May Be Case Study For BS (Banking & Finance) Students

Bit be careful the be careful

See below

UPaisa & U Microfinance Bank Total Equity Wiped-Out:

State Bank of Pakistan has forced U Microfinance Bank to recognize a loan loss provision of PKR 8 billion
equivalent to $29 million! This wipes out all the profits shown by the bank during the tenure of the just
fired ceo Kabeer Naqvi!* More importantly this loss has wiped out the entire equity base of the bank,
infact the loss exceeds total equity by almost PKR 1 billion! The bank now has what is commonly called
“negative equity”. Let alone meeting minimum capital adequacy requirements this bank in Pakistan now
has “negative equity”. From the looks of it this bank owned by PTCL/Etisalat was essentially running a
ponzi scheme!*

History of Ceo Kabeer Naqvi:

The ceo Kabeer Naqvi had come from Tameer/Telenor Microfinance Bank (owner of easypaisa) where
he was CFO and Chief of Staff of ceo Nadeem Hussain (Sherry Rehman’s husband and founder of Raqami
Digital Bank backed by Meezan Bank/Pak-Kuwait Group). After that management left Telenor/Tameer
bank had discovered losses and severe equity erosion of atleast $250 million on account of fraudulent
lending practices of prior years. Ant Financial’s investment in 2018 was lost completely as a result of the
write-down. The losses due to frauds were reported in Telenor Group’s global financial report and
Norwegian newspapers. The losses were absorbed by Telenor and Ant Financial with new equity
injections to avoid disrupting the easypaisa business. However they have been looking to sell the lending
business concentrating solely on easypaisa by setting it up as a separate digital bank for which they have
now obtained a separate license.

What to do:

People would be well advised to immediately move money out of U Microfinance Bank accounts
including UPaisa wallets. U Microfinance Bank in case of full withdrawal requests will most probably be
short by atleast PKR 50-70 billion according to last publicly reported financial statements.

External Auditor was KPMG:

U Microfinance Bank had apparently been purposely severely understating loan losses and loan loss
provisions. It’s no surprise that auditors of the bank were KPMG. KPMG were also auditors of Abraaj and
have been involved in high profile accounting fraud cases in the recent past including that of Carillion UK
and multiple cases of misleading regulators around the globe. Serious Fraud Office UK has recently
imposed a record fine on KPMG UK for deficient audit practices.