In a major development in Pakistan’s banking sector, shareholders of Silkbank Limited have approved the amalgamation of the bank with and into United Bank Limited (UBL). This decision, made at an Extraordinary General Meeting (EGM) on December 26, 2024, is contingent on receiving regulatory clearances from the State Bank of Pakistan (SBP) and the Competition Commission of Pakistan (CCP). The proposed merger stems from an offer made by UBL on October 31, 2024, which was subsequently endorsed by Silkbank’s shareholders.
The approval follows a series of discussions and approvals, including the confirmation of minutes from Silkbank’s 28th Annual General Meeting, held earlier on December 6, 2024. As part of the resolution passed at the EGM, Silkbank’s President & CEO Shahram Raza Bakhtiar, CFO Khurram Khan, and Company Secretary Faiz Ul Hasan Hashmi have been authorized to take all necessary steps to move the merger forward. This includes modifying the amalgamation scheme, submitting it to the SBP for approval, and coordinating with relevant legal and regulatory authorities to ensure a smooth transition.
The proposed merger will see Silkbank’s shareholders receive new UBL ordinary shares as part of the deal. According to the terms of the offer, UBL has proposed issuing one new ordinary share of UBL for every 325 shares of Silkbank. This offer was initially presented on November 1, 2024, and was met with in-principle approval from Silkbank’s Board of Directors shortly after on November 6, 2024. The Board authorized the bank’s Chief Executive Officer to engage with advisors and consultants to evaluate the merger offer and provide their findings for further evaluation.
The merger is expected to significantly reshape the operations of both banks, with Silkbank’s shareholders becoming part of UBL’s broader operational framework. However, the finalization of the deal is still dependent on receiving the necessary regulatory approvals, which are crucial for the amalgamation to proceed. The approval by shareholders marks a significant step in the merger process, but it is still subject to the formal clearance of the SBP and CCP.
The merger also comes at a time when Silkbank is facing financial challenges. According to its financial statements for the year 2022, published in December 2024, Silkbank reported a negative equity of Rs. 13.9 billion at the end of that year. This shortfall in equity is significant, as it falls well below the minimum capital requirement of Rs. 10 billion set by Pakistan’s banking regulators. This financial situation has likely contributed to Silkbank’s decision to pursue the merger with a larger, more financially stable institution like UBL.
For UBL, the merger represents an opportunity to expand its customer base, enhance its market share, and strengthen its financial standing. The amalgamation is expected to have far-reaching implications for both banks, with Silkbank’s operations and assets being absorbed into UBL’s larger operational framework, pending the necessary regulatory approvals.
Once the merger is finalized, it is expected to bolster UBL’s position in the Pakistani banking sector, providing the bank with a broader portfolio of services and a larger customer base. The merger also holds the potential to improve Silkbank’s financial health by integrating it into UBL’s more stable and diversified operations.