KARACHI, Feb 25: Khadim Ali Shah Bukhari & Company Limited (KASB) proposes to merge with Platinum Commercial Bank Limited, which would be the first merger of a stock brokerage firm with a commercial bank in Pakistan.

The board of directors of KASB and Platinum Commercial Bank would meet separately on Wednesday, February 26, to “discuss, consider and approve the scheme of arrangement for reconstruction of the KASB by separating its securities segment and transferring the same into ‘KASB Securities (Pvt) Limited’ and scheme of arrangement for amalgamation of the KASB — other than its securities arm — with Platinum Commercial Bank Limited”. The board would propose to file a petition before the High Court for obtaining orders on both the schemes of arrangements.

The KASB had acquired the controlling stake in Platinum Commercial Bank Limited in October last year, and effective February 21, this year, the State Bank had granted notification of the change of name of the bank to “KASB Bank Limited”.

Nasir Ali Shah Bukhari, President of the Bank, told Dawn that under the proposed arrangement, the group’s stock brokerage franchise would be vested into a separate entity that would operate as ‘KASB Securities (Pvt) Limited’. He said the SBP had granted permission in principle to the merger of KASB & Company Ltd with Platinum Commercial Bank Limited. The arrangement would, of course, have to pass through the mandatory process of sanction of the High Court, nod from the corporate regulators and the approval of the shareholders. An interesting matter for the shareholders in both the KASB and Platinum Commercial Bank would be the swap ratio, which Nasir Bukhari, thought was a little premature to talk about.

After the completion of merger, Nasir Bukhari said the bank would focus on trade finance and capital markets. He said that apart from the range of consumer and commercial banking products, the Bank would be able to offer services of corporate banking and capital market products, due to the 40 years of experience of the KASB in the field. “We might be better placed to take the initiative in offering ‘margin financing’ for stocks, which the regulators have decided to substitute for ‘badla’ business,” Nasir Bukhari observed. The KASB & Company Ltd was the first to convert from sole proprietorship to corporate brokerage firm at the Karachi Stock Exchange in 1991. Of the 200 stock brokers, number of corporate members has since risen to 92, out of which 9 are public listed companies.

After full provisioning, the Platinum Commercial Bank Limited was carrying accumulated losses of Rs151 million on its balance sheet at December 31, 2002. But the Bank’s president stated that the new owners following the restructuring, had been able to turn the bank around. “The bank has made net profit of Rs32 million in January this year and Rs12 million in February,” he said.

Nasir Bukhari said the Bank held Rs3 billion in deposits and Rs1 billion in advances. Directors had injected interest- free cash subordinated loan of Rs250 million, which if swapped from loan to equity, would go to raise the total equity of the bank to Rs1.4 billion, Nasir Bukhari said. He stated that the Bank had invested Rs700 million in government securities, which were producing a yield of 15 per cent.

When the reconstruction and merger is completed, the KASB group would be in leasing (KASB Leasing Limited); commercial banking (KASB Bank Limited) and stock brokerage (KASB Securities (Pvt) Limited.