Punjab Governor Lieutenant General Khalid Maqbool (Retd) has issued an ordinance, allowing sale of 51 percent shares of Bank of Punjab to a strategic investor. Under Section 7 of the Bank of Punjab Act, the provincial government had to maintain at least 51 percent equity in the bank.
This particular section now stands expunged with a proviso that funds of sale of the bank cannot be frittered away and can only be utilised for productive programmes. As such, they can form part of the provincial PSDP and not be utilised for administrative expenditures.
With a network of 272 branches, Bank of Punjab has a balance-sheet size of Rs 240 billion. With deposits touching Rs 200 billion and advances Rs 130 billion, its share closed at Rs 96.70 per share on Friday last.
Local banks in 2007-08 have been sold at around five times their break-up value. Bank of Punjab break-up value stands at between Rs 40 and 45 per share. As such, Punjab government should be able to fetch over Rs 45 billion from the sale transaction to a strategic investor. Both the federal government and the State Bank of Pakistan have encouraged and backed the privatisation of the provincial bank in order to enable it compete with other private banks more effectively.