It has been more than one year since the smooth exit of RBS from Pakistan. Following the foot steps, HSBC has also planned to put its Pakistan operations "on sale".
The move-closure of operations in Pakistan-is one of the elements in HSBCs strategic restructuring plan, under which the bank aims to close its operations in a few Asian countries which accounts for a small portion of HSBCs Asian market operations.
The Banks presence in Pakistan dates back to 1982. With an asset base of Rs.59 billion as on 31st December 2011, HSBC (Pakistan operations) is categorised as a small bank conducting operations through a network of eleven branches across the country. The Bank kept its operations limited across the country, but the success stories of many existing banks, including a foreign bank, SCBPL, suggests that HSBC missed out on an opportunity to expand in the lucrative local banking industry.
Given that the Bank has placed its Pakistan operations on the sales counter, the burning question these days is who will be the successful bidder. So far, the market has highlighted the names of the three possible, potential acquirers: MCB. UBL and KASB. The scale of HSBC Pakistans operations is petite compared to the mammoth size of these acquirers. But, taking into the consideration the financial performance of the acquiree, HSBC acquisition will materialise as a good deal. The icing on the cake is the HSBC (Pakistan operations) asset quality, with the infection ratio of around 4.8 percent as on 31st December 2011, as opposed to the local banking industrys infection ratio of around 16 percent.
Moreover, the acquisition sounds a safe bet considering that advances portfolio accounted for just 35 percent of the Banks asset base, with bank and balance with treasury banks, lending to financial institutions, and investments accounting for sizeable portion of the Banks assets base.
In the face of smaller size, the acquiree clocked in a gross spread ratio of around 50 percent in CY11, a notch below the top five banks average ratio of around 55 percent, but significantly better than those of the average ratio of mid-sized and smaller banks
The Bank has one of the highest deposits per branch, with ratio of around Rs.4 billion deposit per branch as opposed the industrys median at around 650 million deposits per branch. The Banks CASA ratio stood at around 53 percent at end of CY11, a cut above the average CASA ratio of smaller banks.
Given that the acquirees bottom line in black, the success of acquisition depends on how effectively the buyer strike a deal. Not to mention, the potential acquisition would likely to benchmark to Faysal-RBS deal, which took at a deal of 0.57 times the book value.
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