RBS Pakistan has been the central focus of financial deal making in the current fiscal year. The much-delayed sell-off saw interest from many domestic and international groups, before MCB Bank nearly clinched the deal late last year, and is continuing to do so after MCB-RBS transaction collapsed due to some regulatory issues.
Latest in the list of suitors are Faysal Bank and EFG-Hermes, while Soneri Banks application for due diligence is still under review.
Hold on a second, EFG-Hermes? The name doesn sound too familiar.
The Egypt-based financial group, EFG-Hermes SAE Holding is a premier investment banking group established in 1984. In recent history, the group has made significant efforts to increase its regional presence. EFG has a dominant presence in the UAE, Saudi Arabia, Qatar, Oman and Kuwait.
Interestingly, EFGs area of expertise is investment banking, asset management, brokerage and private equity. One of their signature transactions completed this year was the sale of their stake in Bank Audi of Lebanon.
EFG acquired a stake in Bank Audi, a commercial lender, in 2006, reportedly for $454 million, and sold it for $913 million in January 2010. With fresh cash in hand, according to different news agencies, EFGs management is now looking for new investment opportunities.
Its chief executive officer, Yasser El-Mallawany, is quoted to have said in an interview that the bank has piled up about $1.3 billion of spare capital after the stake sale in Audi, that it would use for purchases and to venture into new banking businesses.
EFG is planning to solidify itself in the MENA-Pakistan region, and RBS, therefore, becomes a thematic option. With its healthy consumer banking portfolio - acquired through the ABN acquisition of 2008 - it seems that interest in the assets of RBS, is a replacement for the stake in Lebanese Bank Audi that EFG just let off.
It is clear that EFG Hermes is not in the business of conventional banking. And if EFGs Lebanese transaction is any guide, RBS could be on the market again after a few years. It is entering the domain because of its relatively cheap valuation and may exit when domestic banks have regained their footing in a couple of years.
But there could be more reasons why the Cairo based investor is interested in entering the troubled waters of Pakistani finance.
With investment banking expertise, EFG-Hermes may be positioning itself for the mass scale privatizations of public sector entities planned by the government. In addition, when the economy gathers some steam, there may be new waves of consolidation or new investment.
In either scenario, a group with expertise in high finance and a firm presence in cash rich Middle East, may find it attractive to advise other businesses looking to enter the local market.