market' was followed but the perception now is large does not guarantee survival. These experts also demand the SBP not to pursue the condition of minimum capital requirement for a while. However, the sponsors must submit their own plan to meet the amended requirement.

It should not be considered going two steps back because mobilising additional capital in the given conditions has become real difficult, if not impossible under the prevailing conditions, especially for the loss making banks. While limited outreach may be a problem analysts term the business model followed by some of the banks 'grossly faulty'. They also say with the deployment of technology, the issue of limited outreach can be overcome. However, if the management opts for unviable plans, continues with unsustainable branch expansion program, and keeps morale of workers low by penalizsing the workers for the faults of higher management the entity cannot emerge successful.

It may also be said that the SBP should order change of presidents of the loss making banks or take the extreme step on taking over the management. The growing accumulated losses, also eroding paid up capital are making the depositors and the shareholders jittery. Experts are now openly expressing doubts about very survival of the mismanaged banks. The only criteria for evaluating management skills is the profit earned.