KARACHI: MCB Bank Ltd said on Tuesday it’s going to conduct due diligence of Telenor Microfinance Bank Ltd (TMBL) for a potential purchase of 55 per cent shareholding that the Telenor Group controls in the micro-lender.

TMBL is the second largest provider of micro-savings in Pakistan with a market share of 31pc at the end of June. MCB Bank Ltd is the second largest commercial bank in terms of the value of its shares on the national stock exchange.

The Telenor Group increased its shareholding in the micro-lender to 100pc in 2016. Two years later, it sold 45pc shareholding to Alipay (Hong Kong) Holding Ltd for $184.5 million. In other words, TMBL was worth $410m in 2018.

Speaking to Dawn, Pakistan-Kuwait Investment Company Head of Research Samiullah Tariq said the Telenor Group might consider selling its entire stake in TMBL as the microfinance bank took a beating because of Covid-19. Moreover, competition in the microfinance business is heating up, he added.

TMBL posted a net loss of Rs7.6 billion in the first nine months of 2021 versus a net loss of Rs7.9bn in the comparable period a year ago. Its accumulated losses amounted to Rs34.8bn at the end of September versus Rs27.2bn at the beginning of 2021.

Its latest half-yearly report said the bank’s shareholders injected equity amounting to Rs14bn or $86m in 2020 and 2021 to mitigate the impact of losses. “A further capitalisation plan has also been approved by the board of directors,” it added.

The accompanying auditors’ review report said the existence of material uncertainty may cast significant doubt about the bank’s ability to continue as a going concern.

Mr Tariq said TMBL was facing problems in its lending segment but the income originating from its money-transfer business was steady and growing. “That’s why I believe the Telenor Group expects the bank to fetch a good price,” he said.

The fee, commission and brokerage income, which includes income from branchless banking, amounted to over Rs5bn in the latest nine-month period, up 5.3pc from a year ago.

“I think the bank’s valuation will still be in the vicinity of $410m,” he said, noting that a strong money-transfer business will likely offset the negative impact of accumulated losses on the bank’s valuation.

JS Global Head of Research Amreen Soorani told Dawn that she, too, expects the bank’s valuation to stay at the same level. As for the possible reason for the sale of stake, she said the foreign sponsor had been reportedly looking for an exit ever since the fraud involving fake loans amounting to Rs514m surfaced a couple of years ago.

Published in Dawn, November 3rd, 2021