The State Bank of Pakistan (SBP) has sanctioned the scheme of amalgamation of HSBC Bank Middle East-Pakistan with and into Meezan Bank, according to a notice sent to the Karachi Stock Exchange (KSE) on Tuesday.
The scheme will be effective for 60 days, it added.
Earlier in May, the SBP had allowed Meezan Bank to acquire Pakistan operations of HSBC subject to the fulfilment of all regulatory requirements.
An indirect, wholly owned subsidiary of HSBC Holdings, HSBC Pakistan consists of 10 branches and had total assets of Rs48 billion at the end of 2013.
Meezan Bank has already stated that it intends to make the operations of HSBC Shariah-compliant while ensuring that the existing customer base continues to receive uninterrupted banking services.
Meezan Bank has the experience of acquiring a foreign bank and converting its operations from conventional to Islamic. It acquired Societe Generale in Pakistan through a similar transaction in 2002.
The Competition Commission of Pakistan also gave its go-ahead to the proposed transaction and issued a no objection certificate in August. The deal is expected to complete before the end of 2014.
The information about the size of the transaction is still not in the public domain. According to Reuters, the sale of HSBC Pakistan is part of a strategy by Europe’s biggest bank to exit from countries where it is unprofitable or lacks scale.
Being the second most populous Muslim country, Pakistan has been a profitable market for Islamic banks. As many as five Islamic banks operate in Pakistan while 14 conventional banks offer Islamic banking services through window operations.
The year-on-year increase in deposits by each of the five Islamic banks in 2013 was in excess of 17%, with Meezan Bank’s deposits rising 25.7% to Rs289.8 billion.
Like most foreign banks, the clientele of HSBC Pakistan consists mainly of multinational companies with headquarters in European countries.