HSBC said it was in talks with several unnamed companies to sell its Pakistan business, it said in a separate statement.
The bank said in a statement that the process was contingent on regulatory approval. It wouldn’t comment on the value of the branches in Pakistan, where it has been since 1982, has amassed 30,000 customers and employs 394 people.
“HSBC could potentially be acquired for transaction size of Rs6.0 billion to Rs7.5 billion ($67 million-$83 milllion,” according to AKD Securities research note. The lower-end of this range would likely generate a bargain purchase gain, adds the note.
“While it has a relatively small branch network of around 10, acquirers are likely interested in the bank’s systems, employees, fee income franchise and treasury operations alongside the prestige factor.
News reports indicate that several local players including MCB Bank, United Bank and KASB Finance are interested in acquiring HSBC Pakistan operations while we do not rule out new entrants taking an interest, adds the note.
If completed, the deals would take the number carried out by HSBC Chief Executive Stuart Gulliver since taking over early last year to 25, as he tries to revive his bank by cutting costs and boosting profitability. Deals already struck will cut $50 billion in risk-weighted assets from its balance sheet since early 2011.
The London-based bank operates in 85 countries and Gulliver is trying to sharpen its focus on fast-growing Asian markets, while businesses that lack scale in Asia could also be on the block.
It made a $22 billion profit last year, the largest by a western bank, but costs continue to rise and its return on equity was 10.9%, short of its 12-15% target.
HSBC has this year sold its general insurance businesses for $914 million, sold operations in Costa Rica, El Salvador and Honduras for around $800 million, and said it would quit Slovakia. It is also considering selling some Mauritius units.
In recent months, the sale of businesses has gathered momentum. On Monday, HSBC signed a memorandum of understanding with Korea Development Bank for the lender to buy its Korean retail operations. With additional reporting by Reuters
Published in The Express Tribune, April 11th, 2012.
COMMENTS (20)
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if they want to be in the market they should introduce some user friendly consumer finance products for the middle of pakistan, coz this class contribute major to the economy.
@The Dude:
HBSC has not pulled out from any of these countries. Instead, it is only scaling back its retail banking business but would continue to remain operating in these markets. Pakistan is different as the bank has decided to exit from fully.
While HSBC is not a significant player in Pakistan and hence its withdrawal would not have any direct impact, the fact that HSBC does not see an opportunity in a country of 180 million is worrying.
Its interesting ... http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/hsbc-wants-a-bigger-pie-of-indian-banking-busines/articleshow/12636674.cms hsbc is ctying about india not opening its banking for them..
@khan: Same banks have laready contract or close their business in India.
Even if HSBC decision was not Pak specific , the question arises : Stanchart, Citi, HSBC, Amex all leaving Pakistan as part of overall global portfolio adjustment means that all these banks do not see Pakistan as a future growth center. It is this leading indicator that Pakistanis should see as ominous rather than rationalizing it away.
Even to do trade (import and export), Pakistan will need foreign banks if Pakistani banks letter of credits cease to be accepted due to high Pakistani sovereign risk.
@JS: "Why lend to anyone else or do any other sort of banking with the risks that entails, because what could be better than giving these risk-free, backed by sovereign guarantees, loans to the Pak Gov while earning huge mark-ups?!?!?"
Please check how Pakistan's sovereign credit risk is rated. It is below junk status These loans are FAR from risk free. Pak government has not been honoring contractual obligations to its employees (railways pensions case anyone), suppliers (oil companies and KESC) and other sovereign nations as well (you may recall Iran stopped providing fuel to PIA a little while back because PIA stopped paying it).
What a bunch of fools we are.
We should appreciate that our local banks have matured enough to give these foreign banks a run for their money. If they can't compete, they leave so all good really! Stop being so pessimistic about the country!
@M: The World's Local Bank could not become LOCAL anymore in Pakistan. I really agree with the comment of Mr. M. Really the policies of bank made it to fail in Pakistan Market.
For instance, the branch in Multan was never authorized to give loan to people. However, there were also other strange policies that lead to its downfall...
However, once again the most common reason that will come out from the picture will of the poor position of Pakistan economically and security wise.
Another MNC leaving Pakistan but let's blame RAW+CIA+MOSSAD for this also!
It is true that HSBC is leaving Pakistan in alignment with it's announced global strategy.
While we can be happy about the fact the decision is not specific to Pakistan, we have to realize that it is because HSBC does not see Pakistan as a priority for its banking activities (read: capital and effort investment).
Also note that this sort of decision is being taken by several foreign companies (HSBC, Barclays, Caltex, investors in HUBCO, etc). All of these decision makers are taking a conscious decision that they do not want their/their shareholders money tied up in a country with limited return and relatively high amounts of political and economic uncertainty.
There is no possible way for us to spin this positively, and while these departures will not cause the sky to fall down on our heads, we should recognize that these are not good or positive events.
The only reason HSBC is leaving Pakistan, is because the senior management over the past 5-7 years has run it down. This fact can be verified by any senior banker, or current or ex-HSBC employee. Cheers.
Till sometime ago you saw the 'world's local bank' advertisement about Pakistan's potential plastered at major airports around the world. Did not take them long to back track. Their loss or ours?
@RizwanTKhan: I pity you my friend. Pakistan is one of seven countries where HSBC plans to pull out. Oh and the list includes Bangladesh
First Amercian Express, then Citi, HSBC followed and I believe Barclays will soon take that decision too. What a shame how foreign investments are depleting fast.
From what I have read, this decision is not Pakistan specific, reading too much into this would be a mistake. The fact that Pakistan's economy is politically driven and badly managed is a another story.
HSBC recently left russia, czech republic, mauritius and is planning to leave many other countries soon. pakistan is not specific, it is not about the country, HSBC is changing the shape of the business and no need to get freaked out. it wont have any effect on pakistani economy anyway as the scope of its operations in pakistan was very small.
These banks with their thousands of employees and huge capital costs are really not needed in Pakistan in the current economic environment. The reason they are scaling down or shutting down is because all they need is one man/woman in a suit to sit in his/her office and keep signing off on the money being borrowed by the Pak Government. Why lend to anyone else or do any other sort of banking with the risks that entails, because what could be better than giving these risk-free, backed by sovereign guarantees, loans to the Pak Gov while earning huge mark-ups?!?!?
@Tariq: Why to wonder when Pakistanis themselves are taking their businesses to countries like Bangladesh. It aint the time to wonder but a matter of grave concern. Red alert!
great, Citibank, Stanchart, HSBC, and beeline of other big banks are closing in this country. Teh financial sectors is crumbling which will ruin the country in coming days. Banks have sniffed the coming dark days and making preemptive exit. On contrary, they are expanding massively in India. Shows where the light is.
Has anyone wondered why all the western companies are leaving Paksitan