Prominent UAE national, investor, Naseer Abdulla Hussain Lootah has acquired a majority stake in troubled Pakistani lender Summit Bank Ltd., according to a regulatory filing submitted to the Pakistan Stock Exchange.
As part of the deal, 3.98 billion new ordinary shares of the bank were issued to Lootah at a discounted subscription price of Rs2.51 per share. With latest acquisition, Lootah now owns a 60% stake in the bank. “Consequently, to which the acquirer (Lootah) has become the majority shareholder of the bank,” the notice read.
The State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP), and Competition Commission of Pakistan (CCP) have already approved the deal.
Lootah aims to transform Summit Bank, one of the smallest commercial lenders in terms of net assets, into a full-fledged Shariah-compliant institution, Summit Bank’s President Jawad Majid Khan said in a press statement.
“The bank’s revival involved more than just new equity injection and Islamic banking,” said Khan.
The lender also plans to restructure its operations, digitalize its processes and rebrand itself before starting a fresh start with new identity.
Lootah, said he had a vision for the bank to transform it into a full-fledged Islamic bank, providing exceptional services, innovative products, and a commitment to the principles of Islamic finance.
The new investor is reportedly working with legal consultants Haidermota and Co. and AF Ferguson, a member company of PricewaterhouseCoopers, to develop a medium- and long-term strategic and restructuring plan for Summit Bank.
Shares surge
Following the deal, Summit Bank’s share price surged 16.67% to close at almost a-month high at Rs2.17 with a volume of 1.28 million shares listed at the Pakistan Stock Exchange.
The acquisition comes at a crucial time as Pakistan experiences a catastrophic economic crisis. At the end 2022, the bank had significantly high levels of bad loans, paid-up capital, and capital adequacy ratio (CAR). The bank’s gross non-performing loan (NPL) ratio as of December 31, 2022, stood at 65.78%, compared to 61.89% at the end of 2021. Its paid-up capital (net of losses) was negative (-) Rs21.801 billion, and the CAR was negative (-) 79.55%, according to the bank’s 2022 annual report. The bank’s net loss widened year over year to Rs3.167 billion at the end of 2022 from a loss of Rs2.887 billion a year ago.
However, it’s anticipated that the Rs10 billion capital injection by the UAE investor will help the troubled bank improve these dismal figures.
The renewed commitment to its clients and principles is expected to be a fundamental aspect of the bank’s success, said Khan adding that “The bank will also benefit from the investor’s relationships in the Middle Eastern banking industry.”