Published December 29, 2011
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| Temasek may cut losses on troubled Pakistan venture NIB Bank, in which it owns 88.6%, has suffered huge losses despite cash injections By CONRAD TAN (SINGAPORE) Temasek Holdings is looking to sell its majority stake in troubled Pakistan lender NIB Bank, just months after it injected over $100 million into the bank.
<TBODY> </TBODY> The bank has suffered a cumulative net loss of some 17 billion Pakistan rupees (S$243 million at current exchange rates) since Temasek first invested in the bank in early 2005, according to BT's calculations. The Industrial and Commercial Bank of China has shown interest in buying Temasek's stake in NIB, Pakistan newspaper The Express Tribune reported on Tuesday, citing banking sources. 'We don't comment on market speculation,' a Temasek spokesman said in response to questions from BT. Temasek owns some 9.13 billion shares, or an 88.6 per cent stake, in NIB through its wholly owned, indirect subsidiary Bugis Investments (Mauritius), according to NIB's latest financial statement. Yesterday, NIB shares were trading at 1.49 rupees each, valuing Temasek's stake at 13.61 billion rupees, or about $194 million. That's far short of the estimated $560 million that Temasek has paid to accumulate the stake, BT's analysis of NIB's and Temasek's financial statements shows. Temasek bought a 25 per cent stake in NIB in February 2005, then quickly raised it to 73 per cent in July 2005. It paid a total of US$57 million to acquire that majority stake, its first direct investment in Pakistan, according to Temasek's 2005 annual report. NIB then embarked on a rapid expansion drive, growing from just 11 branches at the start of 2005 to 244 branches at the end of 2008, including the acquisition of local rival PICIC Commercial Bank in June 2007. That acquisition was financed by an 18.7 billion rupee rights issue; Temasek injected another 14 billion rupees or $200 million. NIB's vision, it said at the time, was to become one of the country's top five banks. But it soon ran into trouble. In October 2008, at the height of the global financial crisis, NIB announced a rights issue to raise 12 billion rupees in new capital. BT's calculations based on the bank's disclosures in its financial statements show that Temasek bought 99.9 per cent of the rights shares at their par value of 10 rupees each, injecting another $171 million into the bank and raising its stake to 74.1 per cent. Shortly after, NIB announced a record net loss of 7.47 billion rupees for 2008, due mainly to bad-loan charges. It returned to profit in 2009, but a year later was again suffering losses. Its net loss for the whole of 2010 was 10.1 billion rupees, its worst showing yet. In February this year, NIB again called on its shareholders to stump up more cash, this time by selling its shares at a steeply discounted price of just 1.37 rupees each, and said that it wouldn't pay a dividend for the 2010 financial year. BT calculations show that Temasek ended up buying 98 per cent of the rights shares, pumping another 8.41 billion rupees, or $120 million, into the bank. That raised its stake from 74.1 per cent to the current 88.6 per cent. Earlier this month, the Pakistan Today newspaper, citing sources close to NIB, reported that Temasek had forced NIB founding president and CEO Khawaja Iqbal Hassan to resign for failing to stem the bank's large losses, though he would remain as a board member. The bank said on Dec 18 that it had named director Syed Aamir Zahidi as interim president and CEO, effective Dec 17. [/FONT] |
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