x Abu Dhabi, UAEWednesday 26 July 2017

RBS sells Pakistani arm to MCB as it sheds Asian assets

International Pakistan's biggest bank has approved a deal to acquire the local operations of Royal Bank of Scotland.

MCB Bank, the largest Pakistani lender by market capitalisation,  said its directors approved the acquisition of RBS operations in the country.
MCB Bank, the largest Pakistani lender by market capitalisation, said its directors approved the acquisition of RBS operations in the country.

Pakistan's biggest bank has approved a deal to acquire the local operations of Royal Bank of Scotland as the UK bank seeks to sell assets after posting the largest ever corporate loss in Britain. MCB Bank, the largest Pakistani lender by market capitalisation, said its directors approved the acquisition of RBS operations in the country. The deal is still subject to signing a share purchase agreement between the parties and approval of the regulator, State Bank of Pakistan, MCB said in a filing to the Karachi Stock Exchange yesterday. A purchase price was not disclosed.

Pakistan's banking sector is expected to see further consolidation as small lenders come under pressure to meet tougher central bank rules that require lenders to retain higher cash reserves. "Liquidity and cash reserve ratios are not encouraging," said Ahmed Nabil, the chief operating officer at Javed Omer Vohra, a brokerage house in Karachi. "Under the current economic situation it is hard for banks to maintain a cash reserve ratio of 5 per cent. The obvious choice is merger or a take over by larger entities," Mr Nabil said.

RBS, based in Edinburgh, is selling or shutting businesses in two-thirds of the 54 countries in which it operates. JS Bank and Habib Bank in Pakistan as well as Egypt's Orascom Telecom Holding had expressed interest in acquiring RBS operations in Pakistan. MCB could pay about Dh330 million for the assets of RBS Pakistan, Reuters reported yesterday, citing an unidentified person familiar with the transaction.

"This is the ball park figure circulating in the market. The book value of the RBS is about nine [Pakistani] rupees (40 fils) [per share]," Mr Nabil said. "But we will still have to see what the final pricing of the assets will be." The acquisition of RBS Pakistan would help a new owner tap growth in a nation that is forecasting an economic revival in the next year. The government predicts the economy will expand by 3.3 per cent in the financial year starting July 1.

There have been eight acquisitions of Pakistani banks since 2002, with the biggest being Standard Chartered's purchase of Union Bank for $487 million (Dh1.78bn) in September 2006. The news of the acquisition pushed both MCB and RBS share higher on Karachi Stock Exchange: RBS Pakistan shares rose 5.3 per cent to Rs20.05; while MCB gained 5 per cent, closing trade at Rs179.79. Australia and New Zealand Banking Group earlier this month agreed to buy RBS's units in six Asian countries including Singapore, Hong Kong, Taiwan and Indonesia. ANZ Bank, Australia's fourth-biggest lender, will pay $550m for those assets.

MCB Bank yesterday also reported a 1.6 per cent increase in second quarter net profit, which advanced to Rs3.63 billion from Rs3.56bn, a year earlier, trailing expectations of analysts. "The profit is slightly below expectations, but RBS news has pushed the share prices up today," Mr Nabil said. skhan@thenational.ae