KARACHI, Sept 9: Crescent Investment Bank Limited (CresBank) has neither confirmed nor denied market rumours that it is in advanced talks for takeover of a foreign bank. Nessar Ahmed, president & CEO, has continued to respond that the bank would come up with a proper statement if and when there is something concrete to tell.

Meanwhile in his report for the half year ended June 30, 2002, issued last week, the CresBank president said just this much: “Efforts in respect of consolidation, which includes merger/joint venture with a commercial bank are proceeding in the right direction”.

CresBank was the first to appear on the investment banking scene way back in 1989. One of the major institutional players in the equities market, the bank’s fortunes have largely been tied to the ebb and flow of the stock market.

For the half year ended June 30, 2002, CresBank posted pre-tax profit of Rs215.2 million, which compared with profit of Rs449.8 million earned in the corresponding half of 2001. However, for the second quarter April-June 2002, the bank reported net loss of Rs153.4 million, compared to net profit of Rs178.7 million in the similar quarter of last year. The loss for the quarter to June 2002 stemmed mainly from loss of Rs118.1 million “on sale of investments”. In the comparable period last year, the bank had made gain on sale of investments amounting to Rs149.4 million. The first half of 2001 had been good for the bank and it was perhaps in the second half — mainly after September 11 — that CresBank was caught in the ‘badla crisis’. For all of 2001, the bank had incurred after tax loss of a huge Rs807 million.

The bank attributed the “recovery (in the half year to end-June 2002) mainly due to realization of capital gains on sale of shares and foreign currency denominated fixed income securities”. As for the loss of Rs118.1 million on “sale of investments” in the April-June 2002 period, directors explain: “After the remarkable turnaround in the first quarter, the KSE index closed at 1,770 points on June 28, 2002, lower by 98 points (5 per cent) over the position as on March 31, 2002.” Directors stated that the period was marred by terrorist attacks in Karachi and Indo-Pak tensions. To arrest the declines due to the resultant panic situation, the KSE management had to lower circuit breaker limits to 2.5 per cent or Rs0.50 whichever was the higher and also restrict ‘Badla’ financing rate to a maximum of 24 per cent per annum. “These events also dented CresBank’s profitability to some extent,” directors said.

Profit and loss account showed that for six months under review, the bank earned income from discount/return/profit on commercial papers, loans and advances, amounting to Rs153.4 million and gain on sale of investments contributed a hefty Rs304.1 million. Given that the bank incurred loss of Rs118 million on this account in the second quarter, the earnings in the first three months must have been fabulous to leave an overall net gain of huge Rs304.1 million. The major item on the expenditure side was the profit/return on deposits/borrowing and other charges which stood at Rs275.4 million. For the half year, the bank made a considerably higher operating profit of Rs232.8 million, up from Rs40.5 million in the similar half of 2001. But for the operating loss of Rs147.0 million suffered in the second quarter, the half term net results would have been splendid.

Like the bank’s profitability, the price of the 10-rupee share in CresBank has continued to experience sharp volatility. The share traded between the high and low of Rs10.60 and Rs3.85, between Jan and June 2002. The stock is now priced at Rs8.50. In 2000, the bank had disbursed cash dividend at 41 per cent, but skipped payout last year. With paid-up capital at Rs500.3 million, capital reserves at Rs457.0 million and accumulated losses amounting to Rs144.4 million, the break-up value of the share worked out at Rs16.26. Deficit on revaluation of securities stood at Rs114.7 million at end-June 2002 and Rs355.1 million at the same time last year. At the close of the half term under review, the bank carried Rs5.5 billion in total assets.