ISLAMABAD, July 4: The State Bank of Pakistan is inviting selected financial institutions and commercial banks next week to take part in the bidding of the remaining 51 per cent shares of the Allied Bank of Pakistan (ABL).

Official sources told Dawn here on Friday that Saudi Pak Industrial and Agricultural Investment Company (Pvt) Limited has expressed keen interest to buy the ABL and inject Rs7 billion immediately into it to cover up its losses.

Saudi Pak, which had earlier purchased Prudential Bank and successfully running it with the name of Saudi Pak Commercial Bank Ltd, has assured the senior authorities of the State Bank and the Finance Ministry of improving the financial health of the ABL by buying it through an open bidding or as a strong business group.

But sources said that there will “not” be an open bidding for ABL and that the issue was being negotiated by the State Bank with some potential parties.

“The first experience of partially privatizing the ABL was a failure and we don’t want to repeat that by selling the bank to any unprofessional and financially week group,” an official of the ministry of finance said.

Sources said that the Board of the Directors of Saudi Pak was meeting in Dubai on Saturday to formally decide about the taking over of ABL.

The Privatization Commission (PC) has reportedly expressed its inability to disinvest the ABL because of its so many problems including the existence of huge ‘benami’ accounts. It handed over the bank to the State Bank which had introduced its own management by increasing the government’s equity in the ABL from 49 per cent to 51 per cent.

The sources said that disinvestment of 51 per cent shares of the ABL to employees group, who further involved some unscrupulous parties, did not prove to be a correct decision. Due to poor performance of the ABL, no annual report was published in 2000, 2001 and 2002, which the sources said, forced the State Bank to disinvest the ABL, which is still a fifth largest bank in the country.

Regarding the Loan Book Situation, an official document made available to this correspondent, revealed that top 50 defaulters account for 75 per cent of classified advances which also included Army Welfare Trust (Rs3 billion) and Fateh Group (Rs1.7 billion). It was said that the restructuring of the AWT can result in reversal of Rs500 million provision.

The chief executive, Saudi Pak, Mr Muhammad Rashid Zahir, who is also the chairman of Saudi Pak Commercial Bank when contacted confirmed to Dawn that his group was interested in buying the ABL.

“We are the only institution to rehabilitate the bank. We have the resources to do it and we have the financial muscle and the managerial capacity to turn around the Allied Bank on the pattern of defunct Prudential Bank,” he claimed.

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 deposits base of the bank stood at Rs105 billion and its total assets are Rs114 billion. Its paid-up capital is little over Rs1 billion and its equity account was deficit by Rs3.969 billion. The Capital Adequacy Ratio (CAR) is 14 per cent negative.

As per the categorisation done by the State Bank of Pakistan, the ABL is included in the category of de-nationalised bank. In 1991, under the Employees Stock Ownership Plan, the 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 management control of the Bank.

Under the sale agreement, 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.