Barclays, a London-based banking and financial firm, is in talks to sell its business in Pakistan to Habib Bank Limited (HBL), another possible sale by European bank from the country where it lacks scale, two sources familiar with the matter told The News on Monday. An official of the HBL said the talks with Barclays are at a preliminary stage and will require regulatory approvals.
Barclays Pakistan business has seven branches and the bank’s net assets stood at Rs52.402 billion. The deposit base was 38.234 billion; including fixed deposits Rs12.834 billion and saving deposits Rs16.286 billion at the end of 2013. The bank posted a profit after tax of Rs426.193 million in 2013.
Barclays is understood to be scaling back its small international operations.
Source said HBL is likely to start due diligence on the Barclays unit soon. Value of the deal has yet to be determined.
A banking source said Barclays has been shrinking its operations since last year, and recently it had retrenched around 40 employees. Barclays’ officials were not immediately available for comments.
The plan is yet to be made public. A banking source said the fall in rupee value against US dollar bites profits of small operations of foreign banks, forcing them to wind up less profitable operations.
He said markets like Pakistan are still attractive for the foreign banks.
But, the issue stems from profit repatriation; profit is earned in rupee and has to be converted to US dollars before transferring to the bank’s headquarter, which is incurring currency conversion loss to the foreign bank.
The rupee fell to its lowest in nearly six months against the dollar in August. A lot is lost in (rupee-dollar) conversions, said the banker.
Moreover, the compliance and know your customer procedures by the State Bank of Pakistan are too strict for Pakistan, which hampers deposit generation, he said.
A banker said the banking industry has too many players led by Habib Bank, United Bank, Allied Bank, National Bank of Pakistan and Muslim Commercial Bank, while there is not enough money.
In the last decade, several foreign banks invested in Pakistan when the economy had grown strongly because of economic reforms carried by then military regime of President Pervez Musharraf.
NIB Bank, a subsidiary of Singapore state investor Temasek Holdings had bought majority stake in PICIC. Asia-focused Standard Chartered Bank purchased Union Bank. Faysal Bank, which is 68 percent owned by Bahrain-based Ithmaar, bought Royal Bank of Scotland’s Pakistan operations.
However, a downturn in economy since 2008 pushed foreign players with small operations to scale down their business. Earlier this year, Meezan Bank had bought the Pakistan operations of a 10-branch business of HSBC Bank.
Source: The News
