Lawai consortium acquires Mybank

08 Nov 2008

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KARACHI, Nov 7 The management of Mybank has signed an agreement to sell its entire shares to the Hussain Lawai Consortium and a memorandum of understanding (MoU) has been signed to get a formal approval from the regulator.

The Lawai Consortium is emerging as a new financial group in Pakistan which is making efforts to acquire several banks at a time when banks are facing tough time, especially small banks and their share prices have gone down to a lowest ebb.

The same consortium signed an MoU last month with the Arif Habib Securities Limited (AHSL) to invest Rs4.5 billion to acquire up to 50 per cent shares of the Arif Habib Bank Limited (AHBL).
The Mybank management announced on Friday that it was informed by the sponsor shareholders, Iqbal Alimohammad and family, that they have been approached by Hussain Lawai, head of the Hussain Lawai Consortium, expressing their interest in majority shareholding of Mybank Limited by way of purchase of total shareholding from the existing sponsor shareholders.

The management said that the MoU had been signed by the two parties to complete the procedure for finalisation of the deal.

Industry sources said that the amount involved in the deal was about Rs5.3 billion, but no announcement was made about the price of shares being sold.

Mybank, incorporated in 1992, operates with a network of 76 branches all over Pakistan. Paid-up capital of the bank is Rs4.243 billion, equity Rs5.148 billion and total assets Rs41.344 billion.
The recent global financial crisis, which eroded supremacy of largest banks, impacted Pakistan, also making them vulnerable to serious liquidity crunch. So far no small bank in Pakistan has shown weakness, but their problem is mounting.

These banks are overloaded with State Bank's condition to increase their minimum capital requirement (MCR) up to $300 million (Rs24 billion) in the next five years.

The State Bank has been supporting banks by frequently injecting liquidity, along with reduction in cash reserve requirement, which provided a breathing space for banks.

Bankers believe that a number of small banks could sell their majority shares, but buyers are not available.

They said it was right time for purchasing banks as prices are at the lowest level.
“The Lawai Consortium took a right decision to acquire Pakistani banks and time was extremely good in favour of the consortium,” said a senior banker.

He said just before the collapse of large banks in the US and Europe, Pakistani banks were most attractive for foreign banks and at least four banks were acquired at the best prices.

Banks have been earning record profits for years before the meltdown started last year.
During the first nine months of the current calendar year, banks showed slightly less profits than nine months of last year, but small banks may not get their shares as liquidity problem has badly hit their performance.

Some analysts believe that most of small banks, which are about 12 in number, are bound to merge or acquired by other strong banks.