KARACHI: Habib Bank Limited (HBL) on Thursday disclosed its interest to acquire Barclays Bank PLC’s Pakistan operations.
The company secretary of HBL Ms Nausheen Ahmed made the announcement, saying that HBL was considering entering into negotiations for the proposed acquisition for which it intended to start a due diligence exercise in due course, subject to the approval of the State Bank of Pakistan (SBP).
The secretary, however, cautioned that the consummation of the acquisition was subject to the results of the due diligence exercise; execution of definitive agreements between the parties; and the receipt of all relevant regulatory approvals.
HBL’s interest in the British banking giant’s Pakistani arm was a subject of debate among bankers for quite some time; the announcement by HBL on Thursday confirmed that Barclays was indeed planning to quit the country. It would be quickly on the heels of ongoing process of Hong Kong and Shanghai Banking Corporation (HSBC) wrapping up its business after its buyout by Meezan Bank Limited.
Zubyr Soomro, former MD and CCO of Citibank Pakistan, commented that generally banks all over the globe were restructuring after the banking debacle of 2008. “The global banking model has changed. Banks can no longer speculate on depositors’ money.”
Banks are also facing tough regulatory and capital adequacy rules. Soomro, who now runs a consultancy firm ‘Hikmah’, asserted that bigger local banks were mopping up low cost deposits and also gobbling up huge share in consumer banking. “Competition is getting to be tougher and opportunities are getting to be fewer,” he summed up.
Yet, Soomro pointed out, foreign banks still had edge in investment banking; payment services and TBs segments. “Most hold the fort in corporate lending business,” he asserted, but believed that business in that area has shrunk.
Another banker, who asked not to be named, thought that foreign banks may be disillusioned by their inability to compete with local banks, mainly with those referred to as the ‘Big 5’ — HBL, MCB, NBP, UBL and Allied Bank.
“Over half of the profit earned by the entire banking industry accrues to the ‘Big 5’ that command 60pc of the banking sector deposits and hold 52pc of aggregate advances,” a sector analyst said. “The remaining 29 of the 34 banks operating in the country have to eke out a share for themselves from the left-over.” Analysts also say that the timing of entry of Barclays in Pakistan could not have been worst — in 2007, just before the great global crisis, precipitated by the huge international banks.
Although Barclays Pakistan made gestation period losses for three subsequent years, the matters took a turn for the better in 2011 and the bank skipped out of the red. With seven branches and Rs55 billion in net assets, it earned profit of Rs426 million in financial year 2013. “Yet it is scarcely thought to be enough,” said senior banker M.M. Alam, adding that Barclays may have pondered over returns on investment felt incommensurate with country risks.