PACRA Downgrades Entity Rating of SME Bank Limited : AsiaNet-Pakistan

PACRA Downgrades Entity Rating of SME Bank Limited

June 12, 2018 | General Business News | Share:

Lahore, June 12, 2018 (PPI-OT):Government is in process of divesting 93.88 percent shareholding of the SME Bank. This is an outcome of Government of Pakistan’s endeavours to make SME Bank a vibrant institution by divesting GOP’s equity stake in bank along with the management control to a strategic investor. The Privatization commission has appointed Financial Advisory Consortium (FAC). A number of parties submitted their applications containing expression of interest and statement of qualifications. In response to the Privatisation commission, only five parties submitted the statement of qualification that had obtained documents at the initial stage.

Two parties are finalized for bidding which will commence under the auspices of the Privatisation Commission. Privatization Commission is planning to complete this transaction by June, 2018. Although due to political unrest the process would be delayed further. SBP has incentivised the transaction to provide support to the potential sponsors. The key highlight is the reduction in minimum paid up capital to PKR 6bln. This capital would be built in a staggered manner with initial injection of PKR 2bln and PKR 1bln each year for the next 4 years. The Bank will also be granted specialized Banking license by utilizing 60% to SME Sector and remaining 40% to the Commercial and Retail Sector.

On a standalone basis, SME Bank Limited has a stressed profile owing no announcement of budget by the Government. Due to continuous subdued performance of the bank, the equity base has been fully eroded (negative PKR 406mln at end-dec17). Deposits are pre-dominantly from government linked entities; repo borrowings have been made from financial institutions on the back of government securities – leaving loss coverage to the deposit holders. Given already eroded equity base, the bank’s operational expenditure is a continuing drag. Timely completion of privatization process is crucial for the Bank.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

Tags:

Category: General Business News