KARACHI, Oct 21: A new wave of mergers and acquisitions has swallowed up three more small banks KASB Bank, Atlas Bank, Mybank – leaving no option for them but to change their status after realising their existence under the current circumstances is no more possible.

Industry sources said that a consortium led by Hussain Lawai had finalised a deal with Mybank. The same consortium had signed an MoU with the Arif Habib Securities Limited (AHSL) to invest Rs4.5 billion to acquire up to 50 per cent shares of the Arif Habib Bank Limited (AHBL).

Sources said the amount involved in the deal of Mybank was about Rs5.3 billion, however, it was not known that when this process of acquisition would be completed. Mybank, which was incorporated in 1992, operates with 76 branches across the country. The paid-up capital of the bank is Rs4.243 billion, equity Rs5.148 billion and total assets Rs41.344 billion.

On the other hand, the KASB and Atlas Group on Tuesday announced that they had agreed to merge their respective banks. As a result, KASB Bank, KASB Capital and Atlas Bank would merge together to form KASB Atlas Bank.

The State Bank of Pakistan immediately approved the merger and termed it a positive move.

The merged entities would have a capital base in excess of Rs12.5 billion and a branch network exceeding 110 branches.

The small and medium-sized banks, which are not more than 12, in Pakistan have been in the grip of fear since the enhancement of minimum capital requirement (MCR) by the State Bank.

In August, the SBP had raised the MCR of banks to $300 million and asked all banks to attain the target till 2013 in phases. Till 2009, banks were bound to achieve MCR of Rs6 billion.

“The sharp jump in MCR to $300 million is beyond the capacity of these small- and medium-sized banks to achieve,” said Aamir Ahmed Khan, a banking analyst. “These banks are now looking for opportunity to leave the field for large banks,” he added.

The recent turmoil in the US and European banking industry has also put enormous pressure on the local banking industry. “These banks have geared up their efforts to get out of the industry or merge with a giant for mutual survival,” said a senior banker.

With equity of over Rs5.2 billion and assets base of over Rs.24.79 billion, Atlas Bank is supported by the trusted equity of Atlas Group, a leading manufacturing, financial services and trading group.

Among the small banks Atlas Bank is relatively stronger one. It began its journey back in the year 1990 when Atlas Group and the Bank of Tokyo-Mitsubishi Limited entered into a joint venture as Atlas Investment Bank Limited.

Later in 2002, the bank merged with Atlas Lease Limited and acquired Dawood Bank Limited in December 2005 and renamed it as Atlas Bank Limited and merged Atlas Investment Bank in to Atlas Bank in 2006. Atlas Capital Markets (Private) Limited was also incorporated in 2006 and is currently a wholly-owned subsidiary of the bank.

The KASB Bank, formerly Platinum Commercial Bank Limited, was incorporated in Lahore on October 13, 1994 as a public limited company under the Companies Ordinance, 1984 and received banking licence from the State Bank of Pakistan on January 9, 1995. The bank is currently operating with 41 branches in different cities. Total equity of the bank is Rs4.159 billion with paid-up capital of Rs4.015 billion

SBP welcomes

Meanwhile, the State Bank in a statement has supported the merger and approved it saying it is in line with its 10-year Financial Sector Vision and Strategy.

The SBP has been working towards catalysing a new wave of mergers and acquisitions across the banking sector which is likely to yield more solid and substantive results, particularly in the present environment, the central bank said.

Anticipating more mergers and acquisitions, SBP Governor Dr Shamshad Akhtar said that the central bank was working round-the-clock to help generate such partnerships and would work closely with concerned parties to conclude such transactions smoothly and speedily.

“The merger is in line with consolidation policy being pursued by the State Bank of Pakistan to make the financial sector of Pakistan more vibrant, robust and resilient so that it could meet the financial needs of all sectors and segments of the society in the country,” she added.