International Finance Corporation has completed financial due diligence of Bank Alfalah Limited to acquire its share worth of $67.10 million. It has signed an agreement with Alfalah Limited to acquire 20% strategic in the Bank to increase access to finance in Pakistan(good omen for investors). IFC will initially subscribe to 15% of the Bank’s overall stakes against the share price of Rs 28.00, the official statement said.
In September,14 SBP allowed IFC to commence due diligence of Bank Alfalah for the purpose of considering the possibility of strategic minority investment in the Bank. The final approval of SBP is required by IFC before taken over its granted control over the Bank. IFC’s plans to invest in the Bank are encouraging for the banking industry as a whole witnessing competition and expansion as well. The banking industry remained profitable (more than 40% profitability increase)despite global financial crisis. No bank in Pakistan failed but some small banks still face problems of growth and sustainability, though thousands of banks were closed globally in the aftermath of global financial crisis.
Net interest margins are around 6% in Pakistan while in most of the world they are very low. secondly banks have recently invested heavily in PIBs which give better returns and thirdly lending to private sector is increasing and GDP growth is expected to increase in coming years. Successful operation by the army is helping improve law and order which will result in better growth in the economy. Keeping in view these factors IFC might have decided to invest in BAFL.