KARACHI: Saudi Arabia-based parent company of Samba Bank Ltd has terminated the planned sale of its majority stake in the Pakistani lender owing to the “considerable uncertainty in current market conditions”.

In a regulatory filing on Wednesday, the fifth smallest bank in terms of market capitalisation told investors that Saudi National Bank (SNB) has ended the process for the sale of its shareholding constituting 84.51 per cent of the bank’s paid-up capital because of the “outlook” of Pakistan’s banking sector.

“This process may have created uncertainty amongst some of our employees and stakeholders. Regardless of the outcome of the strategic review, SNB has and will continue to focus on Samba Bank’s commitment to its customers and employees,” it said.

An investment banker involved in the now-terminated transaction told Dawn the foreign investor was put off by the banking sector’s “low multiples” amid deteriorating economic conditions. “There’s no point in divesting at a time when valuations are this low,” he said while requesting anonymity because of a possible conflict of interest.

The price-to-earnings (P/E) multiple, which measures a bank’s share price relative to its income per share, of the bank for trailing 12 months is 8.16 versus the sector’s 4.52.

Samba Bank’s previous majority owner, Samba Financial Group, merged with National Commercial Bank to become SNB in early 2021. The parent company announced on Sept 21 that it was considering all strategic options in relation to its shareholding in Samba Bank, including potential mergers, acquisitions, divestment and/or restructuring. Later on Oct 5, SNB said it’d commence “an orderly well-managed divestment” of Samba Bank and appointed advisers to assist with the process.

Three publicly traded firms — United Bank Ltd, Askari Bank Ltd and Fatima Fertiliser Company Ltd — subsequently received the central bank’s approval for conducting due diligence of Samba Bank for the potential acquisition of its majority shareholding.

Another source in the banking sector told Dawn that SNB reversed its divestment decision because the bids received from the interested parties were lower than it expected. A secondary reason was that the foreign investor was doubtful about the swift repatriation of dollars given the foreign exchange crunch the country is facing these days, according to the source.

The share price of Samba Bank decreased 3.5pc to Rs11.04 on Wednesday.

Published in Dawn, May 19th, 2022