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Report-Picic & Nib
Report-Picic & Nib
Report-Picic & Nib
BANKING
Merger of PICIC with NIB Page 1
Team Members:
Topic:
This report relates to the legal merger of PICIC Commercial Bank and NIB Bank, following the
acquisition of Picic by NIB on June 28, 2007. The three institutions were merged on December
31, 2007.
NIB Bank acquired 63.36 per cent of the outstanding shares of Pakistan Industrial Credit &
Investment Corporation Ltd. (PICIC) at Rs.78/- per share.
The total transaction size is thus valued at Rs20.5 billion (US$ 342 million) 56 per cent of the
shares have been acquired from certain shareholders, and the remaining 7.36 per cent from a
tender offer to the general public.
This merger has resulted in NIB Bank becoming the seventh largest bank in the country in terms
of distribution network, now it has 170+ branches and 160 ATMs.
Total assets Rs 193.56 billion, NIB is the second most highly capitalized bank in the country with
paid up capital exceeding Rs 103 billion.
NIB organized itself around two specific principles: first, NIB will be a customer-centric
organization, which means that in whatever it does, the customer will always come first; and
second, there will be a strong focus on efficiency, which means that whatever NIB does, it will
do in the shortest possible time and at the lowest possible cost.
After the merger, the combined entities emerged as the leading asset management company in
the private sector, and provided a stable dividend stream to the bank.
NIB bank showed positive ratios in first 3 year while the bank profitability decreased in next 2
years and suffered from huge losses because of huge provisions against the obligations of PICIC.
Expenses were also increased in year 2007 and 2008 as well as net assets. An0ther reason of
facing losses in 2007 and 2008 is recession which affects the economy.
FUNCTIONS / SERVICES:
Services
Commercial Financing
Home Financing
Car Financing
industrial financing
Tele-banking
Mobile Banking
Motorcycle Financing
Islamic Banking
Deposit & Saving Products
Internet banking
As technology advanced, PICIC Commercial Bank was set to use it and make the best of it. They
introduced for its customers, Online Banking solutions. With that customers could access their
accounts for deposits, withdrawals or inquiries from any branch nationwide.
The Bank’s resolve to provide world-class financial products and services to the banking
population of Pakistan is driven by its key business units including Retail Banking, Commercial
Banking, Corporate and Investment Banking and Treasury Services.
The NIB Bank Limited Nordic Investment Bank (formerly NDLC-IFIC Bank Limited) was
incorporated in March 2003 as a publicly listed company. In October 2003, all assets and
liabilities and all rights and obligations of the former National Development Leasing Corporation
("NDLC") and Pakistan operations of IFIC Bangladesh were amalgamated with and into NIB
Bank. In April, 2004 the Pakistan operations of Credit Agricole Indosuez (the Global French
bank) were also amalgamated with and into NIB Bank.
In 2007 NIB Bank acquired the assets Pakistan Industrial Credit and Investment Corporation
(PICIC).
In June 2005, “Temasek Holdings of Singapore through Bugis Investments” (Mauritius) Pte
Limited acquired over 70 percent shares in the capital of NIB Bank.
NIB Bank is headquartered at the PNSC Building in Karachi, Pakistan. Six floors of this iconic
building serve as the nerve centre of the Bank’s footprint in Pakistan.
Services
1) Retail Banking
a) Bank Accounts
b) Borrow
c) Protect
d) Home remittance
e) Treasury & capital market
2) Commercial Banking
a) Trade financing
b) Financing
c) SME product financing
3) Corporate Banking
a) Client Coverage
b) Investment Banking
c) Financial Institutions
d) Cash Management
e) Trade
f) Treasury and capital markets
4) Exclusive Banking
a) Client experience
b) Client engagement
c) Client Solutions
The Market Treasury Bills and Pakistan Investment Bonds are held by the State Bank of Pakistan
which is eligible for rediscounting. The market treasury bills mature within 3 to 12 months
yielding 8% to 9% markup while the Pakistan
Investment Bonds matures in 7 to 8 years
carrying 8% of markup per annum.
DEPOSITS
1) DEMAND DEPOSITS
These deposits are further classified to;
a) Current deposits
b) Saving deposits
2. TIME DEPOSITS
These deposits are further classified to;
a) Notice term deposits
b) Fixed term deposits
RETURN ON ASSETS:
Return on Assets (ROA) = Profit after
Taxation / Average Total assets x 100
ROA is a measure of a
company's profitability, equal
to a fiscal year's earnings
divided by its total assets,
expressed as a percentage. This is
an important ratio for Companies
deciding whether or not to initiate a new
project. The basis of this ratio is that if a
company is going to start a project they
MARKET RATIO:
Market Value Ratios relate an observable market value, the stock price, to book values
obtained from the firm's financial statements.
Earnings per Share= EPS: Earning per Share -
Profit after Taxation/ Number of shares
The portion of a company's profit
allocated to each outstanding share of
common stock. Earnings per share serve as an
indicator of a company's profitability.
Earnings p e r s h a r e a r e g e n e r a l l y
considered to be the single most
i m p o r t a n t v a r i a b l e i n determining a
share's price. It is also a major component used
to calculate the price-to-earnings valuation ratio.
