UBL to establish exchange company, sell UK subsidiary to Bestway
Group
United Bank Limited (UBL), one of Pakistan's largest banks,
announced on Tuesday that its board had granted approval to establish a
wholly-owned exchange company and sell its 55 percent stake in its UK
subsidiary to the Bestway Group.
In a filing to the Pakistan Stock Exchange, the country's
third-largest bank stated, "The board of directors has approved the
establishment of an exchange company with Rs1 billion as initial paid-up
capital, as a fully owned subsidiary of UBL subject to the State Bank of
Pakistan (SBP) clearance and other regulatory compliances."
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This move by the bank is expected to enhance transparency and
competitiveness in the foreign exchange sector while meeting the legitimate
demands of the public for foreign currency. Several banks in Pakistan are
currently in the process of establishing exchange firms, with Habib Bank
Limited and the National Bank of Pakistan already having done so, and UBL
preparing to follow suit.
Fahad Rauf, the head of research at Ismail Iqbal Securities,
commented, "Exchange companies operated by banks will improve the market
efficiency and depth. It is a step in the right direction in my opinion."
UBL's decision aligns with recent measures announced by the SBP,
encouraging banks to create wholly-owned exchange enterprises to meet the
legitimate demands of the general public for foreign currency.
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Concerns about operational structure and compliance levels in
category "B" exchange companies have occasionally been raised by
experts. Topline Securities noted, "The SBP has now advised both category
‘B’ firms and franchisees to either merge with established full-fledged
entities or sell their businesses to stronger counterparts. Failing to comply
with this directive within the stipulated three-month window will result in the
automatic cancellation of licenses for standalone category ‘B’ firms."
Furthermore, the SBP has instructed exchange companies to
increase their paid-up capital to a minimum of Rs500 million (excluding losses)
by December 31, 2023, up from the current minimum requirement of Rs200 million.
In a separate development, UBL announced the sale of its 55
percent stake in United National Bank Limited (UNBL UK) to the Bestway Group.
UNBL UK contributed to UBL's consolidated earnings per share (EPS) with Rs0.57
for the first half of 2023 and an EPS of Rs0.48 for the full year 2022.
UNBL UK is a banking institution incorporated in the United
Kingdom, formed in 2001 from the merger of the UK branches of United Bank
Limited and the National Bank of Pakistan. UNBL UK provides retail banking,
wholesale banking, treasury services, and trade finance facilities.
Upon the completion of this deal, it is expected to have a
positive impact of 200 basis points on UBL's consolidated Capital Adequacy
Ratio (CAR), aligning it closer to the levels of the unconsolidated CAR.
Source: The News