Citizens Bank International has been focusing on acquisition to increase its capital base in contrast to the current trend among banks and financial institutions (BFIs) to go for mergers.
It signed a memorandum of understanding (MoU) to take over troubled People’s Finance on Sunday, six months after signing a similar deal to acquire Nepal Housing and Merchant Finance. Citizens Bank said in a press release that its director Pabitra Kumar Karki and the director of People’s Finance Rabin Bhandari signed the pact.
Chairman of Citizens Bank Pradeep Jung Pandey said that the acquisition of People’s Finance would help both the depositors and the shareholders of the finance company. “It is better not to let the troubled company die,” he added.
According to Pandey, the acquisition of People’s Finance will not hamper the financial status of the bank as the finance company has already booked its non-banking assets by foreclosing on collateral put up by delinquent borrowers.
“We can sell such collateral to recover the loans and strengthen our financial situation,” said Pandey. Before the acquisition, a due diligence audit (DDA) of the finance company will be conducted. “Based on the DDA report, the share swap ratio will be determined,” added Pandey.
According to him, the annual general meeting (AGM) of Citizens Bank has approved the proposed acquisition with both People’s Finance and Nepal Housing. “The AGMs of these two finance companies are yet to approve the acquisition plan,” he added.
BFIs have been permitted to go for acquisition since April 21 when Nepal Rastra Bank (NRB) issued the acquisition bylaws. People’s Finance has been facing NRB’s prompt corrective action after its capital adequacy ratio (CAR) sank below the minimum level.
It had faced action on August 10, 2011 after its CAR dipped below 6.49 percent. The finance company has been forbidden to open new deposit accounts, distribute dividends, extend loans or increase the salaries and allowances.
Despite the central bank’s action, People’s Finance has not been able to make a recovery. It plunged into a crisis after its immediate executive chairman Chhabilal Bhusal was revealed to be involved in financial misappropriation by creating fake borrowers.
The acquisition by Citizens Bank of the finance company that could not be turned around will bring its existence to an end. The bank said that its acquisition plan with Nepal Housing was moving ahead well.
Citizens Bank has a paid-up capital of Rs 2.37 billion. It posted a profit of Rs 10 million in the first quarter of the current fiscal year.
source: the kathmandu post, 17 nov 2014
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It signed a memorandum of understanding (MoU) to take over troubled People’s Finance on Sunday, six months after signing a similar deal to acquire Nepal Housing and Merchant Finance. Citizens Bank said in a press release that its director Pabitra Kumar Karki and the director of People’s Finance Rabin Bhandari signed the pact.
Chairman of Citizens Bank Pradeep Jung Pandey said that the acquisition of People’s Finance would help both the depositors and the shareholders of the finance company. “It is better not to let the troubled company die,” he added.
According to Pandey, the acquisition of People’s Finance will not hamper the financial status of the bank as the finance company has already booked its non-banking assets by foreclosing on collateral put up by delinquent borrowers.
“We can sell such collateral to recover the loans and strengthen our financial situation,” said Pandey. Before the acquisition, a due diligence audit (DDA) of the finance company will be conducted. “Based on the DDA report, the share swap ratio will be determined,” added Pandey.
According to him, the annual general meeting (AGM) of Citizens Bank has approved the proposed acquisition with both People’s Finance and Nepal Housing. “The AGMs of these two finance companies are yet to approve the acquisition plan,” he added.
BFIs have been permitted to go for acquisition since April 21 when Nepal Rastra Bank (NRB) issued the acquisition bylaws. People’s Finance has been facing NRB’s prompt corrective action after its capital adequacy ratio (CAR) sank below the minimum level.
It had faced action on August 10, 2011 after its CAR dipped below 6.49 percent. The finance company has been forbidden to open new deposit accounts, distribute dividends, extend loans or increase the salaries and allowances.
Despite the central bank’s action, People’s Finance has not been able to make a recovery. It plunged into a crisis after its immediate executive chairman Chhabilal Bhusal was revealed to be involved in financial misappropriation by creating fake borrowers.
The acquisition by Citizens Bank of the finance company that could not be turned around will bring its existence to an end. The bank said that its acquisition plan with Nepal Housing was moving ahead well.
Citizens Bank has a paid-up capital of Rs 2.37 billion. It posted a profit of Rs 10 million in the first quarter of the current fiscal year.
source: the kathmandu post, 17 nov 2014
LINK
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