A merger committee has already been formed and the consolidation process will be completed within the next six months, according to KIST.
After the consolidation, the new entity will be known as KIST Bank, Gyawali said at a press conference in Lalitpur. ][break]
“There will be no layoffs, and public and promoter shares will be distributed accordingly, based on the outcome of due diligence audits,” said Gyawali, who will retain the position of chief executive in the merged unit.
KIST, a category ´A´ financial institution, currently has a paid-up capital of Rs 2 billion, while Vibor, a category ´B´ financial institution which recently merged with Bhajuratna Finance and Savings Company, has a paid-up capital of Rs 916.17 million.
Once the merger process is complete, the new entity will be one of the largest banks in terms of capital.
“The consolidation process will be a win-win for both the financial institutions as both are looking for opportunities to expand further,” Vibor CEO Ajay Ghimire said at the press conference.
Both financial institutions were once heavily exposed to the real estate sector, which is dormant for the time being. As a result both the institutions have accumulated bad debts due to borrowers´ inability to pay back.
As of mid-January, KIST´s non-performing loans stood at 7.15 percent of the total credit portfolio, while Vibor´s stood at 33.38 percent of total loans.
“Our investment in real estate was high but now we´ve adopted the strategy of moving away from the sector and are entering retail banking. I hope this partnership will provide us that opportunity,” Ghimire said.
Gyawali also acknowledged that the greater amount of money allocated for loan-loss provisioning caused the bank to suffer a net loss of Rs 69.57 million in the second quarter of the current fiscal year, ended mid-January. “But we will bounce back and generate a profit of around Rs 250 million by the end of this fiscal year,” Gyawali said.
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