On Tuesday, Summit Bank Ltd announced its decision to change its name to Bank Makramah Ltd (BML).
This comes as part of the bank’s ongoing efforts to fully convert into a Shariah-compliant entity after a UAE investor, Nasser Abdulla Hussain Lootah, became its majority shareholder in April.
The State Bank of Pakistan (SBP) has given its consent to the name change on July 17, and the new name will take effect once all other relevant regulatory approvals are obtained.
Nasser Abdulla Hussain Lootah, a national of the Gulf nation, injected Rs10 billion of fresh equity by subscribing to 3.98 billion new shares of the bank at Rs2.51 apiece. With this investment, he gained 51% shareholding and management control of the commercial lender. The injection of fresh liquidity is intended to address the bank’s capital adequacy issues.
The International Monetary Fund (IMF) highlighted the need for undercapitalized private-sector banks, including Summit Bank, to enter resolutions if they are not fully capitalized. Resolution involves restructuring a failing bank when regulators believe there is no prospect of recovery.
As of March 2022, Summit Bank’s paid-up capital stood at negative Rs22.6 billion, falling short of the statutory requirement of Rs10 billion. The Capital Adequacy Ratio, reflecting the bank’s preparedness to meet its obligations, was negative 94.9%, well below the regulatory requirement of 11.5%.
Despite incurring a net consolidated loss of Rs934.5 million in the January-March quarter, the bank believes that with the capital injection and adherence to its business plan, it will achieve compliance with applicable regulatory requirements.
To further generate liquidity, Summit Bank plans to sell its valuable real estate assets in major urban centers, according to insiders familiar with the matter.
Following the announcement of the name change, the bank’s share price surged 7.3% to Rs1.91 apiece on Tuesday. The transformation into Bank Makramah Ltd reflects Summit Bank’s determination to pursue its Shariah-compliant business model under its new majority shareholder.