ISLAMABAD, Oct 22: The State Bank of Pakistan has rejected the offer of Saudi Pak Investment Company to take over Allied Bank Limited (ABL) and run it through a new professional management.

Informed sources told Dawn here on Wednesday that the central bank’s refusal came on the grounds that defunct Prudential Bank, now owned and being run by Saudi Pak investment Company in the name of Saudi Pak Commercial Bank, has an outstanding Rs1.5 billion five years concessional loan.

The State Bank maintains that any bank or an investment company which had received concessional loans to improve its financial health cannot be allowed to take over ABL.

The ABL’s transactions is now being handled by the State Bank and the Privatization Commission has nothing to do with it. The government reportedly believes that the disinvestment of remaining 49 per cent shares of the ABL is a difficult and tricky business that should be dealt by the central bank. The SBP wants to disinvest ABL under the State Bank rules and regulations for which it does not have to advertise the matter like that of the Privatization Commission. It is said that the State Bank is now authorized to give ABL to any financial institution.

There are about 12 national and international groups who are interested in the ABL privatization, including Pak Kuwait Investment Company, Askari Bank, former caretaker prime minister Moeen Qurashi’s Emerging Market Partnership, Sheikh Mukhtar Group, Jhangir Siddiqi Group, Skindar Jatoi Group, Fateh Group and Osaf Group.

The sources said that Saudi prince Turkey was also interested in purchasing ABL and had met the senior government officials in this regard when he visited Pakistan recently.

According to the sources, the central bank did not want the creation of monopolies of any particular group to own more than one bank and that was why it regretted to Saudi Pak Company to be obliged over the issue of ABL.

The sources said that ABL losses touched over Rs7 billion that would have to be plugged by the new buyer. However, the State Bank will reportedly facilitate the new buyer to fulfil the capital adequacy requirement.

The previous ABL employees group, which had acquired 51 per cent shares, later sold some of its shares to few private parties. And now, the sources said, the State Bank could offer transfer of the management to a new buyer with 49 per cent shares, and later it could help (the new buyer) further acquire two per cent shares from any private party so that there should be no problem in running affairs of the ABL.

ABL is one of the largest banks in Pakistan in terms of assets, deposits and advances. It has a network of 825 branches and 7,082 employees. As on June 21, 2003, the deposit base of the bank amounted to Rs105 billion and its total assets to Rs114 billion. The paid-up capital of ABL is little over Rs1 billion and its equity was deficit by Rs3.969 billion. The Capital Adequacy Ratio (CAR) is 14 per cent negative.

As per the categorization done by the State Bank, ABL is included in the category of de-nationalized bank. In 1991, under the Employees Stock Ownership Plan (ESOP) approved by the government, employees of the bank were allowed to buy and manage the bank. The Allied Management Group (AMG) purchased 26 per cent of the total shares at a price of Rs70 per share of Rs10 along with the management control of the bank.

Under the sale agreement, the AMG was given the option to acquire further 25 per cent shareholding of the bank at the same price within one year of the first transaction. The second transaction was concluded in August 1993.