KARACHI: Askari Leasing on Tuesday expressed its intentions to merge with sister concern Askari Bank, which in turn wants to amalgamate with Mybank, in what experts say is a survival bid by smaller banks to consolidate their businesses.
In two separate notifications issued to Karachi Stock Exchange, Askari Leasing and Askari Bank announced that the decisions were taken by their respective board of directors earlier in the day.
Askari Bank has yet to seek approval of State Bank of Pakistan (SBP) before it starts due diligence of the books of Mybank, the notification said.
The merger is an attempt by the two banks to raise their capital to a level sufficient enough to meet SBP’s minimum capital requirement (MCR).
According to accounts for first Jan-Mar 2009 quarter, both banks have met the MCR of Rs5 billion for 2008 but they would have to raise it by a further Rs1 billion by this year’s end.
“For smaller banks, there is an issue of survival with rising non-performing loans and slowing economy,” said Khurram Shahzad, a research analyst at Investcap. “We will see more mergers in near future.”
Atlas Bank and Silkbank are already in negotiations over a possible merger. These two banks have failed to meet the MCR for 2009.
The central bank has warned against slowdown in deposit growth. Smaller banks with limited branch network face challenge of mobilizing deposits and mergers to form larger entities seems to be a natural outcome.
Now banks are required to have MCR of Rs6bn by end 2009 and then they have to increase it by Rs1bn each year till 2013.