Talks have been arranged for Tuesday with MCB Bank which is one of the largest commercial banks in Pakistan with the majority shareholder of the NIB Bank.
Non-binding discussions as well as preliminary ones have been held through MCB with Fullerton Financial Holdings. They hold 88.4 pc shares in NIB through Bugis Investments in Mauritius. The investment arm for Singapore namely Temasek Holdings has 100 percent shareholdings in the same.
NIB which shall no more be an existing brand provided both parties reach this agreement shall receive their necessary approvals. The bank’s market capitalization by the end of Tuesday was Rs 24.5 billion though it has 10.3 billion outstanding shares with a stock price of Rs 2.38.
What exactly called for the merger has been unclear where the third tier bank has just Rs 17.1 billion assets whereas MCB is Pakistan’s 4th largest assets bank with Rs 137.8 billion assets and the country’s 3rd largest in profit with Rs 25.5 billion profits.
The reason could only maybe be the huge deferred tax asset of Rs 9.5 billion on NIB Bank’s books as reported by Alfalah Securities Deputy Head of Research Fahad Irfan.
There are more than 170 NIB Bank branches over the country with staff strength of 2,678 people. The profit in 2015 was Rs 2.6 billion whereas the loss in 2014 was Rs 507.7 million. NIB has also sold its asset management subsidy, PICIC Asset Mangement for Rs 4.1 billion to HBL Asset Management last month.
NIB Bank has though been high for NPL (Non Performing Loans) by outstanding advances. The NPL as well as gross ratios have been 3.6 and 20.9 percent which is higher than 85 percent of (ADR) advances to deposit ratios.
Irfan also says that 86 percent high NPL ratios are also risks for bank’s future growth earnings.
Zoya Ahmed who is a senior AKD Securities investment analyst these transactions shall help MCB grow and MCB shall become the 2nd largest bank of the country with 1,424 branches as deposits shall increase by 17 pc and reach up to Rs 830.5 billion.
The deferred tax asset of Rs 9.5 billion of NIB shall cover MCB’s tax rate from 35 pc to 11 pc in 2016 if utilized efficiently.
The news of the merger brought about positive vibes in the stocks as 75.4 million shares changed on Tuesday and NIB rose to 10.7 pc i.e Rs 2.38 per share in intraday closing.