Hopes are high that Pakistan’s Habib Bank may finally succeed in exiting Nepal on its third attempt, following applications from National Life Insurance Company and several other promoter shareholders to acquire its stake in Himalayan Bank.
Habib, which currently holds a 12% stake in the Nepali bank, has faced multiple setbacks in its previous efforts to divest its holdings.
On June 13, Himalayan Bank issued a 35-day notice inviting existing promoter shareholders to purchase Habib’s 28,012,447 shares in the Class ‘A’ commercial bank. The minimum offer price was set at Rs 112.80 per share.
The proposed sale complies with Clause No. 10 of Nepal Rastra Bank’s (NRB) Integrated Directive 2024, which gives first priority to existing promoter shareholders in the sale of such shares. “If promoter shareholders do not respond within the deadline, the shares will be offered to other individuals and institutions in accordance with prevailing laws,” the directive states.
Suresh Prasad Khatri, CEO of National Life Insurance, told Aarthik Abhiyan, New Business Age’s sister publication, that the company has applied to purchase all of Habib’s shares in Himalayan Bank. “We offered to buy them at Rs 118.88 per share,” Khatri said. National Life currently holds a 1.25% stake in the bank.
Khatri added he was informed that another insurance company and an individual promoter shareholder had also applied to purchase a limited number of shares. With ample investable funds and falling fixed deposit interest rates, the company saw better returns in acquiring the founder shares, he informed. “We expect the income margin from this investment to exceed what we would earn from fixed deposits,” he said, noting that Habib had previously approached National Life about the sale two years ago.
“Now, the bank’s board of directors will forward the applications to Habib, and if it approves, the proposal will be submitted to the central bank,” said a senior Himalayan Bank official.
As a major shareholder, the buyer would gain representation on the board, triggering a ‘fit and proper’ assessment by NRB.
Under the Bank and Financial Institutions Act (BAFIA), promoter shares cannot be sold for the first five years of a bank or financial institution’s operation. After that, such shares may only be sold within the promoter group unless specific regulatory conditions for external sale are met. Additionally, any institutional purchase exceeding a 2% stake requires approval from NRB.
Past Attempts
In December 2023, Himalayan Bank signed a share purchase agreement with Himalayan Reinsurance Company at Rs 130 per share. The proposal was submitted to NRB for approval, but the central bank rejected it, forcing Habib to withdraw the application.
Earlier, Habib held a 20% stake in the bank. Its holding was reduced to 12% following the merger of Himalayan Bank with Civil Bank Ltd.
Four years ago, Habib had reached a deal with the UK-based Commonwealth Development Corporation (CDC) to offload its stake. However, the agreement collapsed after objections from some board members of Himalayan Bank.
