LAHORE, June 28: The Securities and Exchange Commission of Pakistan (SECP) on Thursday approved the merger of the Crescent Standard Investment Bank Limited (CSIBL) with the Innovative Housing Finance Limited, a local subsidiary of the United Kingdom’s Innovative Global Business (IGB) Group.
With the finalisation of the merger, which has already taken effect, the CSIBL has been renamed as Innovative Investment Bank (IIB).
The new management has appointed Mahboob Husain as first chief executive officer of the IIB. It plans to inject an equity of Rs1 billion to revive the bank.
The negative equity of the defunct bank is stated be around Rs2.2 billion or about Rs13 per share.
The new entity will shortly be listed on the country’s capital markets, and the existing shareholders of the defunct CSIBL will be allotted one share of IIB against every 200 shares of the CSIBL held by them as approved by the regulator of the non-bank financial institutions.
Thus, around 405,000 shares of the new bank will be allotted to the shareholders of the defunct CSIBL once the new investment bank is listed on the stock market.
The IIB management has also committed to pay back deposits of Rs7 billion to individuals, trusts, charities and corporate depositors of the defunct CSIBL in instalments over a period of three to five years under a repayment plan approved by the SECP, according to Mr. Mahboob Husain.
The disbursement of the first instalment is expected to commence within 30 days.
The depositors will also earn profit on their deposits between five to eight per cent in different categories, which will be payable on a quarterly basis.
The regulator has also granted the IIB a special license for real estate development as real estate forms a major part of the balance-sheet of the defunct CSIBL. Investment banks are not allowed to get involved in property business.
“The IIB will develop products for long-term mortgage and real estate financing,” said Mr Husain.
IGB Group has a turnover of three billion sterling pounds and an employee base of around 600, currently operating in the UK, Europe, Dubai, China and Zambia, according to a handout.
The IIB is the group’s first venture in Pakistan.
The handout said the new management aims at increase the bank’s client base to include expatriate Pakistanis and also develop a number of quality services and products available over the next 24 months.
“This project will create 500 jobs throughout Pakistan,” it said.
It said the IGB has developed plans to utilise land acquired as part of the merger to operate affordable housing schemes in areas of the country where housing is scarce.
The group hopes that the project will lead to construction of approximately 300 affordable units in the first year of operations.
In addition, the group has started off-shoring its IT and back office operation to Pakistan, creating 400 jobs in the first year.
In an unprecedented move on Aug 30 last year, the SECP had appointed administrator for CSIBL, suspended its board of directors and restrained its then chief executive officer Anjum Saleem from functioning under Sections 282E and 282F of the Companies Ordinance, 1984. The action was taken by the regulator after months of exhaustive investigations into the bank’s affairs, which had revealed severe and deliberate violation of the legal requirements and serious financial irregularities, including but not limited to illegal maintenance of parallel accounts, concealment of bank’s assets, unauthorised massive funding of group owned companies, unlawful investments in real estate and stock market, etc.
The action, according to the SECP, was taken to protect the interests of depositors and stakeholders and to stem the fast eroding asset base of the CSIBL.
The regulators had alleged at that time that the bank’s resources were misused by the sponsors - the Crescent Group of Companies -- for the benefit of the group-owned companies and at one point in time its exposure to the group companies equaled Rs3.703 billion or 240 per cent of the bank’s equity.
A group owned company with a paid-up capital of Rs20 million only had made an off-balance sheet investment of Rs1.5 billion.
The SECP had said the bank’s resources to the tune of Rs100 million were used illegally to the personal advantage of the then CEO Anjum Saleem and his brother Altaf Saleem, a former federal minister in the previous military government and the incumbent head of the Earthquake Relief and Rehabilitation Authority (ERRA), for paying off their liabilities.
The IIB chief executive officer told reporters that around Rs800 million were outstanding against the Crescent Group of Companies.
In answer to a question, Mr Badr-Ud-Din Khan, the outgoing administrator of the defunct CSIBL, said it is for the SECP to take action for the recovery of the amount outstanding against the Crescent Group.