KASB-BankIslami deal: Shareholders suffer loss of millions of rupees

KARACHI: Shareholders of the KASB Bank suffered millions of rupees losses with the deal of its merger with BankIslami with no guarantee made by the regulator, State Bank Pakistan (SBP), to pay back their money.

The state of shareholders having made investment in KASB is miserable because the value of the shares has become zero, whereas there is no hope of recovery of the amount later on.

In the last two days before the announcement of KASB Bank’s merger with BankIslami, the share trading in KASB increased to 50 million from the routine volume of 0.3-0.4 million as it was seen that some Chinese investors are pumping in money into KASB Bank, an investor, Muhammad Yaqoob said.

As the KASB Bank was sold at Rs 1,000, the value of shares became zero and millions of losses were suffered by equity traders, he added. There was no ratio set by the central bank in the amalgamation that could make a way for shareholders to retain minimum value of their investment.

The shareholders’ money will go into the pockets of Jehangir Siddiqui, having a handsome share in BankIslami ownership, he added.

The central bank imposed a moratorium on KASB Bank in November 2014 till May 2015 for six months, but trading was suspended at the stock exchange a couple of days ahead of the merger announcement, which sent shockwaves among equity traders.

If the State Bank of Pakistan (SBP) claims that it protects the money of the depositors as per mandate and to repay their money in case of any crisis at KASB Bank, it has also to pay the shareholders who suffered losses of million of rupees, said Yaseen Lakhani, Chairman of Karachi Stock Exchange’s Stock Brokers Association.

There were many amalgamations carried out in the past including MyBank, Arif Habib Bank and Atlas Bank, but it was done amicably with the protection of equity investors and depositors alike. Such a sudden decision of the central bank has caused a dent in the confidence of shareholders, he said. Around 17 percent of the KASB Bank equity share was being traded with nearly Rs 700-800 million worth.

Despite doubts and concerns, KASB Bank has been merged into BankIslami as Ministry of Finance approved the scheme of amalgamation suggested by the central bank, putting the depositors and shareholders interests at stake. The central bank has lifted the moratorium on the KASB Bank immediately that was imposed in November 2014 as it repeatedly justified its decision to protect 150,000 depositors of KASB Bank and their Rs 57 billion deposits.

In contrast, there has been no consent taken from the depositors whether they would like to be part of the conventional banking system or a totally different financing system of Sharia compliance. Now, with the amalgamation of the two banks, all branches of KASB Bank will be operated as the branches of BankIslami from now onwards and customers of the old bank are likely to face problems in withdrawing their deposits.

Besides, the jobs of hundreds of bankers are at risk as a majority of them are not trained in doing banking as per Sharia financing. This could cause retrenchment of the staff as a result of the amalgamation of KASB Bank with BankIslami.

Bankers said the central bank did not facilitate a weak bank but support an emerging bank to be further strengthened, which seems an injustice and inappropriate approach.

KASB Bank management has invested money on the licence fee of banking and operating branches. It made a brand through investment money on marketing and branding activities but none of this seems to have been considered by the central bank when deciding the merger.

Courtesy www.dailytimes.com.pk

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