KATHMANDU, MAY 20 -
In a first after the central bank introduced the acquisition bylaws,
Citizens Bank International Limited is acquiring Nepal Housing and
Merchant Finance Limited (NHMFL).
The two financial institutions on Monday signed memorandum of
understanding (MoU) to this effect. Citizens Director Pabitra Kumar
Karki and NHMFL Director Sonam Lama signed the MoU.
Nepal Rastra Bank (NRB) on April 21 issued the acquisition bylaws
enabling banks and financial institutions (BFIs) to go for acquisition.
If materialized, Citizens’ acquisition of NHMFL will be the first of its
kind in the domestic banking sector.
Citizens Chairman Pradeep Jung Pandey said the two institutions came
into an agreement following three-month talks. “We intend to complete
the acquisition process within this fiscal year,” he said. Citizens
officials said they went for acquisition as it is easier than merger.
“The beauty of the acquisition is the acquiring bank should not suspend
its share transactions as per acquisition bylaws,” said Ganesh Raj
Pokharel, assistant general manager of the bank (operation and IT). The
bank has also initiated talks with other financial institutions to
acquire them. “We are holding discussions with 3-4 financial
institutions,” Pandey said.
According to Citizens officials, shareholders of Nepal Housing would
receive payments in stock for selling the company. The finance company’s
stock was traded at Rs 198 per share on May 13. Citizens share price
closed at Rs 434 on Monday. Although NHMFL has already conducted its due
diligence audit (DDA), Citizens has asked it to do it again to
reconfirm its financial status. The acquisition bylaws say a DDA of the
institution to be acquired has to be carried out after getting approval
from its annual general meeting (AGM). Then, the two sides have to sign a
MoU and take final approval from the central bank.
Although Citizens is yet to get approval from its AGM for the
acquisition, Pokharel said it would not be difficult for the bank as
they would hold a special general meeting for the purpose.
Citizens’ paid-up capital stands at Rs 2.10 billion, while that of
Nepal Housing is Rs 220 million. As of third quarter of current fiscal
year, total deposits and loans of the Citizens stand at Rs 25 billion
and Rs 21.77 billion, respectively. The finance company has deposits of
Rs 1.49 billion and loans of Rs 1.44 billion as of third quarter of the
last fiscal.
According to NRB, none of the banks and financial institutions has
formally so far applied for acquisition. An NRB official said they were
holding discussions on how to ease the acquisition process if BFIs come
up with an acquisition plan without getting the proposal endorsed by the
AGM. “Almost all BFIs have acquired AGM approval for mergers, but not
for acquisition,” said the official. “We will see what we can do to ease
the acquisition process.”
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