KARACHI, April 29: The Privatisation Commission (PC) is likely to price the Initial Public Offering (IPO) of United Bank Limited (UBL) somewhere between Rs 40 to Rs 50 per share, when a total of 15 per cent of the bank’s stock makes its way into the market in June this year. Earlier this week, the Privatization Commission issued a press release which stated that AKD Securities (Pvt) Limited had been appointed as the Lead Manager for the IPO of UBL, “after a thorough and comprehensive pre-qualification process.”

The Government may still be deliberating on the offer price. But the prospective price of the bank’s stock at the above price makes mathematical sense. The widely acceptable method of valuation of a banking stock is its price-to-book value (p/bv). Share in comparable peers such as National Bank of Pakistan was trading at Rs96.70 at the stock market on Friday, which given its book value of Rs 82, worked out at just about the p/bv of 1.1 times.

Following the stock market fiasco in mid-March, prices of listed banks have also dropped, which otherwise stood at the average p/bv of 1.8 times. Taking a mean of 1.5 times and the book value of UBL stock — which according to its latest published balance sheet as at March 31, 2005 — works out at Rs 33.80, the p/bv for UBL would be Rs45. The minimum lot per applicant has also been reduced to 200 shares from 500 previously, which means a small shareholder with as little as Rs8 to 10 thousand can try his luck.

Under its policy of ‘privatization for the people’, it would be the fourth mega issue after OGDC, PPL and Kapco by the government. Considering the rich rewards that investors had reaped from earlier IPOs, offer of shares from State-owned enterprises (SoEs) could be the right move to attract investors in equities back to the market. From OGDC to Kapco, total number of investors had risen from 90,000 to 1.4 million.

UBL, which is the third largest bank in Pakistan (second largest in the private sector) was privatized in October 2002 through a strategic sale of 51 per cent (264.18 million) shares along with management control. An Abu Dhabi Group and the Bestway Group acquired 25.5 per cent shares each for a total cash consideration of Rs12.3 billion. The government would now be offering 15 per cent stock (including the green shoe option of 5 per cent) to the public from its current holding of 49 per cent of the total 518 million issued shares in the bank.

Muslim Commercial Bank, which on Friday declared net profit at Rs 1,402 million for quarter ended March 31, 2005 is yet another competitor; its stock is priced at Rs75.35, with substantial rise seen in recent days.

Cash dividend at 22.5pc was paid out by UBL for the year ended Dec 31, 2003, which was its first full year under private management. The Bank’s financial statements for quarter ended March 31, 2005, published in newspapers on Friday, showed deposits at Rs246bn and profit after tax at Rs1,012m. The bank noted that it was operating with 1043 branches in Pakistan and 15 branches abroad.