KARACHI, July 8: The new owners of the fallen Prudential Commercial Bank Limited are taking time to release the audited accounts for the year ended December 31, 2001, and it is not difficult to understand why. The bank’s sister enterprise — Prudential Investment Bank — had discovered that the group chairman had absconded with around Rs300m, which measured to as much as 44 per cent of the bank’s assets.

But the investment bank was far smaller than the commercial bank that the Prudential group had under its fold. If the commercial bank’s auditors are still busy trying to put together the jigsaw puzzle of the bank’s financials, it is scarcely surprising. Nobody seems to have worked it out yet, but put together, the group’s stalwarts may have managed to slip away with astonishingly colossal sums from the whole of its financial empire: investment bank, commercial bank, a string of modarabas and the discount house. And all of that from under the nose of the financial and corporate regulators.

According to the extended date, Saudi Pak Commercial Bank Limited is now required to hold the shareholders’ annual general meeting by the end of current month (July). Meanwhile the new management has done well to release the report and unaudited accounts of the bank for the first quarter ended March 31, 2002.

It was in March last year that the State Bank of Pakistan took control of the Prudential Commercial Bank, following realization that the bank was in precarious financial health with negative equity of Rs217m. That year, it marked the second casualty in the country’s private listed commercial banks, which reduced their number from 13 to 11; the first was the fall of Indus Bank.

A moratorium was imposed on the Prudential Commercial Bank by the government on the recommendations of the SBP, on March 19, 2001, for a period of 180 days. On September 19, the period of moratorium came to an end and the SBP removed restrictions on the operation of the bank. Majority control and management of the bank was given to Saudi Pak Industrial and Agricultural Investment Company (Pvt) Limited and its associates. The new owners gave the bank a new name: Saudi Pak Commercial Bank.

“After taking over the operations of the bank, the new management focused on confidence building measures by honouring the claims of creditors, deposit holders and market participants,” say the directors in their quarterly report, adding that immediate steps were also initiated for strengthening the internal control system.

Saudi Pak Industrial and Agriculture Investment Company (SPIAIC) apparently has the wherewithal to turn the bank around. SPIAIC was established in December 1981 under an agreement between the government of Pakistan and the Kingdom of Saudi Arabia with the objective of promoting economic cooperation between the two countries. The company had shareholders’ equity of Rs3.2 billion and boasted an asset base of a huge Rs10.1 billion at end- December 2001.

Prudential Commercial Bank began commercial operations on May 7, 1995. It built up a network of twenty branches. During the quarter under review (Jan-March 2002), Pak Saudi Commercial Bank posted deposit growth by Rs387m to Rs5,202m. Advances (net) increased by Rs545m to Rs4,604m and investment by Rs1,151m to Rs2,244m. “As a result of increased business activities, the bank earned profit before tax and provisions of Rs41m for the quarter, as against loss of Rs26m incurred in the previous corresponding period,” directors stated.

Directors also observed in their quarterly report that the bank had been given permission to issue additional stock of shares of the value of Rs1bn. Paid-up capital of the bank currently stands at Rs1.17bn. The price of the 10-rupee share in the bank had touched its record best at Rs19 in 1996; it is now trading at 20pc discount to the par value. The change of management; its intent to put more liquidity and its plans to turnaround the bank should all go well with the investors, who don’t appear to have received any dividend since stock market listing of the bank in 1995.