KARACHI (November 21 2002) : Orix Investment Bank plans to issue 50 percent right shares to meet the condition of State Bank of Pakistan for raising capital.
The State Bank of Pakistan has directed all investment banks to increase their capital to Rs 300 million in the year 2002. In view of this requirement, and to further strengthen the capital base of the Orix Investment Bank, the right issue has been proposed.
The bank, through Karachi Stock Exchange has informed the shareholders and members of the exchange that effective utilisation of existing resources, coupled with stronger capital base ensuing from the issue, it would deliver a synergistic effect, thereby enabling greater diversification into new and existing ventures.
Nevertheless, increased earnings resulting in higher and stable returns to the shareholders are also anticipated.
The bank foresees additional benefits to accrue from the proposed issue of right shares.
The issue will reduce the bank's reliance on borrowed funds, resulting in the reduction of financial costs. The lower borrowing costs would thus enable the bank to strengthen the lending portfolio by offering competitive rates to reputable corporate clients.
Stronger capital base would result in improved credit rating, which will, in turn, provide additional comfort to other financial institutions dealing with the bank.
The issue would enable the bank to take additional exposure on high quality and low risk corporate clients. The per party exposure limit of 30 percent of the bank unimpaired capital and reserves under the Prudential Regulations would be further relaxed with the issue.
Enhanced capital would improve current and debt to equity ratio of the bank in line with the Prudential Regulations and provide additional opportunity to leverage in case of unforeseen liquidity requirements.
Orix Investment Bank forecasts that profit after tax for the year ending June 30, 2003 would be Rs 56.3 million, in 2003-04 about Rs 69.2 million and in the following year it would be Rs 80.5 million. The total assets of the bank which include long-term loans, investment in government securities, investment in COT and other securities etc would increase from Rs 2,324 million to Rs 2,700 million in 2003-04 and to Rs 3,010 million by 2004-05.