MANAMA: Ithmaar Bank shareholders yesterday voted to transform the Bahrain-based institution into a commercial bank and fuse it with its wholly owned retail subsidiary Shamil Bank.
Ithmaar is pushing ahead, with full force, towards completing in the shortest time possible, plans for a comprehensive reorganisation, which is hoped will be in situ by February or March.
The plans, which will turn Ithmaar Bank into a premier Islamic retail bank, involve both banks pooling their resources together to create a single, more efficient and significantly stronger retail-focused bank with an Islamic licence, under the Ithmaar brand.
The plans, which already have the Central Bank of Bahrain's No Objection, were presented by the Ithmaar board of directors to the bank's shareholders at an extra-ordinary general meeting (EGM) held at the Regency Inter-Continental Hotel yesterday.
The shareholders agreed to increase the authorised capital to $2 billion and also approved three capital raising initiatives that will, together, add up to $500 million to the bank's capital, thereby increasing shareholder equity to about $1.4bn.
"The shareholders' overwhelming support for the board's proposals has ushered in a new era for the bank," said Ithmaar Bank chairman Khalid Janahi.
"Our focus is now on ensuring that the reorganisation and capital raising plans are completed in the shortest possible time.
"When the reorganisation and capital raising initiatives are completed, Ithmaar Bank will have been transformed into one of the region's largest, most efficient retail-focused Islamic banks and, with the additional capital, we will be in a better than ever position to capitalise on the unique opportunities that are being created by the challenging financial climate."
"Regional banks will have to merge and grow if they are to survive," he added.
"We are hoping to develop our operations into a commercial bank with equity of between $3bn and $4bn.
"Anyone who can't achieve that size in the region will not be around a few years down the road," he added.
"At the onset of the financial crisis, we had stressed that our strategy, moving forward, would focus on protecting our capital base and on insulating our shareholders from the global financial crisis," Ithmaar Bank chief executive officer Mohamed Hussain said.
"This was our clear message to shareholders at the last general meeting in March and, although we have managed to successfully deliver on our promises, we are continuing to further reinforce our position to protect against the challenging financial climate.
"To further bolster our position, we also announced three capital raising initiatives which include a five-year mandatory convertible sukuk that will be the first of its kind issued by a financial institution in the region," he said.
"These plans will substantially increase our regulatory capital and, in doing so, will give us the opportunity to capitalise on the many, very promising opportunities that are now being created." he said.
On October 17, Ithmaar Bank had announced that it intends, as part of its capital-raising exercise, to offer a rights issue and that J P Morgan is assisting the bank for the mandatory convertible sukuk.
It was also announced that an agreement in principle had been reached with Global Emerging Markets of London (GEM), whereby GEM would commit to providing an equity line of credit amounting up to $125m which the bank will have the option to draw down, resulting in issuance of new ordinary shares.
The benchmark size of the capital raising plans is between $400m and $500m.