KARACHI: Summit Bank Ltd, one of the smallest commercial lenders in terms of net assets, said on Wednesday a UAE investor has become its majority shareholder.
The announcement follows the injection of fresh equity to the tune of Rs10 billion from Nasser Abdulla Hussain Lootah, a national of the Gulf nation, who subscribed to 3.98bn new shares of the bank at Rs2.51 apiece. As a result, he gained 51 per cent shareholding as well as management control of the commercial lender. Mr Lootah already owned 0.51pc shares in the bank.
The injection of fresh liquidity is meant to partially fix the bank’s capital adequacy issues. Without naming Summit Bank, the International Monetary Fund recently urged the State Bank of Pakistan to take a “more proactive approach” in addressing the matter of its undercapitalisation.
At the end of December 2022, the bank’s paid-up capital stood at negative Rs21.8bn as opposed to the statutory requirement of Rs10bn. Similarly, its Capital Adequacy Ratio, which reflects how well a bank is prepared to meet its obligations, stood at negative 79.5pc versus the regulatory requirement of 11.5pc.
It incurred a net loss of Rs3.16bn in 2022 versus a net loss of Rs2.88bn in the preceding year. As a result, total accumulated losses on the balance sheet of Summit Bank were Rs41.7bn at the end of 2022.
The commercial lender is planning to convert itself into a full-fledged Islamic bank, probably under a new brand name. It expects to generate further liquidity by selling its pricey real estate assets in major urban centres, according to one source familiar with the matter.
The bank’s share price jumped 16.7pc on Wednesday to Rs2.17 apiece.
The road to liquidity injection has been a bumpy one for Summit Bank as it battled court cases and accommodated changes in the composition of the consortium of buyers as well as the share subscription agreement.
Two people, including stockbroker Aqeel Karim Dhedhi, filed a suit with the Sindh High Court last April against the planned acquisition and received an injunction order. The court recalled the same in July 2022 while allowing the injection of equity to proceed.
Separately, Salman Iqbal, owner of the ARY Group, showed interest in joining the consortium by subscribing to a maximum of 25pc shares at the same price, but he backed out of the deal subsequently.
Published in Dawn, April 27th, 2023
