Bank Asia's acquisition of Alfalah expected to boost profit

Bank Asia has finally signed a memorandum of understanding (MoU) with Karachi-based Bank Alfalah to acquire the latter's Bangladesh chapter more than a year after the board of the former approved the acquisition.

The deal was signed on Wednesday at the Bank Asia's corporate office in the capital, subject to regulatory clearance and legal formalities, according to a stock exchange filing on Thursday.

Market experts said the acquisition of Bank Alfalah is expected to boost profit of Bank Asia and add value to the publicly-traded stock of Bank Asia as the foreign bank has healthy financial indicators.

"Bank Asia's proposed acquisition of Bank Alfalah seems to be a good deal, considering the financial performance of the latter over the years," said Akramul Alam, head of research at Royal Capital.

Bank Alfalah Bangladesh's operating income grew 36 per cent year-on-year to Tk 1.88 billion in 2024, while net profit soared 51 per cent year-on-year to Tk 653 million in the year.

It has assets worth Tk 35.04 billion as of December 2024, while liabilities Tk 28.89 billion. That means the bank has surplus assets of Tk 6.15 billion.

"The financial health indicators of Bank Alfalah promise a boost to the earnings of Bank Asia in future and the investors of Bank Asia will be benefited," said Mr Alam.

Bank Asia can put to use the lessons learnt in previous acquisitions to make the deal a success, he added.

The acquisition is contingent on approvals from the Bangladesh Bank, the State Bank of Pakistan, and other relevant regulatory bodies, as well as compliance with legal and procedural requirements and the execution of definitive agreements, reads the disclosure.

In April last year, Bank Asia's board approved, in principle, negotiated acquisition of assets and liabilities of Bank Alfalah's Bangladesh part.

In a separate filing with the Pakistan Stock Exchange, Bank Alfalah also confirmed that its board of directors approved the proposed sale of its Bangladesh operations to Bank Asia.

Details of the deal, such as deal price and terms and conditions, are yet to be published.

However, an official of Bank Asia, on condition of anonymity said, PricewaterhouseCoopers (PwC) Bangladesh, a UK-based audit firm, had conducted valuation and audited Bank Alfalah Bangladesh. The initial cost of the deal is approximately Tk 6 billion.

Deputy Managing Director of Bank Asia SM Anisuzzaman earlier said they already had experiences taking over foreign banks' local operations. "Acquiring Bank Alfalah's Bangladesh operation is similar to that".

Bank Alfalah has been running smoothly since its establishment in 2005 in Bangladesh. Now it has seven branches here-- five in the capital city, one in Chattogram and one in Sylhet.

Bank Alfalah, one of the largest banks in Pakistan, has a network of more than 1,100 branches across more than 200 cities in Pakistan, and has international presence, apart from Bangladesh, in Afghanistan, Bahrain, and the UAE. The bank also has a representative office in Abu Dhabi.

Bank Asia's financial performance

Bank Asia secured a 20 per cent year-on-year growth in profit to Tk 2.50 billion in 2024, riding on higher investment income.

Based on the profit growth, the board of directors has declared a 20 per cent dividend (10 percent cash and 10 per cent stock) for 2024, while half of the 36 listed banks failed to declare any dividend for the year due to the strict regulation of the Bangladesh Bank over provisioning shortfall.

As a major facilitator of financial inclusion in the country, Bank Asia pioneered agent banking a decade ago.

In 2001, the third generation private commercial bank acquired the Dhaka chapter of Canada-based Bank of Nova Scotia, the first of its kind in the banking history of Bangladesh, according to Bank Asia's website.

Later, Bank Asia took over the Bangladesh operations of Muslim Commercial Bank of Pakistan.

Meanwhile, following the disclosure of the signing of the acquisition deal, Bank Asia's stock rose 1.37 per cent to Tk 14.8 per share on Thursday on the Dhaka Stock Exchange.

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