The State Bank of Pakistan (SBP) has approved changing Summit Bank’s name to Bank Makramah Limited (BML), the latter announced in a press release.
The name change will become effective after relevant regulatory approvals as well as approval by shareholders in an extraordinary general meeting. The move to change Summit Bank’s name to Bank Makramah Limited comes as it continues ahead with its plan to switch entirely to Islamic banking following its acquisition by United Arab Emirates-based investor Nasser Abdulla Hussain Lootah earlier this year.
“The name change from Summit Bank Limited to Bank Makramah Limited signifies the bank’s commitment to embracing Islamic finance principles and delivering innovative and ethical financial services to its valued customers,” the press release stated.
Summit’s past troubles
Summit has never been a very profitable bank. In fact, it posted a modest net profit after taxation only twice, in 2014 and 2015, in the past 10 years, that too a small one, Rs 217 and Rs 230 million respectively. It became the talk of the town in 2018 following a Federal Investigation Agency (FIA) investigation into alleged money laundering.
The situation was exacerbated when the bank refused to release its financials in 2018, prompting raised eyebrows. In 2019, the bank once again failed to release its financials and as a result of this non-compliance shifted to the defaulters segment of the Pakistan Stock Exchange (PSX).
Following the demotion at the stock exchange, the bank made a feeble attempt to correct course by releasing its 2018 financials in 2020, but for a third consecutive year failed to call an Annual General Meeting (AGM).
A full-blown money laundering investigation initiated by the FIA and the National Accountability Bureau (NAB) following a scandal involving political bigwigs such as Asif Ali Zardari and his sister Faryal Talpur was not the extent of its troubles. The bank was also facing constantly rising pressure from the SBP over its inability to fulfil regulatory requirements due to a deteriorating financial condition. In response, it very much appeared that Summit Bank had willfully buried its head in the sand and was trying to ride the tide of the scandal out. Then, at the end of 2021, the bank released three years worth of financial statements and the picture was not pretty.
After three years in the wilderness, it seemed Summit Bank was trying to edge its way back into the mainstream and make something of itself. While the financial statements were late, following all of these mandatory disclosures, the PSX moved it up from the defaulters segment to its “normal counter” – meaning the bank’s stocks were up for trading once again.
However, in May last year, Profit’s then editor and senior journalist Khurram Husain reported in an exclusive scoop that the government committed to the International Monetary Fund (IMF) that Summit and another bank would be sent into “resolution” by May 2023 if they do not complete the first stage of their recapitalisation plan by March of the same year.
Subsequently, Lootah officially acquired a 51 percent controlling stake in Summit Bank. Lootah’s acquisition became possible after the bank’s board of directors issued 3.8 billion new shares which he then subscribed to, injecting Rs 10 billion into Summit Bank.
Move to Islamic banking
Summit’s decision to convert to Islamic banking came in the wake of a growing trend in Pakistan. On April 28, 2022, the Federal Shariat Court announced a verdict in a long-pending case, declaring the prevailing interest-based banking system as against the Shariah and directed the government to facilitate all loans under an interest-free system. The court instructed the government to make laws within five years with regard to the implementation of Islamic banking within the country.
For Summit, it became clear that going the Islamic banking route was its only path to redemption — both perhaps to shed its former reputation and to fit in better with the demand for financial services in the country. On January 2, the bank announced its intentions.
On Jan 18, shareholders of Summit Bank Ltd passed a special resolution in an extraordinary general meeting to authorise the equity injection of Rs 10 billion from Lootah. He even went ahead and placed the promised equity with the bank as advance against the proposed issuance of shares.
In the latest press release, the bank said it was in the process of developing a comprehensive plan to transition into a full-fledged Islamic bank, which would involve a complete overhaul of its operations, introduction of Shariah-compliant financial solutions, and adherence to Islamic banking practices.