The Board of Directors of Arif Habib Securities Limited (AHSL) on Wednesday decided to recommend to the general body to merge the AHSL with Arif Habib Rupali Bank Limited (AHRBL). AHRBL is a majority-owned subsidiary of AHSL.
The Company holds 89.11 percent of the total outstanding shares of AHRBL. The proposed merger shall, of course, be subject to the approval of the concerned regulatory authorities - the State Bank of Pakistan and the Securities & Exchange Commission of Pakistan.
Based on the half-yearly results for the period ended 31 December 2006, and assuming a simple merger model based on reported book values, the merged entity should end up with equity of over PK)R 13.25 billion. The proposed merger should also result in a tremendous consolidation of the capital base and the business prospects of the surviving entity ÑAHRBL.
Based on this computation, AHRBL should emerge as the 8th largest listed commercial bank in Pakistan in terms of total equity. In addition to the large capital injection, interests in a well-diversified pool of highly profitable enterprises and investments, the Bank would inherit controlling interests in large, highly successful companies effectively competing across a broad spectrum of the financial services industry - including asset management and securities brokerage.
The proposed merger also appears value-additive in that the expected earnings streams from these majority-owned, profitable companies should provide a high return on assets to AHRBL from the very outset - a significant success factor as the Bank continues its expansion program.
AHSL also announced its half yearly results for the period ended 31 December 2006 on 31 January 2007. The Company posted net profit after tax of PKR 2.067 billion for the half-year, which translates to EPS of Rs 20.67 on a fully diluted basis. AHSL appears well-positioned for sustained growth and profitability going forward.
The Company maintained robust growth in operating and pre-tax profits for the half-year, which respectively appreciated by 10 percent and 12 percent, period-on-period.
This growth was despite a decline in earnings for the second quarter ended 31 December 2006 on account of weaker stock market performance during the quarter. The half-yearly performance thus indicates the strength and sustainability of AHSL''s core earnings on the back of a quality, well-diversified, portfolio of earning assets.-PR