Sindh Bank Limited and Summit Bank have initiated talks for a possible merger, which, if happens, will be the second such big happening of 2017, sector officials mentioned on Thursday.
A senior banker, requesting secrecy said, “Due diligence exercise has started,”
“The proposed merger, however, depends on the financial and legal due diligence as well as approval from regulatory authorities and shareholders of both the banks.”
Currently the operations, competitive positions and prospects are being evaluated by officials of both the banks. However, Summit Bank hasn’t notified Pakistan Stock Exchange about the ongoing due conscientiousness. On the other hand, Sindh Bank is not a listed in the Stock Exchange.
The banker said, “The due diligence process usually takes four to six weeks to complete thereby the two lenders are expected to submit a proposal for merger, including transaction price, and the structure to the central bank next month,”
SBP (State Bank of Pakistan) accepted on 27th December, to initiate two banks to start due diligence per the laws, rules and regulations that are applicable. Per the sources, it is being said that SBP would choose according to valuation that which of the two banks will be the serving entity.
The source said, “However, there are chances that Summit would be merged into Sindh Bank given the latter’s strong balance sheet,”. Sindh Bank’s gross profit increased from Rs. 1.5 billion to Rs. 1.7 billion in the months of July – September in the consistent period of the previous year. The paid-up capital of the bank was Rs. 10 billion, equity of Rs. 16.402 at the end of last quarter of 2016.
Summit Bank, though, mentioned a loss after tax of Rs. 1.275 billion in the quarter of January – September of the previous year.
Being the second consolidation of this year per analysts, last month, MCB Bank and NIB Bank’s boards permitted merger of the two banks with swapping of share transaction. In addition, Shariah based lenders, Al Baraka and Burj Bank had also observed union previous year.
If the Summit and Sindh bank merge, they will have total assets of around Rs. 300 billion with 450 branches in the country. Both the banks are likely to benefit from each other, Summit from Sindh Bank’s financial synergy whereas Sindh Bank from Summit’s strong branching network and deposit clients of the Summit Bank.
Analyst said, “A small-tier Summit Bank is struggling with toughest capital requirements under the Basel III regulations,”
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