HBL likely to acquire Silk Bank Consumer Banking Portfolio

April 8, 2021

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As per the notice to Pakistan Stock Exchange, Habib Bank Limited (HBL) has asked Silkbank Limited to provide its concurrence to start the due diligence of the Consumer Banking Portfolio of Silk Bank Limited for possible acquisition. The Consumer Banking Portfolio of Silk Bank comprises credit cards, running finance and personal instalment loans.

The Board of Directors of Silk Bank in its meeting has granted in-Principle approval for HBL due diligence of its Consumer portfolio.

HBL had roughly Rs. 165 billion of Loan Assets in its Consumer and SME segment at 2020 end. While the latest position for Silk Bank is not available, however, as per 2019 data, Silk Bank had Rs. 32 billion of Loan assets in its Consumer/SME segment. The acquisition will bring a significant push to the Consumer segment of HBL

Analysts believe that the sale of the Consumer banking segment of Silk Bank will come at a premium as Silk bank has a sizable presence in Credit Cards and Running Finance segment. The said acquisition is expected to contribute up to Rs. 10 billion of gross Interest Income per year for HBL.

Silk Bank is currently going through difficult times as the bank has accumulated Losses of Rs. 13.5 billion, while One-Third of its Loan portfolio has turned into Non-Performing Loans, the worst figure for any commercial bank in Pakistan. Further, the Low Capital base has aggravated the situation, resulting in restricted operations of the bank.

Previously, Fauji foundation had shown interest to acquire majority shareholding in Silk Bank. However, as per the latest development, Fauji Foundation will not be proceeding with the due diligence process of Silk bank Limited.