Introduction
Mergers and acquisitions, which are poorly executed or are not in line with the code of
corporate governance, pose a threat to the banking system in general and to the participating
institutions in particular. This report gives an overview of the merger of NIB and PICIC, which
followed in letter and spirit all the regulations and code of conduct of the Securities and
Exchange Commission of Pakistan (SECP) and is indeed a glaring example of compliance in
corporate governance.
Discussion
NIB started as NDLC-IFIC Bank which was incorporated in March 2003 as a public limited
company. NIB started operation in October 2003 with a paid-up capital of Rs. 1.2 bn (PKR) with
amalgamation of National Development Leasing Corporation (NDLC) and of IFIC's Pakistan
operations and their assets and liabilities, and subsequently those of Credit Agricole Indosuez
Pakistan in April 2004. The Pakistan Industrial Credit and Investment Corporation (PICIC)
acquired the Gulf Commercial Bank Limited in early 2001. The bank was renamed as PICIC
Commercial Bank Limited. The Board of Directors of PICIC has been altered to reflect the
majority ownership and control by NIB Bank.
NIB's vision was to rank amongst the top five banks in Pakistan. Therefore, it acquired majority
shares of PICIC on June 28, 2007, through the acquisition of PICIC, NIB has also gained control of
PICIC Commercial Bank, PICIC Asset Management Company, PICIC Insurance Ltd., and PICIC
Exchange Company, allowing NIB to position itself as a dominant player in the financial sector
of Pakistan, covering the fields of commercial, retail, consumer, corporate and investment
banking asset management and insurance. Post-merger NIB's total assets increased to Rs. 176.6
bn (PKR) as of December 31 2007, further increasing to Rs. 180 bn (PKR) as of Sep 30, 2008.
This acquisition is the largest foreign currency generating transaction in Pakistan’s banking
sector after Habib Bank, as it will generate close to US$250 million inflow into Pakistan from
Singapore. The rights issue of 555 per cent at par was announced earlier and has been
exceedingly well received by the market with the NIB stock price showing more than 400 per
cent gain in the last few weeks. The sub debt issue has also received full subscription and was
oversubscribed by 25 per cent.
Upon merger, the bank is expected to have total assets close to Rs180 billion and total
employees of over 4400.
NIB was created in October 2003 and has been one of the fastest growing banks since. It has
recorded a growth in total assets of 543 per cent to Rs56 billion and a growth in deposits of 849
per cent to Rs35 billion. The total number of people employed has grown from 249 to over
2000 in a short period of three and a half years.
Its present paid-up capital of Rs. 40.4 bn (PKR) is the highest amongst banks in Pakistan.
Temasek Holding remains the largest single shareholder with approximately 74% shares.
The process for the proposed merger of National Fullerton Asset Management Company
(NAFA) (27% owned associate) with PICIC Asset Management Company Limited (PICIC AMC)-a
whollyowned subsidiary-was handled very strategically. To realize its aggressive growth
objectives, the NIB developed a segmentation strategy through which it would offer a unique
banking experience to customers in each of its corporate, commercial and consumer business
segments. For this purpose, NIB organized itself around two specific principles: first, NIB will be
a customer-centric organization, which means that in whatever it does, the customer will
always come first; and second, there will be a strong focus on efficiency, which means that
whatever NIB does, it will do in the shortest possible time and at the lowest possible cost.
Post-Merger Strategy
The acquisition of a majority stake and management control of PICIC and PCBL by NIB in June
2007 helped it in progressing towards the integration process, of both staff and operating
platform, on a fast track basis. Meanwhile, NIB continued its assertive growth in advances and
deposits on a standalone basis during 2007. While the fund and fee-based income registered a
healthy increase, the high provisioning expense due to the change in regulatory provisioning
criteria resulted in a net loss during the year.
After the merger, the combined entities emerged as the leading asset management company in
the private sector, and provided a stable dividend stream to the bank.
The NIB bank in the year 2004, 2005 and 2006 is showing positive ratios while
the bank profitability decreased and even it suffered huge losses due to the acquisition of PICIC
and PCBL during the years 2007 and 2008. This is because of huge provisions a g a i n s t t h e
obligations of PICIC and PCBL. These provisions were made by the proper
notice from the State Bank of Pakistan as this was mandatory for the
N I B bank. The NIB bank although made a profit of 2 billion during the years 2007
and2008 but it was veiled by the huge provision. NIB bank made for about 9 billion
of provisions in 2008. Expenses were also increased during these two years and the
earnings were not enough to cover these expenses. Similarly the total
a s s e t s a l s o increased as NIB bank acquired the prescribed banks so there was a huge
problem of managing these assets. Second reason but an indirect reason for the losses
in 2007 and 2008 is there recession, which affected almost all the world’s economic
systems. Thus all the banks in Pakistan as well as NIB bank were affected by this economic
crisis. NIB bank’s managers should properly manage assets by understanding
the basic principals of management and by implementing them properly. They should use the
resources optimally. They should also erythematic such a marketing campaign that promotes
the bank and create value of the bank in the minds of its customers.
REFRENCES:
http://nibpk.com/about-us/#!/about-us/?page_id=4
https://www.questia.com/library/journal/1P3-3162857141/nib-picic-merger-corporate-governance-
compliance
https://www.thenews.com.pk/archive/print/61837-nib-bank-acquires-63pc-stake-in-picic
http://fp.brecorder.com/2006/12/20061207505027/