KARACHI: A foreign investor formally submitted on Friday his offer to acquire at least 51 per cent shareholding in Summit Bank Ltd, which is the second smallest of the 20 listed lenders in terms of the value of shares.

Nasser Abdulla Hussain Lootah, a businessman from the United Arab Emirates, will acquire the bank’s majority stake and management control by both subscribing to new shares as well as purchasing existing shares through a public offer at Rs2.51 apiece, a regulatory filing showed.

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.

Mr Lootah, who already owns 0.51 shares in the bank, signed a share subscription agreement last year under which Summit Bank will issue a total of 5.97 billion shares to both the acquirer and other minority shareholders. The minority shareholders will have the opportunity to subscribe to 896.4 million or 15pc of the newly issued shares while Mr Lootah will subscribe to the rest.

The subscription exercise at Rs2.51 a share will help the bank generate Rs15bn, which will be used for meeting its “operational requirements”.

In addition to the subscription of new shares, Mr Lootah will make a tender offer of Rs3.29bn to acquire at least 1.31bn shares from existing shareholders at Rs2.51 apiece.

Speaking to Dawn, a bank official said the proceeds of the two transactions will likely materialise between 60 and 80 days, resulting in a marked improvement in the bank’s capital adequacy.

Last year, Summit Bank incurred a net loss of Rs2.88bn, translating into accumulated losses of Rs38.77bn and negative equity of Rs14.4bn. The bank’s capital adequacy ratio (CAR) stood at negative 61.45pc against the minimum regulatory requirement of 11.5pc.

“These proceeds alone won’t be sufficient to fully resolve the CAR issue, although they’ll bring a lot of improvement,” he said. The bank plans to generate “lots of cash” through several initiatives, including the sale its pricey real estate assets, he added.

“We’ll rename it and convert it into a full-fledged Islamic bank. We’re going to take the bank forward in a big way,” he said.

Its share price decreased 0.85pc to Rs2.33 apiece on Friday.

Published in Dawn, March 19th, 2022