MCB Bank, NIB Bank en­ter into merger deal

The Pak Banker - - FRONT PAGE - Muham­mad Yasir

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.

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