Shareholders of The Bank of Punjab have unanimously approved an equity injection of up to Rs30 billion by Punjab’s government.
The approval came during an Extraordinary General Meeting held on Tuesday, clearing the way for the proposed share issuance.
The Government of Punjab will subscribe directly through ordinary shares, rather than using a rights issue structure.
The move is designed to provide The Bank of Punjab with additional growth capital as it expands its business operations.
The bank said its President and CEO, Zafar Masud, also addressed questions raised by shareholders during the meeting.
According to the bank, shareholders received satisfactory answers to their questions regarding the proposed equity injection.
Why The Bank of Punjab Is Seeking More Capital
The Bank of Punjab currently has the lowest capitalisation among Pakistan’s ten largest banks, according to the bank.
Its Tier-1 capital stands at Rs99.9 billion, compared with total assets of Rs2,952 billion.
Even after receiving the full Rs30 billion equity injection, the bank would remain ninth among the country’s ten largest banks.
However, the bank said stronger Tier-1 capital will support its ability to expand its balance sheet safely.
A bank’s capacity to grow depends on both strong Tier-1 capital and its ability to mobilise low-cost deposits.
These two factors remain closely connected because deposits must be deployed within regulatory capital and leverage requirements.
Therefore, the additional equity is expected to give BOP greater capacity to mobilise and deploy deposits.
The bank plans to support growth across its corporate, commercial, SME, agriculture and housing businesses.
At the same time, the additional capital will support its digital and Islamic banking operations.
It will also support the bank’s proposed overseas wholesale banking unit as its business capacity expands.
Furthermore, BOP expects stronger capital to improve its ability to compete with larger banks.
In particular, the bank aims to strengthen its position in mobilising low-cost deposits across its growing business areas.
Punjab Government Backs BOP’s Growth Strategy
The Government of Punjab’s decision reflects its confidence in the bank and its contribution to the provincial exchequer.
BOP has paid more than Rs15 billion in dividends to the provincial government since 2021.
The bank paid Rs3 billion in dividends during the first six months of 2026 alone.
Meanwhile, the value of the Punjab government’s investment has increased approximately seven-fold over the same period.
BOP also recorded the strongest performance among banking stocks in Asia during 2025, according to the bank.
The proposed equity injection is intended as general growth capital rather than funding linked to portfolio stress.
Moreover, the bank said all capital deployment will remain subject to its normal lending standards.
These include credit assessment, risk management, pricing requirements and profitability considerations.
The same standards will apply to business involving the Government of Punjab.
Why BOP Chose Direct Subscription Instead of Rights Issue
The bank said a rights issue of this size would have required fresh investment from all shareholders.
It would also have created uncertainty regarding subscription levels, timing and completion of the proposed capital raising.
According to BOP, approximately 80% of recent rights issues on the Pakistan Stock Exchange were priced below market value.
The bank noted that only two of ten rights issues since November 2024 were priced at a premium.
Both of those premium-priced offerings were substantially smaller than BOP’s proposed equity injection.
Therefore, the Government of Punjab’s direct subscription provides greater certainty over the amount and timing.
It also gives the bank greater certainty regarding execution of the proposed capital injection.
The shares will additionally be issued at a premium to both market price and break-up value.
Consequently, fewer new shares will be required, which will result in lower dilution for existing shareholders.
Minority shareholders will not need to provide additional funds for the injection.
Nevertheless, they will continue participating fully in the benefits associated with a better-capitalised bank.
Shares to Carry Premium Above Break-Up Value
Under the approved structure, shares will be issued at the higher of two applicable prices.
The first is Rs38.20 per share, while the second is the prevailing market price plus a five percent premium.
The Rs38.20 floor price represents the base-case value determined by independent valuer KPMG Taseer Hadi & Co.
That floor price is approximately 20% higher than BOP’s audited break-up value of Rs31.83 per share.
Therefore, the new shares cannot be issued below Rs38.20 per share.
They also cannot be issued at a discount to the prevailing market price at issuance.
The premium generated through the issuance will accrue to the bank’s net assets.
As a result, the additional value will benefit all shareholders rather than being transferred outside the bank.
Following a full Rs30 billion injection at the floor price, Punjab’s shareholding would rise significantly.
The Government of Punjab currently holds 57.47% of BOP, which would increase to 65.71%.
Meanwhile, minority shareholders would remain above all principal statutory thresholds.
The bank also stressed that the share issuance would not create new powers for the majority shareholder.
BOP Says Capital Injection Is Not a Rescue Measure
BOP said the bank already comfortably meets its regulatory capital and leverage requirements.
It also carries an AAA long-term credit rating, according to the information provided by the bank.
At the same time, its non-performing loan ratio has declined considerably in recent years.
The ratio fell from 9.7% in 2021 to 4.8% during the first half of 2026.
The bank’s weighted obligor risk rating has also improved to 3.6 from above 4.0 three years earlier.
Government of Punjab schemes currently amount to Rs182 billion, representing approximately 18% of the bank’s portfolio.
More than 17% of those schemes are covered by a government guarantee.
Importantly, these schemes account for only 3% of the bank’s total non-performing loans.
Recovery rates on the major programmes range between 97% and 100%, according to BOP.
Therefore, the bank described the proposed equity injection as proactive growth capital.
It said the measure is not a recapitalisation prompted by stress within its loan portfolio.
Earnings Could Face Temporary Dilution
The capital injection could initially create a mechanical reduction in earnings per share and return on equity.
This effect could occur if the new shares are counted before the additional capital is fully deployed.
However, BOP said the capital will be raised in phases and directed toward profitable, risk-adjusted growth.
The resulting additional earnings are expected to absorb the initial dilution over time.
The bank also expects post-injection return on equity to remain competitive with the wider banking industry.
At the same time, book value per share is expected to increase rather than decline.
The new shares will also rank equally with existing shares for dividends declared after their issuance.
Therefore, the bank expects the long-term benefits of additional capital to outweigh the initial mechanical impact.
First Phase of Equity Injection Expected by December
Subject to all required regulatory approvals, BOP expects to issue the first tranche of shares by December 31, 2026.
The initial cash subscription is expected to range between Rs15 billion and Rs20 billion.
The remaining Rs10 billion to Rs15 billion is expected to be issued by June 30, 2027.
However, BOP will not issue any shares until all statutory and regulatory requirements have been fulfilled.
The phased approach will therefore allow the bank to raise and deploy the additional capital progressively.
It will also provide greater capacity to support growth across its various banking businesses.
Zafar Masud Calls Move Growth Capital
BOP President and CEO Zafar Masud described the proposed injection as funding for the bank’s next stage of expansion.
“This is growth 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.”
The shareholder approval now provides a clear path for the proposed Rs30 billion equity injection.
However, the issuance remains subject to the required regulatory and statutory approvals before any shares can be issued.
For BOP, the move is aimed at strengthening its capital base while creating greater capacity for future business growth.
