BOP Shareholders Unanimously Approve PKR 30 Billion Equity Injection by Government of the Punjab

Shareholders of The Bank of Punjab ("BOP" or "the Bank"), at an Extraordinary General Session held today, unanimously approved the proposed equity injection of up to PKR 30 billion by the Administration of the Punjab ("GoPb") through the issuance of ordinary shares.

Key points

• While recovery rates on the major programmes range from 97% to 100%, these schemes account for only 3% of the Bank's total non-performing loans.
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• Shares will be issued at the higher of PKR 38.20 per share or the prevailing market cost at the time of issuance plus a 5% premium.
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• Zafar Masud, President and CEO of The Bank of Punjab, remarked.

For context, the President and CEO, Mr. Zafar Masud, addressed the questions raised by shareholders. It were answered to their satisfaction.

BOP is at present the lowest-capitalised bank among Pakistan's ten largest banks, with Tier-1 capital of PKR 99.9 billion against total assets of PKR 2, 952 billion, and would remain ninth even after the full equity injection. A bank's ability to grow its balance sheet depends on both the strength of its Tier-1 capital and its capacity to mobilise low-cost deposits. As deposits can only be deployed into earning assets within applicable capital adequacy and leverage requirements, these are closely linked.

As well as its proposed overseas wholesale banking unit, the extra equity will therefore enable BOP to mobilise and deploy a larger deposit base safely and productively throughout its corporate, commercial, SME, agriculture, housing, digital and Islamic banking businesses. It will additionally strengthen the Bank's ability to compete with larger banks, particularly in mobilising low-cost deposits.

GoPb's decision reflects its confidence in a Bank that has become a significant contributor to the provincial exchequer. BOP has paid more than PKR 15 billion in dividends since 2021, including PKR 3 billion in the first six months of 2026 alone. While BOP was the best-performing banking stock in Asia in 2025, over the same period, the value of GoPb's investment has rose approximately seven-fold. The proposed injection represents general expansion capital. All deployment of this capital, including toward Government-related business, will remain subject to the Bank's normal credit, risk, pricing and profitability standards.

Notably, a rights matter of this scale would have required fresh funds from all shareholders and would have introduced uncertainty regarding subscription, timing and completion. Approximately 80% of recent rights problems on the Pakistan Stock Exchange were priced at a discount. Of the ten rights problems since November 2024, only two were priced at a premium, and both were substantially smaller than BOP's proposed offering. GoPb's direct subscription provides committed capital with greater certainty of amount, timing and execution.

It will additionally be issued at a premium to both the market rate and break-up value, resulting in fewer new shares and lower dilution. Minority shareholders are not required to invest extra funds, yet will participate fully in the benefits of a better-capitalised Bank.

Meanwhile, the Bank comfortably meets its regulatory capital and leverage requirements and carries an AAA long-term credit rating. While the weighted obligor risk rating has improved to 3.6 from above 4.0 three years ago, its non-performing loan ratio has declined from 9.7% in 2021 to 4.8% in the first half of 2026. Administration of the Punjab schemes amount to PKR 182 billion, or approximately 18% of the portfolio, of which more than 17% is covered by Administration guarantee.

While recovery rates on the major programmes range from 97% to 100%, these schemes account for only 3% of the Bank's total non-performing loans. The equity injection is therefore a proactive growth-capital measure, not a recapitalisation driven by portfolio stress.

Shares will be issued at the higher of PKR 38.20 per share or the prevailing market cost at the time of issuance plus a 5% premium. As independent valuer, and is approximately 20% above the audited break-up value of PKR 31.83 per share, the PKR 38.20 floor cost is the base-case value determined by KPMG Taseer Hadi & Co. Accordingly, shares cannot be issued below PKR 38.20 or at a discount to the prevailing market cost.

In practice, the premium will accrue to the Bank's net assets for the benefit of all shareholders. While minority shareholders would remain above all principal statutory thresholds, after the full injection at the floor rate, GoPb's shareholding would growth from 57.47% to 65.71%. The issuance does not create any new powers for the majority shareholder.

Notably, a short-term mechanical reduction in earnings per share and return on equity may arise if the new shares are counted before the extra capital is fully deployed. Nevertheless, the capital will be raised in phases and deployed into profitable, risk-adjusted expansion. The resulting incremental earnings are projected to absorb the initial dilution and keep post-injection return on equity competitive with the industry. While the new shares will rank pari passu for dividends declared after issuance, book value per share will be enhanced rather than diluted.

Subject to all requisite regulatory approvals, shares against cash subscriptions of PKR 15 billion to PKR 20 billion are projected to be issued to GoPb by December 31, 2026, with the remaining PKR 10 billion to PKR 15 billion anticipated by June 30, 2027. No shares will be issued until all statutory and regulatory requirements have been fulfilled.

Commenting on the development, Mr. Zafar Masud, President and CEO of The Bank of Punjab, remarked.

"This is expansion capital for a growing bank. The Bank of Punjab is well capitalised, liquid and sound; we are creating the capacity required for the scale of business we intend to undertake. The pricing is transparent and market-linked, and the premium accrues to the Bank. Any dilution shareholders may see on paper is temporary; the capital, capacity and earnings it enables are enduring." Stay Connected with ProPakistani.

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Taken together, the developments around BOP Shareholders Unanimously Approve PKR 30 Billion Equity Injection by Government of point to a situation that is still moving, and the coming days should bring more clarity.