March 27, 2008	Thursday	Rabi-ul-Awwal 18, 1429

KARACHI, March 26: The Bank of Punjab, which has been in the eye of storm since the release of its annual accounts in February with an auditor’s qualification, may be extricating itself out of the mire as debtor in dispute is understood to have paid a tranche of total advances of Rs8.6 billion it owed to the bank.

Hamesh Khan, BoP President, in reply to a query, affirmed on Wednesday that such was indeed the case. He, however, did not disclose the amount of loan that the bank had been able to recover from the controversial debtor.

The total advances of the bank, which stood at Rs137 billion on Dec 31, 2007, included a sum of Rs8.6 billion “due from three companies” which the management said it “considered fully secured/collateralised and recoverable after legal and financial due diligence.”

The auditors, nonetheless, expressed their reservations and qualifications, stating that due to limitation of the scope of the financial due diligence, it was not possible to determine the provision and its extent against the said advances.

There was also a suspicion that the bank did not hold the quantum of free reserves enough to disburse the bonus shares at 25 per cent proposed by the directors. But a certificate from the statutory auditors on March 12, stating that based on position of issued capital and free reserves after the issue of bonus shares of face value of Rs1,057 million, “free reserves and surplus would not be less than 25 per cent of the increased capital,” dispelled that concern.The qualified audit report, as is always the case, scared investors to death. The fate of loan to unidentified borrowers, believed to be a private steel manufacturing company and its allies which comprise seven per cent of the aggregate advances of the bank, sent shivers down the spine of shareholders for fear of their default.

The stock in the bank was stripped of 20 per cent of its value in less than a month from Rs105.50 on Feb 29 when the annual accounts were first released, to Rs85 inclusive of dividend, Rs65.65 ex-dividend, currently.

The price of the share in the bank has started to edge higher. Could it be that some people know what others don’t?

The bank should come out with a clear statement regarding the current status of controversial debt, which is mandatory in the interest of transparency and disclosure of material information.