TWO leading Pakistani banks are going head-to-head in a near-£200 million battle to take over Royal Bank of Scotland's local operations as the 70 per cent taxpayer-owned bank scales back its global business.
MCB Bank, Pakistan's biggest by market value, and rival Habib Bank are competing to buy RBS Pakistan as the Royal's new chief executive, Stephen Hester, wants to further beef up the Scottish bank's balance sheet.
In separate statements to the Kara ADVERTISEMENT chi Stock Exchange yesterday, MCB and Habib said they would apply to the country's central bank, the State Bank of Pakistan, for approval to begin a due diligence review of RBS Pakistan.
Asif Qureshi, head of research at Invisor Securities in Karachi, said: "The market capitalisation of RBS Pakistan today is $266m (£181m), so that is the minimum price it would get. It could be higher than that."
Farhan Rizvi, an analyst at JS Global Capital, said if Habib won the takeover battle it would also become the biggest bank in Pakistan by assets and deposits. The current largest by assets is National Bank of Pakistan.
Rizvi said Habib was mainly interested in RBS's market share in Pakistan's consumer lending market. The purchase of RBS Pakistan would give it an edge in a nation that forecasts an economic revival starting in the next fiscal year.
Pakistan's economy could expand at an average of 6 per cent annually over the next five years, Shaukat Tarin, adviser to the prime minister, said last month, as the nation seeks $6 billion in aid from countries including the United States and Japan.
Habib is majority-owned by the Aga Khan Fund for Economic Development, while MCB is 20 per cent owned by Maybank.
Hester, who effectively took over as RBS chief executive last autumn, had to unveil a £24bn loss for 2008 in February.
At that time Hester said RBS was looking to scale back its retail and commercial banking operations in Asia and put them in a "non-core" division. He cited countries such as China, India, Pakistan and Malaysia. "Non-core does not mean they are bad businesses," Hester said.
The new RBS chief executive said he also wanted to "streamline the footprint" of the bank's investment banking division, Global Banking and Markets (GBM).
As a result RBS was "exploring new ownership" of GBM in 15 countries, including Pakistan, Hester added.
GBM made an £11bn loss last year amid the turmoil in financial markets, although Hester said the core business, including trading in forex and US bonds, was extremely strong and profitable.