Sindh Bank and Summit Bank are likely to sign a pact for merger during the second quarter of the current fiscal year after obtaining the official approval of the banking regulator. Sources indicate that the amalgamation deal of these two banks is currently in the final stage. Rumors also indicate that the combined entity after the merger could be named as Sindh Summit Bank.
It is reported that the banks have already finished the exercise of due diligence, mandatory for every bank, to prepare the amalgamation scheme of their operations according to the requirements set by the State Bank of Pakistan (SBP).
The SBP will likely issue the No Objection Certificate (NOC) to the banks in the coming few weeks. Moreover, shareholders’ approval for the merger will be obtained by Summit Bank in a separate general body meeting, which is a requirement for all the companies listed with Pakistan Stock Exchange (PSX). In addition, the combined entity is expected to have total assets worth approximately PKR 300 billion and 450 branches across the country.
Analysts believe that Summit Bank is more likely to benefit from Sindh Bank’s financial synergy, while Sindh Bank could take advantage of the widespread branch network and deposit clientele of Summit Bank.
“The due diligence process usually takes four to six weeks to complete thereby the two lenders are expected to submit a proposal for merger, including transaction price, and the structure to the central bank next month,” said the banker who requests anonymity.
It is important to note that Summit Bank posted a loss after tax of PKR 1.275 billion during the nine months (Jan– Sep) of the previous year. Moreover, if the deal goes ahead it would be the second consolidation in the country’s banking industry this year. Last month, the boards of NIB Bank and MCB Bank approved merger of the two banks through a share swap transaction. In addition, last year the banking industry of Pakistan also witnessed a merger between Burj Bank and Al Baraka Bank.