The UBL Story
The Privatisation Commission (PC) threw a party on Jan 29 to celebrate the privatisation of United Bank Limited (UBL) — and nobody came! Correction, out of the two foreign guests invited one did turn up but without the “invitation card” — in this case the Earnest Money. For the fiasco the PC has no one but itself to blame since it had loaded the dice against its own interests (and that of Pakistan) by eliminating the domestic aspirants and narrowing the field of intending bidders to only two foreign competitors, both of Arab origin. This muddied up the so-called transparency in the process, making it a game of real-time “monopoly” where the final moves will come much after Feb 14, 1996, the date of the postponed bidding. Without the threat of local competition, one of the two surviving entities had promptly laid down a condition that the Government of Pakistan (GoP) would keep a deposit of Rs 20 billion in UBL for several years. Faysal Islamic Bank’s request being considered unacceptable, Ms Saudi Basharahill was left as the only suitor. Very little is known about Ms Saudi Basharahill except that its name does not seem to set the financial world alight. Left alone in the bidding process, Ms Saudi Basharahill took advantage and made a brazen “show of force” by making the Bid without the requested Earnest Money. This was too much for even the PC to swallow — or correction, perhaps too much for the PC to try and attempt to make the people of Pakistan swallow and as such the Bid was “postponed”.
In 1992-93, UBL’s basic share price was provisionally estimated at Rs 65. Given that Muslim Commercial Bank’s (MCB) 26% had gone at Rs 56 a share and Allied Bank Limited (ABL) at Rs 60 a share (the then PM Mian Nawaz Sharif giving a special discount of Rs 10 to the ABL employees from the original Rs 70). Rs 65 per share is a modest figure for such an enormous bank as the UBL. It is true that UBL has a very large debt portfolio and pilferage by employees is estimated conservatively annually at Rs 840 million. Annual profits fell from Rs 275 million in 1993 to Rs 59 million in 1994. Mr Shahid Hasan Siddiqui a senior economist and an eminent banker, contends that contrary to general public perception the decline in profitability is not due to stuck-up advances but due to a steep rise in expenses in 1994 as compared to 1993. Expenses increased by Rs 173 million and miscellaneous expenses by Rs 171 million in 1994, a cumulative grand total of Rs 354 million. The commission earned during the same period by the Bank decreased from Rs 1861 million in 1993 by Rs 183 million to Rs 1678 million. Blame the atrocious management by those picked by the government to run the bank as they resorted to wasteful expenditure besides adding surplus staff, many of them political appointees. Blame also the good credit given to perennial bad debtors under sustained political pressure. In contrast the public sector National Bank of Pakistan (NBP) recorded a rise in net profit of 196% in 1993 while privatised MCB showed only 28%. Dr Siddiqui suggested the obvious, it does not matter whether the corporate entity is public or private, with better management (and without induction of capital) and freedom of action, provided credit was not advanced on political patronage, UBL could have shown better profits.
