LAHORE: The troubled Silkbank Ltd (SBL) has requested the State Bank of Pakistan (SBP) to allow it yet another extension until June 30 for finalising and publishing its annual report and audited accounts for 2020.

The bank has sought the extension on the grounds that Habib Bank Ltd (HBL) has recently started due diligence of its consumer portfolio in order to explore the possibility of acquiring its credit cards, personal installment loans and running finance business.

This was disclosed by the company secretary in response to a letter from the Pakistan Stock Exchange (PSX) about its plans for holding its Annual General Meeting (AGM).

Initially, the bank had informed the bourse management to organise its AGM on March 3. However, it was later delayed to April 30 after receiving permission from the central when the Fauji Foundation expressed its interest in acquisition of SBL. The bank board had allowed HBL to begin its due diligence in its meeting on April 7.

The company secretary said in the letter to the PSX that the bank will submit its request for deferring the planned AGM once it gets extension from the SBP to delay finalisation of its annual accounts.

The Habib Bank’s interest in SBL’s consumer assets follows the collapse of Fauji Foundation’s interest in acquiring the bank.

Through sale of its consumer business SBL is trying to raise funds to improve its Capital Adequacy Ratio (CAR), also known as capital to risk-weighted assets ratio.

According to Silkbank’s nine-month unaudited accounts for the period covering January-September 2020, the bank’s CAR eroded significantly in nine months from 5.81pc at the end of 2019 to 4.16pc at the end of September 2020.

The SBP requires banks to maintain CAR at 11pc. The erosion in CAR shows a significant increase in the bank’s infected loan portfolio in the period between January and September, forcing it to make provisions of Rs2.81bn against its non-performing loans.

CAR is a measure of how much capital a bank has available, reported as a percentage of a bank’s risk-weighted credit exposures. The purpose of CAR is to establish that the banks have enough capital on reserve to handle a certain amount of losses, before being at risk for becoming insolvent.

Silkbank had a strong consumer asset base of Rs18.4bn in personal loans, credit cards and running loans at the end of September. According to the unaudited accounts, the bank opened 9,895 new consumer loans during the third quarter of last year. Silkbank earned a profit-after-tax of Rs150.84 million in first nine months of last year compared with a cumulative loss of Rs2.77bn in 2019, with the EPS (earnings per share) growing to Rs0.02 per share from a loss per share of Rs0.30. The net assets, however, have declined to Rs8.92bn from Rs10.77bn because of downward revaluation of its assets.

The Silkbank management is hopeful that it would fetch a good price for its consumer assets because it generates decent revenues. The bank plans to focus on mortgage financing once its current consumer portfolio is sold.

Published in Dawn, April 22nd, 2021