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Atlas, SPC Bank announce merger

April 10, 2009

KARACHI, April 9 The Atlas Bank and the Saudi-Pak Commercial Bank have decided to go for a merger after a formal approval by the State Bank.

Both the banks informed the shareholders that the board of directors of the banks have agreed to the merger.

The merger carries some interesting facts as both the banks failed to meet the minimum capital requirement (MCR) set by the State Bank, and both have been facing losses while the year 2008 was a serious dent for their balance sheets.

At the end of 2008, the Saudi-Pak Bank showed a total equity of Rs4.319 billion while Atlas had a total equity of Rs3.657 billion.

The State Bank which revised the requirement of MCR, had set Rs5 billion minimum capital requirement till December 2008. Now after merger, this requirement could be met through combined equities.

During 2008, banking sector`s profitability dropped by 21 per cent compared to the preceding year that suggested that hard times are there for banks.

Experts believe it would not be easy to earn profit, especially for small of medium size banks in the country.

This would be the first merger of the year and also an indication that existence of even medium-sized banks is difficult under the current banking scenario which has been receiving negative impacts from the collapse of giant banks in the developed countries.

“The boards of the Atlas Bank and the Saudi-Pak Commercial Bank have agreed for a potential merger of the two banks after the majority shareholders of the SPCB entered into an MoU with the sponsors of Atlas Bank for merger of Atlas into SPCB, subject to State Bank approval and other regularity approvals,” said the notification.

The swap ratio for the merger would be determined based on valuation by a mutually agreed firm of chartered accountants and on the results of the due diligence.

Atlas Bank began its journey back in the year 1990 when Atlas Group and the Bank of Tokyo-Mitsubishi Limited entered into a joint venture as Atlas Investment Bank Limited.

Later in 2002, the bank established a merger with the Atlas Lease Limited and acquired Dawood Bank Limited in December 2005 and renamed it as Atlas Bank Limited and merged Atlas Investment Bank into Atlas Bank in 2006.

Atlas Capital Markets (Private) Limited was also incorporated in 2006 and is currently a wholly owned subsidiary of the bank.

Atlas Bank, KASB Bank and KASB Capital in 2008 announced the merger of their respective operations to form a KASB-Atlas Bank.

However, despite announcement the deal could not materialise.

The Saudi-Pak Bank also went through many changes. On March 31, 2008, a consortium, comprising International Finance Corporation (a member of the World Bank Group), Bank Muscat, Nomura International and Sinthos Capital, acquired an 86.55 per cent stake in Saudi Pak Commercial Bank (SPCB) for around $213 million or $0.47 per share (PKR 29.3 equivalent per share).

The consortium, led by senior bankers Shaukat Tarin and Sadeq Sayeed, had plans to make SPCB a significant player in the local market.

This is also interesting that Shaukat Tarin who led the Consortium to acquire Saudi-Pak Bank, is now adviser to the Prime Minister on finance and the Governor of the State Bank Syed Salim Raza was one of the directors on the board of Atlas Bank in 2008.