Tuesday, Nov 28, 2006
(This article was originally published Monday.)
By Sarmad Khan
Of DOW JONES NEWSWIRES
DUBAI (Zawya Dow Jones)--Pakistan's central bank is considering applications from two banks to begin Islamic banking operations in the country, the central bank's governor said Sunday.
Shamshad Akhtar, governor of the State Bank of Pakistan, didn't name the banks that have sought the licenses.
Currently, four Islamic banks - Meezan Bank, Al Braka Bank Pakistan, Bank Islamia Pakistan and Dubai Islamic Bank - account for 2.3% of Pakistan's total banking industry, Akhtar told Zawya Dow Jones on the sidelines of Hawkamah Corporate Governance in the Middle East and North Africa Conference in Dubai.
"Islamic banking is still scratching at the surface, for the simple reason that Pakistan started late on this concept," Akhtar said. However, Islamic banking is picking up rapidly in South Asian country, she said.
Akhtar said Pakistan is also encouraging diversification in ownership of banks. Standard Chartered Bank's recent acquisition of Union Bank is an example, she said.
"ABN Amro Bank is also contemplating acquisition of a bank in Pakistan," Akhtar said, without specifying which bank ABN AMRO is targeting.
"We know ABN Amro has taken an in-principle decision, but it's hard to put a timeline as to when the deal between the two parties will be finalized."
"It could be first quarter of next year or later than that. We don't know yet."
A person familiar with the situation said ABN Amro is in talks with Prime Bank (PRCBL.KA) for acquiring a majority stake.
"We don't know what the stake will be, but it's expected the deal will be concluded within couple of months," Ahmed Nabil, head of operations at Pakistan-based Invest & Finance Securities Ltd., told Zawya Dow Jones.
He said the shares of the Karachi Stock Exchange-listed Prime Bank have moved up from 23 Pakistani rupee to PKR53 on acquisition rumors.
"There is also talk of ABN Amro acquiring a stake in Pakistan Industrial Credit & Investment Corp. (PICL.KA)," said Nabil.
He said U.K.-based Barclays Bank is also reportedly interested in PICIC.
Privatization and inflation
The central bank governor said 80% of the banks in Pakistan have been privatized, and the government is encouraging investment from different regions.
"The deregulation process is complete and there is no political interference in the banking operations," Akhtar said.
She said ownership in Pakistan's banking sector is already diverse. United Bank Ltd. is owned by Best Way Group and Abu Dhabi Group, while there is a major Singaporean representation in National Investment Bank, Akhtar said, adding that further mergers and acquisitions are on the cards.
Asked to comment on the flight of capital from Pakistan, she said the central bank has no firewalls on capital transfer.
"We believe there is no major flight of capital from Pakistan. People can take money in and out of the country through banking channels," she said.
Akhtar said remittances have grown from $1 billion in 2002 to $4.6 billion in 2006 and foreign direct investment has risen to almost $4 billion in 2006.
"When opportunities are available in Pakistan why anyone would want to transfer capital elsewhere?" she said.
Akhtar said Pakistan has lowered inflation through monetary tightening initiatives launched in April 2005.
The inflation that stood at 11.3% in 2005 has come down to 7.9% in June this year, Akhtar said.
"We had raised the policy discount rate from 7.5% to 9% and in July by another 50 basis points," she said.
Akhtar said she will hold a meeting with the governor of U.A.E Central Bank, Sultan Nasser Al Suweidi, and later will meet her Saudi counterpart in Riyadh. She didn't specify the agenda of the meetings.
-By Sarmad Khan, Dow Jones Newswires, +9714 227 8287; sarmad.khan@dowjones.com
Copyright (c) 2006 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
11-27-06 2030ET
