Saudi Pak Bank

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26383
Company name	Saudi Pak Commercial Bank Limited
Country	Pakistan
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Active

Date SPI disclosed	November 5, 2007
Projected board date	November 29, 2007
Previous Events	Invested: March 31, 2008 Signed: January 4, 2008 Approved: November 29, 2007

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The proposed project involves IFC acquiring an equity stake up to 19% in Saudi Pak Commercial Bank (SPCB or the Bank) along with the consortium of financial institutions which is proposing to acquire majority stake in the Bank. SPCB is a small size bank with a capital base on PKR3.9 billion and a network of 50 branches spread all over the country. As of Dec. 31, 2006, the total assets of the Bank were PKR 59 billion whereas deposits closed at PKR49 billion. The other consortium members include an Omani Bank, Sinthos Capital and Nomura.

This project has not yet been approved by the investment committees of the consortium investors, including IFC and depends on a satisfactory outcome of the price negotiations for all the parties involved. Finally, the project shall require approvals from State bank of Pakistan, Securities & Exchange Commission of Pakistan, Monopoly Control Authority and acquisition commission.

Anticipated development impact of the project

This project is expected to have a high developmental impact by fostering competition and the provision of quality banking services in an increasingly private sector-led financial sector in Pakistan. The Bank will primarily focus on SME and Consumer financing which will result in increased and improved access to finance to those underserved segments. The project will help consolidate & strengthen the financial sector in Pakistan. Due to liberal licensing policy in the past, Pakistan still has 37 banks (down from 46 in 1997). Excluding the five large banks (Tier I banks), there are still around 20 banks which together hold a mere 9% share in the banking system. The Bank is currently sustaining losses and need recapitalization. The project will bring in deep pocketed sponsors, an experienced team of seasoned bankers with extensive experience in banking and successful track record in turning around banks. Finally, the project will positively impact the economic development of the country, through contribution to GDP growth, increased public finance, and higher FDI and employment creation.

IFC's expected development contribution

IFC’s role in this project stems from its ability to engage strategically in the Banking sector, and to support the Bank in improving outreach and access to finance to SME and consumer financing. IFC is also expected to play a role in improving corporate governance, efficiencies and stronger operating performance resulting from the introduction of international best practices at SPCB. IFC is keen to introduce the “Environment and Social Standards” (ESS) in the banking sector in Pakistan. IFC has already taken steps to launch this initiative. Broad based strategic partnership with SPCB is expected to support the initiative.

Environmental and social issues - Category FI

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the FI portfolio, for types of transactions, size, tenor and industry sectors and determine the Applicable Performance Requirements, if any, that would include a combination of:

- The IFC FI Exclusion List; and/or
- The applicable National Social and Environmental Laws and regulations; and/or
- The IFC Performance Standards.

IFC will also review, if required, the capacity of the FI to manage social and environmental risks and to establish and maintain a Social & Environmental Management System (SEMS). If required, IFC will suggest Supplemental Actions to address any gaps in the SEMS.

Based on the review, the project will be required to:

- Develop an, or upgrade, if necessary, any existing SEMS, prior to disbursement to the satisfaction of IFC;
- Identify responsible, qualified persons to manage and implement the SEMS;
- Commit to implement the SEMS, to ensure that its investments/activities are in compliance with the Applicable Performance Requirements;
- Submit a periodic report to IFC as per a format to be provided by IFC.

IFC PROJECTS