KARACHI: The boards of directors of MCB Bank and NIB Bank in their separate meetings on Wednesday app­roved the amalgamation scheme through a share swap arrangement.

The banks approved the swap ratio of one share of MCB Bank for every 140.043 shares of NIB Bank. “As a consequence of the proposed amalgamation, 73,569.197 shares of MCB shall be issued in aggregate in favour of the shareholders of NIB Bank on the basis of a swap ratio of one share of MCB for every 140.043 shares of the bank,” NIB Bank said in a stock notice.

The decision of the committee is subject to the approval of the shareholders, sanction of the State Bank of Pakistan (SBP), approval of the Competition Commission of Pakistan and receipt of other requisite regulatory authorisation, consents and approvals.

Analysts at Topline Securities commented that based on the prevailing market price of the MCB Bank share and the swap ratio of 140, the value of the NIB Bank share worked out at Rs1.60, which was at a discount to the book value of Rs1.80 per share.

The NIB Bank share traded at Rs1.90 on Wednesday. Its total deposits stood at Rs118 billion, which was 16 per cent of MCB Bank’s total deposits. The amalgamation will increase MCB Bank’s total deposits to Rs887bn. The branch network of MCB Bank will increase by 171 branches to 1,395 branches. Banking-sector analysts at Intermarket Securities stated that MCB Bank will issue 73.57 million shares based on the swap ratio.

“In MCB’s context, positives include: incorporation of 171 branches of NIB into MCB Islamic Bank, potential NPL recoveries (Rs27.4bn as of September) on account of the common client base of the two banks, and reduction in MCB’s deferred tax liabilities by Rs8.7bn. On the flipside, dilution of roughly 6.5pc is expected on MCB’s books,” the analysts said.

Published in Dawn, December 8th, 2016