950820

Govt no to UBL

consultants'

guarantee proposal

RECORDER REPORT

ISLAMABAD: The Government has rejected the proposal from Credit Lyonais - the consultants for privatization of United Bank Limited - that the government provide a guarantee of Rs.10 billion to the private sector buyers in order to obtain a good price for placement of 26 percent shares of the bank, it is reliably learnt.

At a meeting held at the Privatization Commission last week, the Finance Secretary, Jawed Talat, categorically ruled it out and said that this would amount to injecting capital in the bank and if the government were in a position to do this, it would not be opting to privatise the institution.

Talat asked the State Bank of Pakistan, Pakistan Banking Council and the UBL management to draw up a new proposal with realistic terms so that the bank could be put on the auction block.

According to Credit Lyonais, the Capital Adequacy ratio of UBL was less than one percent. However, if the capital plus assets ratio was calculated, it was over 3 percent which was in accordance with SBP regulations.

Independent experts believe that if the government can guarantee to the bidders that UBL under a new management would be provided relaxation from requirements under Prudential Regulations, such as acceptance of realisable securities as coverage for overdue loans and the public sector advances portfolio is shifted from its books or covered by some kind of government paper like bonds, the bank could be sold at over Rs.40 per share on the basis of its 1993 balance sheet.

UBL despite being over staffed by about 8000 persons is still regarded as an attractive buy as it has a stronger presence as compared with other Pakistan banks in the Middle East region.

Prince Waleed, of Citibank fame, is reportedly eyeing to purchase the UBL equity in the bank's joint venture in Saudi Arabia.

People at the helm in UBL are also confident that groups could be formed at the local level for buyout on the MCB pattern and the bank placed in private hands by December this year. However, one thing appears to be imperative that foreign consultants and accounting firms need to be axed if UBL is to be privatised within this year as the due diligence exercize they plan to hold for an institution of the size of UBL would take more than six months.