April 11, 2008	Friday	Rabi-us-Sani 4, 1429

KARACHI, April 10: The process of consolidation is catching on in the financial sector as small banks find it harder to survive any longer in the country.

Banking sources told Dawn that a large shareholder of another small bank is preparing to sell his stakes.

They revealed that a major shareholder of Mybank had initiated the process to assess value of its shares in the bank for a possible sell-off.

However, the sources said there was no indication from the management side of the bank to sell the entity as was witnessed in the sale of other small banks earlier.

Banking analysts have been of the opinion that the banking environment in Pakistan does not suit small banks to run their business and earn the desired level of profits.

Despite booming banking in the country prevailing for last four years, small banks could not establish themselves to remain competitive with the larger banks, which dominate the banking industry in the country.

The fastest growing foreign influence in the local banking industry has made it further difficult for small banks to get any significant role in the growing economy of the country. At the same time, it created enormous attraction for the shareholders of small banks to get high price of their stakes.

“Survival of small banks becoming difficult with increasing size of economy and enlarging shares of five major banks along with growing volume of foreign banks,” said a senior banker of a small bank.

In case of Union Bank, now acquired by Standard Chartered Bank Pakistan, the move was first initiated by its large shareholder and the management had denied its involvement in the sale of the entity, which was later sold out.

Prior to the merger with Standard Chartered Bank, Unon Bank was Pakistan’s eighth largest bank and had 65 branches in some 22 cities, about $2 billion in assets.

Prime Bank was relatively smaller compared to Union Bank.

However, the charm of the booming banking industry in the country attracted another large foreign bank, NIB Bank, which acquired PICIC Commercial Bank.

Despite the presence of giant foreign banks like ABN Amro, which acquired Prime Commercial Bank, Standard Chartered and NIB Bank, major shares in banking are still acquired by the five big banks of Pakistan.

“Share of foreign banks is not more than 16 per cent of the total banking business,” said a brokerage house analyst adding that the foreign banks would soon capture the market with high-tech and innovative products with better service to the customers.

Banking sources said: “If Mybank is purchased by any foreign bank, it would increase the shares of foreign banks in the country”.

“It was premature to assume that the said large shareholder of Mybank would sell its shares to any foreign bank. There is a possibility that another shareholder of the bank may buy the shares being put to sale,” said the senior banker.

The website of Mybank says that the bank operates with 60 branches network all over Pakistan. The paid-up capital of the bank is Rs3.085 billion, equity Rs5.234 billion and total assets Rs33.205 billion.