NIB Bank likely to acquire Global Securities Pakistan

KARACHI - NIB Bank is likely to acquire Global Securities Pakistan Limited, one of the leading corporate finance and stock brokerage entity, The Nation learnt.

The NIB Bank has applied for approval from the State Bank of Pakistan to acquire 100 per cent stake in the said company.

It may be noted here that the NIB Bank had already acquired PICIC a few months ago and as of January 2008, the paid-up capital of the bank increased to Rs. 28.4 billion, which is the second highest paid-up capital among all banks in Pakistan.

Meanwhile according to Annual Report of the bank 2007, the investment banking and advisory business of Global, which is responsible for more than 50% of all privatizations in Pakistan, will be divested and merged into the Corporate and Investment Banking Group of NIB, creating a new area of growth for the bank.

The bank is also set to merge PICIC Asset Management Company with National Fullerton Asset Management Company (NAFA), subject to shareholders and regulatory approvals. This proposed merger will create the largest asset management company in Pakistan.

After the merger, PICIC Insurance Limited, a listed general insurance company is also now 30% owned by NIB Bank.

The bank successfully merged with Pakistan Industrial Credit & Investment Corporation Ltd (PICIC) and PICIC Commercial Bank Ltd (PCBL) in December2007. This merger resulted in creating the seventh largest bank in the country in terms of distribution network (240 branches).

Just fewer than half a million customers of the merged bank will also provide considerable opportunities to cross-sell products. The stable and lower cost deposit base inherited from PCBL will allow NIB the room to grow advances without having to raise deposits at a high marginal cost.

The bank will also benefit from acquiring a large branch network at a relatively low operating cost base.

NIB annual report revealed that after acquisition, with Rs. 176.7 billion in total assets, Rs. 82.2 billion in advances and Rs. 116.7 billion in deposits as of December 31, 2007, the bank has grown its asset base more than twenty times in the first four years of its existence.

The merged income statement represents activity primarily related to NIB Bank and only includes the relevant portion of the income generated at PICIC and PCBL. Due to the substantial growth in its lending activities a improved spreads, NIB Bank doubled its net mark up earned to Rs. 2.00 billion in 2007 from Rs. 1.00 billion in 2006.

Non-mark up income a1so recorded a growth of Rs. 105 million or 21 % over 2006. It is important to note that unlike many other banks, the bank did not enter into any trading or long positions in the equity markets, and its non mark up income was generated solely from its core operating activities. Before provisions therefore, the bank recorded a 73% growth in total revenue from Rs. 1.5 billion in 2006 to Rs. 2.6 billion in 2007, demonstrating the robustness of its business models.

On a consolidated basis, NIB accrued earnings from its subsidiaries and associates and from its investments in the funds managed by these affiliates. Consequently, compared to merged results, the bank reported a lower pre and post tax loss of Rs. 246 million and Rs. 111 million respectively.

The bank recorded a 280% increase in the size of its balance sheet as a result of the merger with PICIC and PCBL and the indigenous growth of NIB Bank through 2007. Total assets increased from Rs. 46 billion to Rs. 177 billion between 2006 and 2007, of which loans and advances increased 165% from Rs. 31 billion to Rs. 82 billion while the industry's loans grew by 10%. Investments increased by 488% to Rs. 39 billion, the bulk of investments being fixed income instruments of the Government of Pakistan. Total deposits also grew aggressively by 281% from Rs. 31 billion to Rs. 117 billion again as a result of the merger and the inherent growth of NIB Bank's deposits, whereas the industry grew by 19%.