MCB Bank, NIB Bank enter into merger deal

Besides setting up a MCB Islamic Bank, MCB Bank is planning to acquire NIB Bank through its merger of its operation within and into which will give a significant edge to banking company over its competitors. According to the official disclosure to Pakistan Stock Exchange shareholders, MCB Bank and the major shareholders of NIB Bank, Fullerton Financial Holdings through its wholly subsidiary Bugis Investments are in preliminary non-binding discussions for the possible merger of NIB Bank into or with MCB Bank under the provision of section 48 of the bank companies. The discussions will lead to due diligence of operations and share prices of both banks with the permission of State Bank of Pakistan (SBP), and permission of different regulatory bodies such as Security Exchange Commission of Pakistan (SECP), Competitive Commission of Pakistan (CCP).

Haris Arshad of MCB Bank said the MCB has decided to acquire the whole bank rather than merger of the bank with NIB Bank's investors will retain as investors of the merged bank but it will depend upon negotiations of the two banks' management and approvals of banking regulators and authorities.

Ather Ali Khan, NIB official said that the deal is being commenced by sponsor for merger of the banks, which means stakeholders of NIB Bank will remain part of the MCB Bank as investors instead of selling out operations to MCB Bank. Since the discussions are non-binding between the managements of two banks, the deal of merger of acquisition could not be sealed and ended up anytime but it will be a difficult deal because NIB Bank is a bank entity. It seems that NIB Bank, a mid-tier banking company, decided to curtail its operation in Pakistan as it recently sold out its 100 percent subsidiary of PICIC AMC to Habib Bank's Asset Management Company (HBL AMC) at the cost of Rs 4.1 billion The development was seen to be happening with the arrival of new CEO Atif Bokhari who quit United Bank Ltd to join NIB Bank in December 2015.

Surprisingly, NIB Bank's performance improved in the outgoing year as it managed to post a profit of Rs 2.617 billion in 2015 as compared to a loss of Rs 508 million in 2014. The bank is operating with 17 branches across the country.

MCB Bank seems aggressive in its expansion plan for setting up a subsidiary of MCB Islamic Bank. But it failed to acquire banks in past many years. In 2014, MCB Bank was decided to buy a small bank in Kenya but it dropped the idea later on after the management was focusing on local operations. In 2013, MCB Bank was engage in talks with Burj Bank management back for possible merger but the negotiation was failed and deal was expired as a result. In 2012, MCB was interested to acquire HSBC Bank but the central bank did not give permission to its management even for due diligence in a view to stop dominance of big banks in Pakistani banking industry.