KARACHI, Oct 4: Another Pakistani bank, Prime Bank, has reached to finalise a deal with a foreign bank, and the State Bank has permitted ABN AMRO Bank to conduct due diligence, highly reliable banking sources told Dawn on Wednesday.

The sources said ABN AMRO had asked the State Bank for the due diligence of Prime Bank last week and the SBP provided the required permission.

“We confirm that the State Bank has allowed ABN AMRO to conduct due diligence this week,” said a banking source, adding that it can not be confirmed officially as the matter is still ‘confidential’.

This is surprising to note that foreign and local banks were making deals but neither the banks nor the State Bank was ready to confirm them officially even when a deal is practically signed.

In case of Union Bank’s acquisition by Standard Charted Bank, the former used to deny reports while the latter kept silence till the acquisition is completed. The SBP, which knows every movement, never confirms the reports. This allows speculation in the shares market and provides chances for brokers and insiders to manipulate the situation in their own interest.

ABN AMRO succeeded in getting permission for the due diligence of Prime Bank but not ready to disclose its deal with the bank. Prime Bank was also tightlipped over the deal.

The sources said the due diligence would be completed within a month and would enable the two banks to conclude their deals. They said Prime Bank could not get the offer as high as Union Bank fetched. Union Bank fetched a price 17 times higher than its earning in 2005.

After the purchase of Union Bank, Standard Chartered has become the largest foreign bank in Pakistan, with the acquisition of 67 branches.

ABN AMRO will also able to enlarge its network with 63 branches of Prime Bank.

“The State Bank should not keep it confidential once it allowed due diligence, as the permission means the two banks have already reached a deal,” said an analyst. The analyst requested anonymity fearing pressure from the regulatory authority.

“This is a wrong impression that a bank is purchased at its current market price,” he said, adding that speculations only provide smart people to get benefit from confusion.

The banking sector is facing a tidal situation as several large foreign banks have started exploring possibilities to acquire a bank in Pakistan. The highly profit banking sector became more attractive after its ability to keep continue with high profits for more than two-and-a-half years and tax reduction on the sector. The tax on the banking sector was 55 per cent, which was gradually brought down to 35 per cent last year, providing opportunity to earn more and pay less.

“The significant economic growth in the region is another attractive scenario for investors in the banking industry,” said the analyst.

Pakistan succeeded in achieving an average seven per cent economic growth for the last there years and expected to continue with it, especially in wake of heated economic growth of India and China.

“This is like the Far Eastern region where all most all countries benefited from each other’s growth and the region as a whole succeeded in uplifting standard of life of the people,” he said.