HSBC has announced its deal with Meezan Bank to sell its Pakistan-based 10-branch business, indicating another overseas lender s departure from the country.
Several foreign banks have either opted for wrapping up their operations in Pakistan or trimmed businesses there since the start of financial crisis in 2007. As for example, Citibank has lowered its activities in the country already.
On Friday, Meezan Bank revealed, Meezan Bank Limited has entered into an agreement with HSBC Bank Middle East Limited (HBME), an indirect wholly owned subsidiary of HSBC Holdings plc, to acquire (through a process of amalgamation) HSBC s banking business in Pakistan (HSBC Pakistan).
The merger, which will require regulatory and other key nods, comprising the support of direct investors of Meezan Bank and HMBE, is likely to be accomplished in H2, 2014.
Nearly all of the foreign banks active in Pakistan are carrying out banking activities not in real terms because of their reluctance to tie-up with the private sector. Though these banks have been earning profits, they generate their whole income via doing investments in the government papers. Regarding the domestic lenders, their moves are not much dissimilar to their foreign counterparts, but they are somewhat accessible to the private sector, since the local banks credit delivery is around 12% to 15% of their total positioning of liquidity.
As of the end of 2013, the HSBC Pakistan has overall assets of Rs48 billion.
Meezan Bank has revealed that it will transform the Pakistani operations of HSBC into Islamic banking model as well as offer nonstop banking facilities to the customers.
The growth of the Pakistani economy in the past 6 years was significantly lower than the crucial rate, and due to this, it was favorable for banks in Pakistan to finance cash-starved governments. The growth of the Pakistani private sector has been hugely hindered due to this type of banking activities.
Although the financial crisis has led to the closure of many banks across the globe, banks in Pakistan have survived the disaster. This is chiefly because of their sole customer - government. The successive Pakistani governments have protected their money as well as retained their profitability, although the global banking industry was incurring massive losses.
Meezan Bank, the largest Islamic bank in Pakistan, has disclosed that it has previously acquired a foreign bank and transformed it into an Islamic banking unit in 2002. The lender, which has 351 branches in 103 cities in the country, purchased the banking operations of Societe Generale in Pakistan (SG Pakistan) in a deal resembling much to the ongoing one.
Pakistan has been witnessing fast growth in its Islamic banking sector and now two more banks are planning to convert their conventional banking operations into the Islamic model fully.