Sell-off programme: SME Bank delisted for lack of positive feedback from bidders, CCoP told

ISLAMABAD: The Privatisation Commission has informed the Cabinet Committee on Privatisation (CCoP) that positive feedback was not forthcoming from pre-qualified bidders with respect to the transaction of SME Bank and consequently, it was delisted from privatisation programme.

A meeting of the CCoP presided over by Finance Minister Ishaq Dar was informed in a summary by the Privatisation Commission (PC) that three investors – Pakistan Kuwait Investment Company (Private) and Pak Libya Holding Company (Private) Ltd as well as Veon Holding, BV (parent company of Pakistan Mobile Communications Ltd and Saudi Pak Industrial and Agricultural Investment Company Ltd – were prequalified by the PC Board on 2nd June 2020.

However, on 28 January 2021, Saudi Pak communicated that it was not interested, whereas, the consortium of Pak Kuwait and Pak Libya its response on 17 February 2021 had sought concessions for further engagement.

The PC in collaboration with the Finance Division and the State Bank of Pakistan (SBP) held series of meetings with them from March to August 2021 to address their observations with regard to MCR compliance (given that SME Bank has negative equity), SME Bank License as well as SPA provisions with reference to indemnities and warranties and Veon Holdings - Proposed Merger with MMBL.

An update on the SME Bank transaction was presented before the PC Board in its meeting held on 25 November 2021 where financial advisor (FA) made a detailed presentation highlighting the concerns of each of the prequalified bidders.

Privatisation programme: CCoP decides to delist SME Bank

Financial Adviser informed the PC Board that the request of two bidders for provision of deposit of Rs10 billion for a period of 10 years either by the government or the SBP was not agreeable being out of the scope of approved framework.

In addition, two incidents outside the scope of privatisation transaction – the FBR action against Mobilink on account of income tax for the tax-year 2018 and the SBP policy measure waiving inter-bank fund transfer (IBFT) charges during Covid period – led to Veon Holdings’ disengagement from the SME Bank privatisation.

Financial Advisers further informed that that despite all efforts and iterative interactions with the prequalified bidders, positive feedback was not forthcoming. The PC Board decided to place before the CCoP its recommendation to delist SME Bank from the Privatisation Programme to enable the Finance Division and the SBP to proceed further with alternate options.

The CCoP considered recommendations of the PC Board in its meeting held on December 31, 2021, which constituted a sub-committee under the chairmanship of finance minister for further deliberations on the matter.

The committee convened its meetings on March 8 and July 4, 2022 and deliberated upon the matter. Another meeting of the committee was held on 2nd December 2022, where it was told that the SME bank was incurring a loss of around Rs1 billion each year and maintaining the bank on ventilator was not a good option. It was directed to explore the possibility of merging it with NBP or any other bank.

The SBP on 22 November 2022 pointed out that due to continuously deteriorating financial condition; the SME Bank has sent a SOS call for urgent financial support from the federal government. The SBP requested the Finance Division to immediately arrange necessary funds to meet the instant liquidity needs of the bank to avoid default in payments to its depositors besides initiate the process of winding down at the earliest to avoid further accumulation of losses, and possible drag on exchequer.

Copyright Business Recorder, 2022