In the interest of sponsors, stakeholders, shareholders and public at large, the Bank of Punjab wishes to clarify the news item, conceived from the press conference of Chairman Senate’s Standing Committee on Finance and Privatisation Saleem Mandviwala, circulating in the social, print and electronic media.
The Bank of Punjab was established in the year 1989 with a majority shareholding of the government of Punjab. Owing to imprudent lending decisions of the previous management (2004-2008), in the year 2008, the reputation of the bank and the financial position suffered badly.
Being the first priority of the bank’s new management, recovery of inherited non-performing loans have always remained the cornerstone of the strategy. Consequent upon vigorous follow-up, the bank has successfully achieved recovery/restructuring/regularisation of impaired relationships of over Rs 50 billion, which itself is a remarkable feat in the banking history.
The Bank of Punjab is a scheduled commercial bank and operates in line with the prevalent regulatory requirements under the supervision of regulatory bodies. The decision of issuance of 70pc Right Shares at a price of Rs 12/- each has been taken purely on the basis of the bank’s business requirements and strategies. The value of the bank’s net assets per share was Rs 13.41 as on December 31, 2016, and as per market practice, normally, the price of Right Share has not been determined on the basis the highest price at a certain date.
It is also clarified that the Right Issue would not affect the existing percentage of shareholdings of the government of Punjab as these Right Shares shall be issued to all the existing shareholders proportionately in accordance with their current shareholding. Accordingly, question of increase in percentage shareholding of any specific shareholder does not arise.
The movement in the bank’s share price in the stock market primarily depends on market dynamics, investors’ sentiments and objectives and trading activities within the applicable rules and regulations of the Pakistan Stock Exchange. Accordingly, the bank’s management and board of directors have no influence over the change in the bank’s share price.
A brief rationale of 70pc Right Issue is clarified hereunder:
In order to support the capital structure of the bank, the government of Punjab, being the majority shareholder, deposited a share deposit worth Rs 10 billion and Rs 7 billion in years 2009 and 2011, respectively under arrangements agreed with the State Bank of Pakistan. The bank has already issued right shares, in 2 phases of Rs 5 billion each in years 2013 and 2014 against Rs 10 billion and currently the bank holds Rs 7 billion as share deposit money. Now, in order to convert the said balance amount of share deposit money and to achieve the following objectives, an issue of 70pc right shares for Rs 12 per share has been approved by the board of directors of the bank:
- Support the capital structure of the bank
- Compliance with BASEL-III Capital Requirement
- Meet the enhanced capital requirement in line with business expansion plan
- Retirement of Letters of Comfort (LOCs) issued by government of Punjab
The subject right issue is expected to yield following benefits for the bank:
- Strong equity base would lead to a better credit rating for the bank.
- The balance sheet will get strengthened, thereby providing additional comfort to the financial institutions and other stakeholders.
- Additional equity will enable the bank to explore permissible business avenues for ultimate increase in earnings, which shall result in better returns to the shareholders.
- The bank will be able to expand its branch network.
The bank understands that facts and explanations narrated above would suffice to clarify the bank’s position and also help in better understanding the rationale behind the announcement of Right Shares. A responsive and professional approach from all concerned quarters is expected towards a business decision taken for the betterment of the bank which is being operated entirely in a professional and compliant manner.
